How Can Investors Bid on and Buy HUD Homes?

HUD homes can be incredible opportunity for investors to get a great deal on a property. Some investors are apprehensive to bid on HUD homes, because purchasing a HUD homes is much different than purchasing a traditional listing or even a REO. HUD also gives priority to owner occupant buyers over investors. However, once you know the HUD system it becomes very easy to submit bids and buy HUD homes. I am a HUD listing broker, and I will explain the best way for investors to bid on HUD homes so that they get the best deal. For an extremely detailed explanation of the HUD buying process, please see the investors guide to purchasing HUD homes.

Not only am I a HUD listing broker, but I am also an investor. To get more information on my rental properties, fix and flips and investing strategies, check out my complete guide to purchasing long-term rental properties.

What are HUD homes?

HUD homes are properties the United States Government repossess after they go through foreclosure. HUD homes were bought by the previous owners with FHA loans, which are insured by the government. When a bank forecloses on homes that have a FHA mortgage in place, there is a good chance those homes will become HUD homes. HUD sells these homes through local listing brokers like myself, and list them on lists all HUD homes currently for sale, which are not under contract. Once a HUD home has a bid accepted on it, it is taken off, and the status in MLS is changed to under contract. HUD homes are sold in an online auction format, and all bids must be submitted online by a licensed real estate agent who is registered with HUD.

When can investors bid on HUD homes?

HUD has very strict owner occupancy restrictions that I explain in detail here. On FHA insured HUD homes only owner occupants, non profits and government agencies can bid on HUD Homes. For uninsured homes the owner occupancy only bid period is the first 5 days. Investors can bid on HUD homes on the 16th day for insured properties and on the 6th day on uninsured HUD homes. When a HUD homes goes under contract, HUD stops the daily count for a home being on the market. If a HUD home goes under contract on the 11th day and that contract falls apart, then the home would come back on the market 11 days into the bid period, not 30 days or however the home has been for sale. An investor can see whether a HUD homes is insured or uninsured on the If a home is listed as only for sale to owner occupants, an investor can see when they can bid by looking at the period deadline. The period deadline will tell you when the last day of the current bid period is.

HUD will typically change the price on HUD homes every 35 to 50 days a home is actively on the market. HUD does not start a new owner occupant bid period when they change the price on a home. Investors can bid on the first day after a price change on a HUD home. If a home is in the owner occupant period, and you want to know when investors can bid, look at the period deadline on Hudhomestore. The period deadline is the last day for the current bid period.

Below is a breakdown of the HUD bidding periods.

For insured homes:

  • 15 day owner occupant, government agencies, and non-profit only bid period. The first ten days of this bid period HUD collects all the bids and subsequently reviews them on the next business day. Thereafter for the next five days, HUD reviews any bids received the following day (not sure if they review them the same day or the day after the bid is received during this time).
  • Investors can bid on the 16th day the home has been actively for sale. You can see this date by looking at the period deadline. Investors can bid on the next day after this deadline.
  • If the price is lowered, the owner occupant period does not start over. Investors can bid right away.

For uninsured homes:

  • 7 day lottery bid period. Government agencies and non-profits only can bid. The home is listed on HUDhomestore, but not on the MLS.
  • 5 day owner occupant, government agency and non-profit only bid period. HUD accepts bids the first five days and opens them the next business day. Investors can bid on the 6th day.
  • If the price is lowered, the owner occupant period does not start over. Investors can bid right away.

What are the penalties if investors bid as owner occupants on HUD homes?

A HUD home is federal property, which means any crime committed involving that property is usually considered a felony. HUD is very clear that any investor,who bids as an owner occupant when they are an investor, is subject to two years in federal prison and up to $250,000 in fines. HUD does prosecute investors who have been caught buying in the owner occupant period. HUD also may take away the ability for the real estate agent representing the buyer and their office to sell HUD homes. It is not just HUD who is looking for investors breaking the rules, but many times investors are turned in by other investors who watch these properties.

It is also a felony for investors to make repairs to a HUD home before they buy it or to move anything onto the property before closing.

Why are HUD homes a great way for investors to buy houses below market value?

HUD has an appraisal done on each of their homes before they are listed. That appraisal is usually the list price, and determines how much money HUD will take for the home. For whatever reason, many HUD appraisals come in very low compared to market value. If a HUD home makes it through the owner occupant bid period, they can be a great opportunity for investors. Uninsured HUD homes will not qualify for FHA loans, because they have more than $5,000 in repairs needed. The more repairs a HUD home needs, the better chance it will make it to the investor bid period, and uninsured homes are much more likely to be bought by investors. I have sold many HUD homes to investors, who were able to flip the house or get a great deal on a rental property because they needed a lot of work.

How much less than the asking price will HUD accept?

This is not an easy question to answer, because HUD uses different formulas in different areas of the country. In Colorado, HUD usually does not take less than 90 percent of the list price unless a home becomes an aged asset. HUD considers an aged asset to be a home that has been actively on the market for more than 60 days. Once a HUD home becomes aged in my market, HUD may take 80 percent of list price. If a HUD home is on the market for an extended period, they may take even less. However, the discounts are figured on a case by case basis and there is no across the board rule. In other parts of the country, I have seen investors buy HUD homes for 80 percent of the list price in the first month. On some aged assets, investors are getting HUD homes at 50 percent or less of the list price.

If HUD receives a bid that is close to what they need out of the home, they may counter a buyer. It never hurts to submit a low offer to HUD, the worst they will do is not accept your bid. HUD does not blackball investors who submit many offers, in fact HUD encourages all bids to be submitted no matter how low they are. I would not submit the same bid everyday, as there is not an advantage in doing that, and that might annoy the asset mangers for HUD.

How soon should investors submit a bid to HUD?

The key to an investor getting a HUD home is speed. There are many investors waiting for HUD homes to make it to the investor bid period, and most good deals will get bid on the first day an investor can bid. On uninsured homes, there is a trick investors can use to gain an advantage over other investors. HUD opens bids on the next business day after the 5 day owner occupant bid period is over. HUD does not open bids first thing in the morning, they usually open them mid morning or later depending on how busy they are. At the beginning of the 6th day, an uninsured HUD home will be available for investors to bid on, even though HUD may be accepting an owner occupant bid later in the day. Investors should always try to get their bid into the system on that 6th day because HUD homes tend to fall out of contract more than other properties. If an owner occupant cancels their contract, HUD will move on to any backup offers in their system that are an acceptable price before they put the home back on the market. If the house comes back on the market, an investor who bid on the 6th day could have their bid accepted, before any other investors get a chance to bid on the home.

This is why investors should always have their real estate agent mark “yes” to the question on the HUD contract if they want their offer to be in backup position. There is no penalty to buyers if they mark yes to backup position, and later on decide they don’t want the home if HUD accepts their backup bid. There is also a chance that HUD will accept an investor’s low bid if HUD changes the price on their homes, and that low bid is now in an acceptable range to HUD.

How does HUD handle inspection periods with investors?

A very important point investors must remember with HUD is HUD does not give back earnest money to investors, if they cancel their contract. HUD is very clear that they consider investors “savvy”, and if an investor cancels due to inspection items, the earnest money is forfeited to HUD. If an investor is using financing, and their loan cannot be completed, the investor may get half of their earnest money back. I always tell investors to expect to lose their earnest money if they cancel a HUD contract. HUD also does not pay for title insurance, or any closing fees that other sellers my typically pay for.


HUD homes can be a great deal for investors who know how the system works. It can take some time to get used to the system, and learn all the HUD dates and procedures. Many investors shy away from HUD, because it is different and can be confusing. This creates more opportunity for the investors who are willing to learn the HUD system.