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How to Bid on a HUD-Owned Property

by Stan Smith, studioD

HUD is the acronym for the U.S. Department of Housing and Urban Development. It is the government agency that oversees the Federal Housing Administration, the largest mortgage insurer in the world. Whenever an FHA-backed property goes into foreclosure, HUD is responsible for selling it at the best price it will fetch. They want to keep those properties about as much as your local bank does, so imagine this agency as the ultimate distressed seller and take advantage of it.

The Process

Search for a home. You can find local HUD homes for sale by visiting www.hudhomestore.com. Another good route is to contact a local Realtor and ask around.

Do the math. Most FHA-backed loans require at least a 3-percent down payment on the sales price. You need at least a 20-percent down payment to avoid mortgage insurance fees. Most lenders will recommend that any potential mortgage payment be around 30 percent of your current take home pay. There will be upfront and closing fees to consider, so prepare a realistic assessment of what you can potentially afford based on your current financial situation.

Get your financing pre-approved. The easiest way to figure out how much you will be able to borrow for a house is to secure approval from a lender ahead of time. You may use a traditional lender, but there are some good HUD-backed programs available for first-time buyers.

Do a market analysis of the home. Take a peek at what prices properties sold for within the last six months, and what your local authorities estimated the property you are looking at to be worth during the last tax assessment. It is fairly easy to do online, and the estimate will probably be on the high end of what HUD will ask for.

Get a home inspection. HUD properties are sold as-is with no warranty attached, so it is up to you to find out if there are any surprises.

Make the offer. You will need to use a HUD approved broker to submit one and will have to pay a deposit up front of $500 to $2000 to prove you are serious about buying. This is called “earnest money” and is basically the price of admission. The deposit is kept in escrow until the bid process ends.

See if your bid is accepted. Your broker will be the one in contact with HUD and will update you with the news. If your bid was accepted then the earnest money will be applied to the down payment. Rejected bidders get their money back. The bidding process usually operates on a once-a-day format during the business week.

Items you will need
  •  HUD-approved broker
  •  Upfront cash deposit of $500 to $2000 for earnest money


  • Local agents usually know where the HUD properties are and what shape they are in. They also might know how far along in the foreclosure process they are. Current occupants of the house have priority buying a HUD home before it goes to public bid, so you may be getting a little-known bargain if you time your bid for soon after the occupants decline the offer.
  • If you can afford to be patient, low-ball the bid and see if HUD comes to you with a magic number. This does happen and may potentially save you thousands of dollars.


  • HUD properties tend to be cheaper than privately listed ones because they are used homes with older equipment and wiring.
  • Be serious about bidding for HUD properties. It’s OK to window shop online but in most cases you do not get your money back if you successfully bid for a property then back out for some reason.

About the Author

Stan Smith is a writer based in Nashville. He has been a journalist with "The Tennessean" and "The Northern Virginia Daily" since 1985 covering crime, corruption and sports. Stan holds a Bachelor of Arts in German history from The University of the South and is working on his first novel.

Photo Credits

  • Ablestock.com/AbleStock.com/Getty Images