HUD Home Buying Process

How to Buy a HUD Property  

Buying a HUD home can be a simple process.The following is a how to guide on how to make an offer on a HUD home and what to do once you win the bid. If you have any questions about the process, contact our HUD listing coordinator, Jesse Garza at (817) 354-7653.
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What is a HUD Home?

The United States Department of Housing and Urban Development (HUD) oversees the Federal Housing Administration (FHA), which provides federal insurance on home mortgages. If a homeowner fails to make payments on a FHA loan, the mortgagee forecloses and files an insurance claim with HUD. In exchange for paying off the unpaid loan balance to the mortgagee, HUD receives title to the property. At this point, the house becomes a HUD home. After the mortgagee conveys the property to HUD, the asset manager begins the process of managing and marketing the homes according to HUD guidelines.

How the Buying Process Works

Welcome to buying a HUD home. The following information is intended to give you a brief overview of the buying process. For more detailed information you may go to

For details, visit

Buying a HUD Home is Different than Buying Other Types of Homes

There are a few things you need to know up front about buying a HUD home, since the procedures may be different than those used in buying other types of homes. HUD however, has made the procedure as efficient and convenient as possible. Here are some things you should know:

Anyone can buy a HUD home
HUD homes can be purchased by anyone. While many homes are affordable, this is not a low-income program. Home may be bought by owner-occupants (who have a priority bid period for 15 days), and by investors after that if the property is still available.

HUD homes are sold at market value
HUD homes are initially priced for sale at the appraised market value. The buyer may offer any price, but HUD will only agree to offers that provide an acceptable return. Price reductions may take place later if the home does not sell.

HUD homes are sold "As Is"
It is extremely important to understand that HUD homes are sold in "as is" condition. This means that the condition of the home when you see it is what you will be buying. HUD makes no warranties, does not guarantee the condition of any home, and does not verify that it complies with any local code or zoning requirements. You must make any necessary repairs after the purchase. HUD may make, or give you an allowance for, major system or safety repairs only if you are purchasing with an FHA-insured loan. It is very important that you get a Home Inspection by a licensed professional prior to closing on the sale.

Deadlines must be met
When you buy another type of home, you can usually negotiate the contract and other transaction items over an unspecified period of time. When purchasing a HUD home, this is not possible. In order to be fair to all purchasers, HUD has imposed timetables that must be met or your bid or contract will be cancelled and the home returned to the market. Once your bid is acknowledged as the highest net to HUD, for example, your agent must send in a correct contract within 48 hours or the bid will be cancelled. Generally, closing must take place within 30-45 days. Asset Manager cannot change the HUD deadlines.

To learn more about HUD, contact us today!

Making an Offer on a HUD Home

Offers must be made through a HUD registered broker
If you want to make an offer on a HUD home, you must bid through a HUD-registered broker. Century 21 Mike Bowman, Inc. is a registered HUD broker. Call 817-328-2308 for an agent.

How to find a HUD home
You should contact a broker as instructed above. These brokers will have a list of HUD homes from the MLS, which contains detailed information on the home. You can also look at available listings for your area here on this site under HUD Properties. Check with your broker for more information about the house. You may also see a HUD or Asset Manager sign on a home; these are placed on homes after the initial inspection and mean that the home is being readied for sale. To find out if the home is actually for sale go to Offers must be submitted through an electronic bidding process

All offers must be submitted by your broker through an electronic bidding process. All offers are made via computer through the Internet. The electronic bids are stored in the computer system and, at the appropriate time, calculations are automatically performed to determine the apparent highest net offer to HUD. The apparent highest bid is acknowledged by the Asset Manager to your broker, who is notified to send in a correct, signed sales contract within 48 hours. If the contract is not received within 48 hours or is incorrect, the home will be returned to the market or acknowledged to the next highest bidder. All acknowledged bids are subject to cancellation for prior sale, electronic error, and other conditions (see Disclaimers). An acknowledged bid does not constitute a sale; only a correct contract that is counter signed by Asset Manager and returned to your agent allows you to proceed to closing.

Initial Listing Period
The initial listing period, which is generally the first public listing for HUD homes, is 15 days. During this time, only bidders who are buying the home as their primary residence will be accepted. All owner occupant offers received during the first ten days of this initial period are considered to be received simultaneously. On the first business day after this period, bids are reviewed daily to determine the highest acceptable offer to HUD.

If there is no acceptable bid, bids are reviewed on a daily basis. Bids received at different times during the day will be considered received simultaneously, and the highest acceptable net bid will be acknowledged on the date opened. If the property remains unsold after 15 days, it is made available to investors as well, and bids are reviewed on a daily basis.

An owner-occupant purchaser is defined as a purchaser who intends to use the property as his or her principal residence; a State, governmental entity, tribe, or agency thereof; or a private nonprofit organization. Governmental entities include those with general governmental powers (e.g., a city or county), as well as those with limited or special powers (e.g., public housing agencies).

Subsequent Listing Period
When a property still remains unsold after the 45 day initial listing period, the asset manager will re-analyze the case as soon as possible. The price may be reduced, and for five days after the price reduction, all bids are considered simultaneous, with owner-occupants given priority. After the five-day initial reduced price bidding period, then bids are reviewed daily and the acceptable bid that offers the highest net value to HUD (regardless of occupancy) is acknowledged. Contract must be submitted within 48 hours

If your bid is acknowledged, your broker must submit a correct HUD Sales Contract, along with other required forms and Addendums signed by you, to the Asset Manager Regional office within 48 hours. You are required to submit proof of financing commitment or cash to close, along with other items. You should be working with your broker to put the required items in place before you bid on a home, so that you are ready when the time comes.

To learn more about HUD, contact us today!

Closing on a HUD home

Closings are generally within 30- 45 days and held at the closing agent office
After your contract has been received correctly, it will be signed by the Asset Manager on behalf of HUD and returned to your agent along with a contract acceptance letter. The letter will give you up to 45 days to close. Once you are ready to close, you and your agent must schedule the date with the closing agent indicated on the letter, who also receives a copy of your contract. The Asset Manager does not set the closing date; it is up to you. If you use the HUD closing agent, HUD pays their fees. You may use your own agent, but then you must pay the fees. If you use your own closing agent, they must work with the HUD agent on some legal items.

HUD will pay some closing and sales commission costs
Generally, HUD will pay up to 3% (minimum of $1250 on distressed properties) of your broker commission cost. In addition, HUD will pay up to 3% for standard closing cost items (excluding the closing agent fee which is paid for separately). These items are designated by the buyer and may include discount points, loan fees, title costs, surveys, and other items. HUD will also generally pay any outstanding seller costs such as outstanding tax or utility bills which relate to HUD's ownership.

Return of Earnest Money
When you submit a contract, you must submit the earnest money with it, usually in an amount of $500 or $1,000 or if you are submitting a contract on a lot or land the earnest money needs to be half of the listed price. If you know your transaction will not close, your agent must notify the Asset Manager as soon as possible so the home can be returned to the market. You may have to forfeit all or part of the earnest money if the sale does not close. If the sale is to an owner-occupant and does not close due to circumstances beyond their control, the money may be returned. Please review the earnest money policy for your area with your broker before you place a bid on a home.

Extensions of time
Extensions for time to close may be granted, under certain circumstances. Extensions may be granted at no cost to owner-occupants under certain circumstances that are beyond their control, such as a delay in financing approval that is not due to the buyer. Extension fees may be charged under other circumstances, and for investors. Extension requests must be submitted to the closing agent (not the Asset Manager) in writing prior to the expiration of the original closing date, and accompanied by a non-refundable fee, in certified funds, if a fee is required. Contact your closing agent for more information on this process.

How to Successfully Bid on the Internet

Once the winning broker bid is accepted, the Broker has 48 hours from time of posting on the internet to deliver the contract and all addendums to the Asset Manager

Line by Line instructions for filling out the HUD-9548 Sales Contract

Sample HUD Sales Contract Package

Deliver by Priority Mail. Do not deliver in person (only in an emergency)

Address to:
The appropriate asset manager, Sage Acquistions
Attn: HUD Contracts
Address -See agent information on

Packet must include:

Fully executed, signed and initial contract (all in blue ink)
Earnest money in the form of a cashier's check or money order delivered to listing broker, and a copy to the Asset Manager.
Pre-approval letter from Lender (original or legible fax copy) on lender letterhead, signed by Loan Officer. (Letter should state after reviewing buyers credit, the buyer is pre-approved for the bid amount).
Information about brokerage service.
Power of Attorney
Request for earnest money receipt

The Asset Manager will e-mail approved signed copy of contract, and addendums when ratifed to the selling agent.

Escrow amount for repairs
The Buyer has to finance the repair amount and include it in the winning bid amount at closing and funding. The Lender retains that amount in their escrow account until repairs are completed. The Buyer must get an Invoice from their Contractor for the amount of the repairs made. The Buyer must approve the Contractor's work and release payment to the Contractor through the Lender.
No repairs can be done until after the closing and funding, i.e., if the Contractor's bid is estimated at $2400, and the repairs are $1800, the Lender will credit the Buyer in the amount of $600 toward their principal. If the Buyer chooses to do their own repairs, HUD will only allow for the Buyer to be reimbursed for materials, not their labor.

To learn more about HUD, contact us today!