How to Bid on HUD Home Foreclosures

Only certified brokers can presnt a bid on a HUD foreclosure home.

When a homeowner with a Federal Housing Administration (FHA)-backed loan forecloses on the home the United States Department of Housing and Urban Development (HUD) pays the homeowner's lender whatever is owed on the home. HUD then becomes the homeowner and sells the foreclosed property to the public. Generally, buyers who intend to occupy the home, instead of rent it out, have priority when HUD opens the bidding process. If the home doesn't sell to an owner-occupant, the bidding is then opened up to investors as well. The HUD bidding process is straightforward and relatively easy.

Instructions

1. Locate a real estate broker that is HUD-certified. These are the only people that have keys to HUD lockboxes and can show and present offers on HUD home foreclosures. You can find such a broker by visiting the HUD website, listed in the resources section.

2. Obtain financing if you won't be paying cash for the home. You will need a commitment of funds from a mortgage company or bank, for the full amount of your bid.

3. Compile the bid package. Your real estate agent will assist you with this part of the process by providing you with the required paperwork. Some of this paperwork includes purchase contracts and addenda. The bid package must be accompanied by an earnest money deposit: 5 percent of the purchase price of the home. The deposit can be tendered in cash, money order, cashier's check or a certified letter of credit. If your bid is not chosen you will receive this money back. If your bid is successful, the earnest money will be credited toward your down payment and you will have 30 days in which to close escrow.

Tips & Warnings

• HUD will notify your broker or agent within 48 hours of the closing of the bid period as to whether your bid was successful.

Resources

• HUD.gov: State Information