HUD foreclosures refer to foreclosure properties that were insured through the Federal Housing Authority (FHA) as overseen by the HUD (the Department of Housing and Urban Development). Typically, the HUD properties are residential; it is either listed as a single-family residence but also may be up to a 4-family unit dwelling. When the property owner defaults on their loan payments, FHA forecloses the property and the HUD takes over of the property, for future sale.

Many home buyers and investors may believe that an FHA foreclosure property which is also sometimes called a HUD acquired property, is a bargain priced property, and that may be the case. Nonetheless, it’s important for the prospective buyer to be sure that the opening bid price of the foreclosed property is within the range of comparable properties on the market. HUD, after all, wants to recoup the cost of the loan, and in a soft real estate markets where housing values have depreciated, an unwary investor may not get the bargain priced property that they had hoped for.

Properties are available through management listing companies which are under contract to HUD, and are available to anyone, however, priority is given to prospective buyers who intend to use the HUD acquired property as their primary residence. Property that is unsold to individuals who are considered “priority” is then made available to all other prospective purchasers, including investors. HUD does occasionally offer designated properties to specific classifications of individuals, generally those who fall into specific social services categories such as law enforcement, teachers, medical specialists, etc. at a reduced price, as part of their “Good Neighbor Initiatives” program.

It’s important to note that HUD acquired properties are sold on “as is” basis and there is no warranty made to the buyer. HUD will provide information about the property’s condition, and from this the prospective buyer should be able to formulate a bid. The opening bid for the HUD acquired property is comprised of the amount of the loan balance outstanding, plus any and all expenses permitted by the court or the respective state laws.

Sources:
http://www.hud.gov/homes/homesforsale.cfm
http://www.reohud.org/
http://www.smalldeadanimals.com/Ask-A-Question/Foreclosed_Homes_buying_advice__.htm