Let’s start this off by first saying just what HUD stands for: Department of Housing and Urban Development. HUD homes are received when a home that was foreclosed had a loan that the lender insured with the FHA (Federal Housing Administration). When it is foreclosed, the lender will file a claim with the FHA and then they pay off the claim and give the home to HUD to sale.

So, basically, it is just another foreclosed home. The economy is at it worst and has been crumbling over the past two years now, the amount of homes in this position is terrifying. Many individuals who have lost value in their home now worth more on their mortgage than the value of the property, which is causing thousands of people are the country to “strategically default” on their loans. A strategic default is when a borrower decides to stop paying their mortgage, not because they cannot afford it, but because they feel they will never recover equity in the home, and do this as a business decision.

While the majority of people falling behind on their mortgage do so because they have either lost a job or had a major reduction in income. These are probably the most common hardships that have caused banks to foreclose on their homes. If the bank feels they cannot afford the home even with a loan modification, they will seize the property and sell it through foreclosure auction. FHA lenders are also being ht very hard by this recession.

HUD homes can be a lot cheaper than regular homes just because they were repossessed and the agency needs to sell the homes quickly to get its money back. If the house has any damage, this will also be a factor in how much they will be asking for it. Many times repossessed properties will be on the market for half of what they were worth just a few years ago.

You will have to work with an agent to buy a HUD house, as HUD does not deal with individuals but only with agents. HUD houses can sell either by a regular auction or by a silent auction. A silent auction is when they take sealed bids up until a certain date and then sell the home to the bidder who offered the highest amount. If it is a silent auction, be sure and bid as much as you are willing to spend so that you will have the highest chance at obtaining the property.

In a regular auction, you will know what everyone else is bidding and to most people, this is a nicer way to buy a house via an auction. It is possible that the HUD house may have a set price they just ask for, just like an individual would when selling his or her own home. There are thousands and thousands of HUD homes for sale you will fin don the internet.

HUD also offers a program called the Good Neighbor Next Door initiative that is designed to help communities, by offering special low price deals to law enforcement officers, teachers, EMT, and firefighters to help revitalize the community. This program will offer up to a 50% discount on the initial listing price on the home, in exchange the borrower commits to reside in the home for at least 36 months. Read more about the Good Neighbor Next Door program at the HUD website.

So be sure and check out HUD homes if you’re shopping around for a place to live or even if you’re interested in a decent real estate investment. You never know, you could be close to the deal of a lifetime if you look into HUD houses!