HUD purchases are very different than conventional deals because they follow a “blind” bidding process. The bidding date is released by HUD, and each buyer submits their best offer – without the knowledge of any other bids. As long as HUD finds the highest offer acceptable, that offer is accepted. HUD retains the right to refuse all offers.

One of HUD’s goals is to increase the number of US citizens who own homes. Because of this, they give preferential treatment to owner-occupants over investors. Owner-occupants have the first 10 days to bid on any home before it is released to investors. A buyer may bid as an owner-occupant once every two years. Make sure and bid honestly – otherwise is illegal, and can result in hefty fines.

You are allowed the opportunity a third party inspection before closing, but buyers cannot negotiate repairs based on the results. Backing out of HUD deals & retaining your earnest money is trickier than conventional purchases, too, so you may run the risk of losing your earnest money. Make sure and go through the home thoroughly before bidding on it.

As foreclosure rates rise and fall, so does HUD’s inventory. The laws of supply & demand definitely apply here – when the inventory is high, your chances of getting a great deal are higher than when they are low. Follow the asking price & sales price of HUD homes – if they are selling far over asking, it might not be the time to buy.

After your bid is accepted, the paperwork begins! In Texas, HUD requires that you submit original signed (in blue ink) paperwork to the HUD agent’s office within 48 hours of the bid’s acceptance. If the paperwork is incorrect, you are allowed one revision – which must be received within 48 hours. They are just as strict with a lender’s closing documents – so make sure both your Realtor & lender are very familiar with the HUD process. Oftentimes, the HUD agent’s office will be located in a different city – and often, the escrow agent will be located in yet another city – this can put a very interesting twist on the process, and time constraints.

Because HUD places very strict time constraints on bidding, and due to the bidding process, you must act quickly & decisively. You will typically have 1-2 weeks from the date HUD places the property on the market until the bidding period begins – and more often than not, the property will be purchased on the first day of bidding. Make sure & exercise your due diligence, and make your decision quickly – you often won’t get a second chance.