Buyers Guide to HUD homes (Part 1)

It seems like 10 or 15 times a month I get emails from people wanting to know more about the purchase of HUD homes. I have personally sold more than 20 HUD homes as an agent and have bought quite a few myself. Two of the HUD homes that I purchased last year for rehab have recently sold generating me a $35,000+ profit. This being said there must be some money making possibilities with these bad boys.

For newbies and seasoned investors alike, HUD homes are a great way to buy foreclosures because they are done in an auction style format with a specific time frame. Many of you lose out on great deals because you have to work during the day or have other obligations that aren’t conducive to looking at real estate. HUD homes work out great because bids are due by midnight on the day that the website lists. This will enable you to go through at your own leisure so long as your bid is put in by midnight on the day that the auction ends.

HUD homes are listed as either daily-all purchaser or owner occupant or daily owner occupant.

Daily all purchaser means that the home is open to all bids from both owner occupants and investors. New owner occupant homes come out every Friday and are listed as owner occupant for 10 days. Every Monday owner occupant homes from 2 Fridays ago turn into daily all purchasers if they have not sold yet. This means that the bids are due Monday by midnight. Many times owner occupant homes that make it past their Tuesday bidding time will end up going all the way to daily all purchasers. If you’re an investor who can’t look at homes on Monday be sure to go out over the weekend to check out the listings from the 1st Friday. One other way that properties end up going from owner occupant to investor is if the deal falls apart during the owner occupant period. Every Friday the entire HUD list is updated with new owner occupant homes, new daily all purchaser homes and price reductions on existing inventory. Homes with bids that are being considered will have read letters that say to check back after 4:00 to see if HUD decided to take the bid. Bottom line is the days to check HUD homes are Mondays and Fridays.

Owner occupant means that the home can only be purchased by someone who intends on living in the home for at least a year. A word of caution the penalties for falsifying that you are an owner occupant when you are actually an investor can be fines not to exceed $250,000 and up to 2 years in prison. New owner occupant homes are listed every Friday and the bids do not have to be turned in until the following Tuesday. This 5 day window works out great because it allows so much time to go through the property before the actual bids are due. After the initial 5 day bidding period the bids are then changed to daily owner occupant. Daily owner occupant means that bids will be due each night by midnight until the property sells or turns to daily all purchasers.

Locating HUD homes. There are alot of websites out there that would have you pay to get updated HUD listings but there is no need to pay for them the listings are FREE. I have put together a HUD finding tool on my blog (see my signature), just enter your state in the box over my picture and you will be transfered to the HUD website for your state. Note California Residents must choose Northern or Southern California. You can also find info at the website, I tried to take the work out of it for you though.

Bidding on HUD homes can only be done by licensed realtors. You are required to have either a verification of cash funds or a preapproval letter in order to bid on a HUD home. Agents are required to have you fill out all of the paperwork and collect your earnest money prior to submitting your bid. Some agents do not require this, and they will submit your bid for you prior to filling out all the paperwork and collecting the earnest money. You will be required to give the agent either your Tax ID number or Social Security number, along with your name or business name, and address. The agent will also need your bid amount and the amount of closing costs that you would like HUD to pay. The agent will then enter all of your information into the agent section of the HUD website.

Bid results are posted the following day at 4:00. Daily all purchaser homes or daily owner occupant homes that come out on Friday have a bid due date of that Sunday at midnight. If bids are placed anytime over the weekend the results will be posted on that Monday at 4:00 unless you are bidding on a new owner occupant home in that case the bids would be due on Tuesday with the results coming out Wednesday at 4:00. Bid results is the place you can go to find out what the most recent homes have sold for.

Bid Statistics is where you can find out what all previous offers have been, and what was finally accepted. Bid statistics updates vary per state but many states update bid statistics every Friday. Bid statistics is a great place to do your research on what prices have been getting accepted in your area. Comparing accepted price versus the HUD asking price can give you a good idea of how low HUD is willing to drop their prices.

Closing a HUD home is just like closing on any other home. The major benefit to buying a HUD home is that they allow up to 60 days to close after all of the contracts have been signed. HUD does not take into account the amount of days that you will take to close when looking at your offer. Many times other homes for sale will take a 2 week closing contract over a 6 week to closing contract even though the 6 weeks to close offer might be for more money. HUD does not care how long it takes you to close so long as it is within the 60 day time frame. If you end up going past the 60 day closing period you can apply for an extension.

Wholesaling a HUD home can be a great way to make money when you have none. HUD homes work especially great for wholesaling because of the long closing period that HUD allows. The one problem that HUD homes can pose when wholesaling is the lack of ability to inspect (see inspection section). It will make it much easier to wholesale if the person you are selling to is willing to take the home in “as is” condition. Wholesaling HUD homes can be done as explained above (see wholesaling section), namely you would want to use a “back to back closing”. Also, having a cash buyer on a HUD wholesale will make things much easier if you are going to use the back to back closing. I typically buy using my line of credit, and then wholesale the property the following week or later that month depending on the type of buyer.

Closing Date Extensions are bought in 15 day increments for $15/day. This means that to get even a one day extension it will still cost you $225.00. The extension must be paid for with a cashiers check before closing. Many times HUD will waive the extension fee and credit it back to the buyer at closing if the buyer is an owner occupant. HUD is not so lenient on investors; normally they do not refund the extension fee for investors. When you submit your funds for the extensions you will be required to submit a letter stating why you are needing the extension. I have never had HUD try to verify the reason given on the letter. The typical letters that I write usually say something to the effect of “the buyer is having trouble obtaining financing because the previous lender lied about what they could do; but the buyer now has secured the proper financing”. If HUD does not grant you a closing extension then you would forfeit your earnest money.

Earnest Money on HUD homes is non-negotiable, if your are buying a home under $49,999 the earnest money is $500, if the home is anywhere over $50,000 then earnest money the earnest money is to be $1,000. If your realtor follows HUD guidelines then your earnest deposit check will be due prior to bidding when you submit your contract. Some realtors will wait to collect earnest money check until after you have won the bid. HUD guidelines also state that the money must be in certified funds. I have seen many realtors just take a regular check and HUD didn’t require them to change it. You will however be required to supply certified funds for your extension period if you pass your closing date.

Closing dates on HUD homes are 60 days from the day that the contract is signed by HUD. HUD does not take into account your closing date when looking at offers. There is actually not even a space for the closing date on the bid form that your realtor will use. When you sign your contracts their will be a space on the purchase agreement that states when you plan on closing the deal; HUD recommends just putting the maximum time which is 60 days.

Closing Costs that HUD is willing to cover have changed as of Oct 12, 2006. Here is a synopsis of the new HUD closing cost rules. HUD will now allow up to 3% of the purchase price to be included in the purchase price to go towards financing and closing costs. Costs covered within 3% include origination fees of up to 1%. On a 203k purchase HUD will only allow up to 1.5% of the purchase price to be financed in as costs.

Well my kid just woke up better end this one, part 2 will cover financing, rules about looking at HUDs, Insider information about closing costs and commissions that will save you thousands, and quite a few other tips for buying HUD homes

Eric Medemar

Big dogs out there feel free to ad more insight into the HUD process.

Hmm…well this is a paste from an article on your blog. I’m assuming part two will also be from a previous post on your blog? Not that this isn’t helpful, but the purpose of the site isn’t to repost articles from our blogs. If so, I can have hundreds of new posts on the topics I chose to write about. They’re helpful, but I just didn’t feel it was appropriate for me to repost here. Otherwise, everyone would start doing that.


Repost or not, I just got A LOT of my HUD questions answered in 10 short paragraphs.

Thank you very much, I am looking forward to part 2!


Many blog articles are useful, but we don’t want to cross the line and start getting reposts from everyone with a real estate blog. I’ve written hundreds of articles on my blog that are useful, so should I just repost here under a new topic?

The issue we have as moderators is that, if we allow one person to start posting articles, what do we do when other people with blogs want to do the same thing. Is it considered a form of advertising or just helping people?

I’ve asked the other moderators what they think. Don’t get me wrong, it’s helpful. We just don’t want the crazies coming out of the woodwork to repost their blog articles here, then complain that we’re being unfair since we allowed this one.

An SEO expert actually told me it hurts PR ranking if Google finds the same articles on different sites. Even if the wording is slightly changed, it can still hurt. (Side issue).

I see your point and understand your concerns…

Maybe just having the guys post URLs to the blog articles is the solution and just a short blurb explaining what the article talks about…

I would have clicked a link to check out that article!

Thanks for maintaning such a good site!



It is actually against the forum rules to put in a link to your own site…

If you have your site link “Memeber Default Signature”, you can refer to it…like, “See the article about HUD properties in my blog…”


I read the rules…promise…maybe… :slight_smile:

Hmm, well that makes it tough then to reference good articles outside of the forum?


No…you can link to articles and such, you just can’t link to your OWN site in the body of your messages…


I am tremendously sorry for sharing my experiences in real estate investing, I guess I was completely off center posting a fairly thurough guide to buying HUD homes in foreclosure forum that includes HUD homes…

I had to pause a minute to search through this forum and see all of the questions that people have had about HUD homes it seems to me there were quite a few…

Would I have been smarter to post this under someones question selection?


Perhaps I should wait for someone to post a question, and then instead of giving thurough answer, I could give a short answer that might not clear things up nearly as well for a new investor, but hey it was short, and not on my blog so people are happy…

I had to pause another minute to go and search the texas realty blog…hmmmmm, great blog if an investor cared about things like
Texas, oh and more texas, hmmmm. some more digging to find even one article that might help an investor, still none. Not that Texas is bad, I loved going there but come on your the queen of the forums, and your blogs contents are exclusively texas. I guess there could be something there, I just cant find it under all the self promotion and texas.
Perhaps if some posted a question like “Has the Corpus Christy Beach ban been voted down?” then you could easily post one of your articles to the REI club forums.
I’m positive people are dying to know. Because this is one of the hundreds of great articles that you could post here…lets look a bit deeper and see some more of the hundreds of helpful investor articles…hmm a few more articles about texas, oh and some great stuff about some committee, some colleges, still nothing even remotely close to something useful for investors…

Now a stop at The millionaires blog…lets see

Follow a flipper

2007 real estate goals

get out of analysis paralysis

Wholesale guide.

Keys to happiness

Perspectives on the real estate market.

Yes, I also have some self promotion, yes I have already made over $100,000 in 2007 flipping homes, yes I continually talk about real estate that I have flipped, rented, wholesaled, and yes I talk about the money I have made, and will make. Sure some people find it offensive, but if I were a beginning investor, I would want to know whos making what, so I know who is just talking and who is actually doing.
Perhaps the reason that I post things that come directly from my blog is because they would be helpful to real estate investors.

If your thinking that I am trying to drive traffic to my blog to get people to do my phone consultations you would be sadly mistaken. I have more people than I can ever take on willing to pay $99 for 30 mins on the phone with me.

Dont get the wrong idea, I am completely wrong for posting A HUD buying guide in a Foreclosure forum, it wont happen again.

Thank you,
Eric Medemar

I’m not sure how to answer your questions, Eric. We’re all here to be helpful and just need a good, clean way of doing so without spammers grabbing onto an idea and running with it.

PM could be one way if you want to let someone know about an article because it becomes a mess if all of the writers in the world start reposting their articles. Sometimes, the best intentions can cause chaos if people with bad intentions get involved. You obviously have good intentions, so no harm, no foul.