HUD Homes Q&A

HUD Homes Q&A

HUD has a streamlined process for winning bids. There are many differences that you need to be aware of before making an offer on a HUD Home. Below you will find the most commonly asked questions home buyers like yourself will need to know and understand before make an offer on a HUD Home.

HUD Home Buying Process:

How do I know if my bid has been accepted?

Winning bid notifications will typically be sent within 24-48 hours of bid deadline. Daily bid result postings may be available on the HUD Home Store website.

What happens after I find out I have the winning bid?

If your bid is accepted, the sales package must be received at the appropriate HUD Resources office within 2 business days of bid acceptance. The package may be hand delivered or sent in through overnight mail or delivery service to assure timely delivery. You will be given specific instruction when you receive the HUD documentation. Make sure you carefully read everything so you fully understand all the requirements. Failure to provide HUD with exactly what they need will cause your winning bid to be canceled.

When can I make an offer?

HUD requires all homes to be on the market a minimum of 10 days before any offers can be reviewed. All bids received during the first 10 days are opened and reviewed simultaneously on the 11th day. If no acceptable offers are received at that time, the home is available for future bidding. New bids received are reviewed daily, Monday – Friday until the exclusive 30day owner-occupant period expires. On the 31st day, properties are then available for all bidders, including investors.

Some HUD homes are located in HUD-designated revitalization areas and are first placed into the Lottery program for nonprofits and government agencies or in some cases for the Good Neighbor Next Door Sales Program. If no acceptable bids are received after 7 days in the Lottery program, these homes will be moved to a 5day owner-occupant exclusive listing period. All offers received during this period will be reviewed simultaneously on the 6th day. If no acceptable offers are received at that time, the home is available for future bidding. New bids received are reviewed daily, Monday – Friday. The HUD Home Store website will indicate which HUD Homes participating in these programs.

What is owner-occupant?

An owner-occupant by definition is a purchaser who intends on occupying the property they are buying as their full time, primary residence.

A non-owner occupant by definition is a purchaser who does not plan to occupy the property as their full time, primary residence. This includes second home buyers, any trust purchases, special entities who will hold title and all investors.

What is an FHA case number?

An FHA case number is a unique 10-digit number assigned to all FHA loans through Case Number Assignment on the FHA Connection website. All HUD Homes have an FHA case number assigned to them.

What does “AS-IS” mean?

All bank owned homes come with an “AS-IS” disclosure. Because the home has never been occupied by the current owner, in this case HUD, they can not provide you with the customary disclosures you would receive if you purchased a home from Mr. and Mrs. Smith. The banks take a position of “AS-IS” as a matter of liability.

The “AS-IS” disclosure is put in place so you, as the buyer, understand you will be purchasing the home, in most cases, without any repairs being done by the seller. Nor will there be any disclosures about the property condition made by the current seller (HUD).

What disclosures will be available when I purchase a HUD Home?

There are a few forms that you will not see in a traditional real estate purchase that HUD makes a part of their buying process. These documents will be specific to the property and can be found on the HUD Home Store website.

  • Listing Disclosures and Repairs: This document reflects any repairs that need to be made to the home and gives you the total dollar amount HUD will allow for the “escrow repair” value.
  • Property Condition Report (PCR): is a brief property inspection report which provides information on the condition of the major mechanicals of the home (i.e. the heating/cooler, plumbing, sewer electric, etc).
  • Lead-Based Paint Disclosure: any property built before 1978 is required to have a lead-based paint disclosure. The seller is obligated to disclose any known facts pertaining to the existence of lead-based paint and/or lead-based paint hazards.

Can I do a home inspection on a HUD Home I want to buy?

Yes. In most HUD transactions, the buyer is allowed to conduct all customary inspections within a specific inspection contingency timeline. However, there are a few differences you need to know about the inspection process:

  • If you want to do an inspection on a property, you must complete the For Your Protection: Get a Home Inspection Document.
  • A general walk through can be done prior to the bidding process, however, formal inspections can not be done until the seller has signed the HUD contract package.
  • After the sales contract has been fully executed by all parties, an electronic copy will be emailed or faxed to you or your real estate consultant. They will also include a Utility Turn On Request form. In order to activate the utilities for the home inspection, this document will need to be completed and returned as instructed.

I haven’t decided who I want to use for my loan, can I still make an offer on HUD property?

Although shopping around for a home loan is always a good idea, you will want to have your loan approval in hand before making an offer on any home. HUD will not consider your bid without a Pre-Qualification Form. Not all HUD Homes are eligible for financing. Make sure you verify this before you make a bid on a HUD Home.

If you will be financing your purchase, HUD will require an Appraisal Report Request Form, which is unique to HUD Home purchases. This document will need to be filled out and signed by your loan officer and sent back with your completed HUD contract package. To see a sample of this form, please reference page 13 of the sample HUD contract package.

What if I plan to pay cash?

If you are planning to pay cash for the property, you will need to provide a copy of your bank statement or an official document which supports the offer you are making in available funds. The “proof of funds” must be in your name (or the name of the person/company on the contract) and it must be dated within the last 30 days. In some cases, an exception can be made if you are pulling money from an investment or account that only provides statements once a quarter.

What if my FHA appraisal requires repairs?

Again, you need to verify the eligibility of the home before you make a bid – do not make an offer on a HUD Home that does not qualify for financing. HUD will in most cases determine a dollar amount they are willing to offer for repairs, if repairs are needed. HUD calls this an “escrow repair.” This dollar amount will need to be noted in section 4 of the HUD contract.

If during your inspection period, the property is found to no longer meet the Minimum Property Standards (MPS), HUD may at their option, perform additional repairs (if more than already agreed to), or cancel the contract and return the your earnest money.

Can I ask the seller to pay my closing costs?

Before you decide to include seller concessions in your bid, make sure you ask your loan officer how it will impact your loan. Most FHA/VA guidelines have a cap on how much you are allowed to receive as a concession. HUD will not pay more than what is allowable by FHA/VA guidelines, which is customarily 3% of the purchase price.

HUD does not have a set rule on how they handle seller paid concessions, however it must be presented in your initial bid. This means that even investors, cash buyers and second home owners could be eligible for closing cost assistance.

How long do I have to close on a HUD Home?

HUD will allow for a 45day escrow period, except if you are going to use an FHA 203K Rehab Loan. In that case, you will be allowed a 60day escrow period.

How much Earnest Money do I need? Will HUD take a personal check?

Only certified checks or money orders will be accepted by HUD as earnest money, made payable to “HUD or Purchaser’s Name”. It is important to remember, you must reference the FHA case number on the certified check or money order.

  • If the property you are purchasing is $50,000 or less in sales price, the required earnest money deposit will be $500.00.
  • If the property you are purchasing is $50,001 or more, the required earnest money deposit deposited will be $1,000.00.
  • All vacant lot purchases require earnest money to be 50% of the agreed sales price.
  • Earnest money MUST be included with your completed HUD contract package.

What is a pre-diem?

If you require an extension to the escrow period, HUD will grant a 15 calendar extension, however they will charge a per-diem. A per-diem is a daily fine HUD will charge for the extension.

  • $10.00 per day on purchases under $24,999
  • $15.00 per day on purchases between $25,000 and $49,999
  • $25.00 per day on purchases greater than $50,000

Will I have to sign an Owner Occupant Certification?

HUD requires all winning bidders to sign a form called an Owner Occupant Certification to ensure proper handling of purchases by non-owner occupants. This form is to help prevent fraudulent transactions where a buyer may say they plan to occupy the property but really have no intention of living there as their primary residence. The Owner Occupant Certification “certifies” that as consistent with your initial offer, you are in fact a true owner-occupant. Please note, if you are working with a Realtor, they will also be required to sign the Owner Occupant Certification.

You will also be required to provide a cover sheet with your completed contract package. HUD is going to ask you for a complete address, social security number and a phone number. Some buyers may not feel comfortable providing this information to HUD however it is a requirement for the paperwork. If you are making an offer through an LLC or a special entity name, be prepared to provide your company’s tax ID number. Unfortunately, not agreeing to sign/complete the paperwork will only cause your offer to be rejected or canceled. There are never any exceptions and this is a must when purchasing a HUD home.

Can I choose my own title company?

In most traditional real estate sales, the buyer is allowed to choose which title company will handle the escrow and transfer of sale. However, with HUD Home purchases, HUD will always designate who the closing agent (or escrow company) will be.

In all Real Estate transactions there are specific addendums and documents that must be used to ensure the home transfer is done legally and accurately. When purchasing a HUD Home, there are a few required addendums which you may not normally see in a traditional home purchase.

  • Conditions of Sale: Located on page 5 of the HUD contract package, you will find all the legal terms and conditions of the contract with HUD. Make sure you read this page very carefully so you have a clear understanding of what you are agreeing to in writing.
  • Radon Gas & Mold Disclosure: This document is used to disclose that HUD is selling the property “AS-IS” and has no information regarding the existence or non-existence of Radon Gas and/or Mold. If either of these two conditions are of concern to you, you are encouraged to perform separate inspections specific to the discovery of Radon Gas and/or Mold. To see a sample of this form, please reference page 7 of the sample HUD contract package.
  • Forfeiture and Extension Policy: This document clearly outlines how your earnest money will be handled during the escrow process and what will happen should you need to cancel or extend the agreed upon closing date. Make sure you read this document very carefully so you are fully aware of HUD’s policy regarding earnest money deposits. To see a sample of this form, please reference page 9 – 11 of the sample HUD contract package.


To review a sample HUD contract package for an owner-occupant purchase, click here.
To review a sample HUD contract package for a non-owner occupant or an investor purchase, click here.

Contact Information

Photo of Nate Martinez Real Estate
Nate Martinez
RE/MAX Professionals
20241 North 67th Avenue, Suite A1
Glendale AZ 85308
Fax: 602-532-7352

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