How to Buy a HUD Home

HUD homes are houses the U.S. Department of Housing and Urban Development acquired after an FHA-insured mortgage was foreclosed, and you buy one by having a HUD-registered real estate broker submit a bid for you online. Owner-occupants get an exclusive bidding period before investors, the homes are sold as-is, and on most sales the buyer can ask HUD to pay up to 3% of financing and closing costs, according to HUD. This guide explains the bidding process, the special programs and what to check before you bid in California.

How the HUD home sale process works

1. HUD prepares the home. Before listing, HUD appraises the property, resolves title issues where needed and decides whether it qualifies for any discount programs. The asking price generally reflects the appraised value in current condition.
2. The home is listed on HUD’s sales site, HUD Home Store, and usually on the local MLS.
3. Owner-occupants bid first during an exclusive priority period. The listing shows the period and its deadline.
4. Bids go through a HUD-registered broker. HUD doesn’t show properties itself. Brokers register with the FHA Resource Center and receive a HUD-issued identifier (NAID) that lets them show homes and submit bids.
5. HUD’s contractor reviews the bids and accepts the best acceptable offer, giving owner-occupants priority during their period.
6. If unsold, the home moves to an extended sales period open to all buyers, including investors.
7. The buyer closes on HUD’s contract and timeline.

Homes that remain unsold for 180 days may be offered to local governments for $1 plus closing costs, according to HUD.

Who can buy a HUD home?

• Owner-occupants who’ll live in the home as their main residence, during the priority period and after it. You’ll sign a certification that you intend to live there.
• Investors, once the owner-occupant period ends, if the home is still available.
• Local governments and FHA-approved nonprofits, which in some revitalization areas can buy directly before public listing.

Good Neighbor Next Door: 50% off for some public servants

Through the Good Neighbor Next Door program, HUD offers certain homes at 50% off the list price to full-time law enforcement officers, pre-K through 12th grade teachers and firefighters or emergency medical technicians. The rules come from 24 CFR part 291, subpart F:

• The home must be a single-unit property in a HUD-designated revitalization area.
• The buyer must live in it as their only residence for 36 months.
• Neither the buyer nor their spouse can have owned residential property in the year before the bid, or have bought under the program before.
• The buyer signs a second mortgage to HUD for the discount, which is reduced by one thirty-sixth each month and disappears after 36 months of occupancy.
• With FHA financing, the down payment can be $100. Earnest money is 1% of the list price, between $500 and $2,000.

HUD’s Good Neighbor Next Door page adds that the buyer must work for a federal, state, local or tribal government or an accredited school, in a job that directly serves the locality where the home is, and must certify occupancy every year. Each eligible home is listed through the program for seven days. Eligible homes are limited and change often; check HUD Home Store regularly if you qualify.

Financing a HUD home

HUD listings indicate whether the home can be bought with FHA financing in its current condition, with a repair escrow, or only with cash or other financing because of its condition. For homes that need work, HUD points buyers to the FHA 203(k) rehabilitation loan. Since November 4, 2024, the Limited 203(k) allows up to $75,000 of repairs, according to FHA’s 2024 changes. Get preapproved for the right loan type before bidding. See financing a bank-owned home for the options.

What to check before you bid

• Condition: HUD sells as-is, won’t pay for repairs and strongly urges buyers to get a professional inspection. Utilities may be off; ask your broker how inspections are arranged.
• Repair costs: get estimates for anything visible on your walkthrough, and price them into the bid.
• Permits and hazards: check permit history and fire and flood zones yourself, because you won’t get the usual seller disclosures.
• HOA and taxes: confirm dues and the property tax you’ll pay at the new assessed value.

Our REO due diligence guide applies to HUD homes as well.

How to bid well

• Know the deadline. Bids during the priority period are reviewed at set times shown on the listing.
• Bid from evidence. Use comparable sales and your repair estimate, not just the list price.
• Use the closing-cost help. If you need HUD to contribute toward financing and closing costs, include it in the bid; on most sales HUD allows up to 3%.
• Be ready to close. HUD’s contract sets the timeline, and extensions can cost money.

HUD homes in the North Bay

HUD homes come up irregularly in Sonoma, Napa and Marin, because they depend on FHA-loan foreclosures in each area, and higher home prices mean fewer FHA loans than in lower-cost regions. When they appear, they draw owner-occupants looking for a price below renovated homes. Setting up an alert is the practical way to see them in time.

How Diamond Real Estate Group helps HUD buyers

We help you find HUD listings, set up alerts, check the home’s condition and price, and prepare a bid. On HUD homes, bids must come from a broker registered with HUD; we’ll confirm our registration with you before submitting any bid, and if needed coordinate with a registered broker. For the other government programs, see Fannie Mae HomePath and Freddie Mac HomeSteps, and for the overall buying process, our guide to buying bank-owned homes and short sales.

Questions buyers ask

Are HUD homes cheaper than other homes?

They’re priced from HUD’s appraisal of the home in its current condition, so they’re usually cheaper than comparable renovated homes, not cheaper than they’re worth.

Can I bid on a HUD home without an agent?

No. HUD accepts bids only through HUD-registered brokers.

Can investors buy HUD homes?

Yes, after the owner-occupant priority period if the home hasn’t sold.

Do I have to be a first-time buyer?

No, not for HUD’s standard sales. Good Neighbor Next Door does require that you haven’t owned a home in the past year.

Want help bidding on a HUD home? Contact us, or browse the bank-owned and short sale buying guides.

Sources & notes

• HUD: how HUD homes are sold
• 24 CFR part 291, subpart F (Good Neighbor Next Door); HUD: about Good Neighbor Next Door
• FHA 203(k) changes, Mortgagee Letter 2024-13

HUD’s procedures change; check the current listing and HUD’s site before bidding. This is general information, not legal or lending advice. Last reviewed October 2026 by Matthew Martinez.