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The Ultimate Guide to Buying a HUD Foreclosure Home

You can buy a HUD Home and pay the costs of repairs and improvements for 80% or less of its fair market value. We’ve done it. We bought our last home for $112,500 and spent $12,000 to rehab the property for a total cost of $127,000. The home has an appraised value, after improvements, of $158,000. So, we were able to buy the home and put it in rent-ready condition for 21% less than its fair market value.

In this series of articles, we are going to walk step-by-step through the process of buying a HUD Home. Along the way, we will address some common misconceptions about HUD foreclosures and reveal how we determine HUD’s minimum acceptable bid for a property, a critical step to buying a HUD Home at a great price. Over the next few days, this series will cover the following topics:

* What is a HUD Home and how do you find them
* How to bid on a HUD Home
* Unlocking HUD’s Secret Minimum Acceptable Bid
* How to Use HUD’s Bidding System to Find Great Deals

This Ultimate Guide to Buying a HUD Foreclosure Home is an ongoing project. As we publish additional articles, we will add links to this page so you can easily navigate to the information you need. These first few articles will get you started in the right direction if you’re looking to buy a HUD foreclosure home at a good price. First, let’s address some common myths and misunderstandings about HUD Homes.

Myth #1: HUD Homes are only available to homeowners

HUD Homes can be purchased by investors and homeowners alike. However, HUD’s bidding system provides a preference to those who plan to live in the home by first opening only to owner-occupants. But if no homeowners submit an acceptable bid during this initial period, HUD opens the bidding to all buyers, including investors.

Myth #2: HUD Homes are only found in bad neighborhoods

Each of the HUD Homes Mike and I have bought have been in safe, family-oriented neighborhoods. In fact, most of the homes are just minutes from my childhood home. To be sure, some HUD Homes are in some rough areas, but many homes are in middle and upper-middle class neighborhoods.

Myth #3: HUD Homes are in terrible condition

The condition of HUD Homes varies drastically. Our first HUD Home was in great shape, requiring mainly cosmetic improvements such as new carpet and paint. There are HUD Homes, however, that do require substantial renovation such as new kitchens and roofs. As an investor, the best deals are often those that require the most work. We have found that to be true, but if you’re looking for a home that requires less upfront work, they can be found through HUD.

Myth #4: HUD Homes can be purchased for a $1

If only it were that easy! Investors and homeowners cannot buy a HUD Home for $1. So how did this rumor get started? HUD does offer single family homes for $1 to local governments who, often in partnership with non-profit organizations, improve the home and offer it as low-income housing. These HUD Dollar Homes must have been listed by HUD for six months before entering this program. You can read more about the HUD Dollar Homes here.

{ 4 comments… add one }

  • Sell My House May 20, 2008, 12:18 am

    An easy way to find HUD homes before the banks get to them is to get a list from your tilte company of pre foreclosures. Contact these home owners to buy there house before the bank takes it back

  • Foreclosure Houses July 14, 2008, 11:48 pm

    or on eBay…no kidding, foreclosure houses for a few thousand dollars. simply amazing…

  • Mike Woods from Indianapolis July 23, 2012, 5:31 pm

    Good info. Something people should also be aware of is that HUD makes certain homes available at a 50% discount for teachers, policemen and firemen.

  • Judy Bronaugh April 15, 2013, 12:38 pm

    Hi,
    Can you tell me if there is any factor in the Bid acceptance by the type of loan your are using to finance? FHA or Conventional loan?

    Thanks
    Judy

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