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What is a HUD Property?

When looking for a home to purchase, you may come across HUD REO properties.

REO stands for real estate-owned property: a type of property that has failed to sell at a foreclosure auction, has been claimed by the lender and is up for sale again.

If that property is backed by a government mortgage, it’s a bit different.

The Department of Housing and Urban Development, or HUD, pays off the remaining mortgage and then puts it up for bid. In short, a HUD REO home—also known as a HUD home—is a property without liens sold by the government often well below market value.

Locating a HUD REO

HUD has developed a quick and easy method of advertising its homes to the general public at, which lists available HUD REO properties throughout the country. It also lists the name and contact information of the asset manager in charge of the property.

Along with regular listing information, the HUD’s site will tell you the listing period, eligible bidders and FHA financing eligibility.

How to Buy

Buying a HUD REO property is different than buying a traditional home. Here are some key things you’ll need to know when looking to purchase one:

  • You’ll need to use a REALTOR® or broker who is authorized to sell a HUD property. McNaughton Real Estate has authorized agents.
  • There’s a bidding process. At first, the property is available only to owner-occupants—investors who don’t intend to live there can’t bid at this time. If there are no acceptable bids or any offers at all during the initial bidding period, the bidding is opened up to the general public—which then includes investors.
  • You won’t see what other offers are made on the property.
  • You will need to include earnest money.
  • They are sold as-is, without a warranty.

Completing the Purchase

If HUD accepts your bid, it will notify your broker. HUD will give you a settlement date, usually 30 to 60 days after the bid is accepted. If you do not have enough cash to buy the home outright, you will have to arrange financing and should work with a mortgage lender as soon as possible.

HUD properties can be financed through a conventional loan or an FHA loan.

If you back out or cannot pay for the home during the settlement period, you will lose the earnest money. It’s a good idea to get pre-qualified even before you place a bid in order to avoid problems later.

Special Purchase Programs

HUD offers special discounts on HUD homes to government workers and government entities.

The Good Neighbor Next Door program offers some HUD properties at a 50% discount to law enforcement officers, firefighters, emergency medical technicians and public school teachers. Eligible houses for this program are in revitalization areas, which are often low-income neighborhoods that need improvement.

Eligible participants must commit to live in the property for 36 months and use it as their primary residence.

HUD REO properties not sold within six months are offered to local government agencies and nonprofit organizations for only one dollar, to be used as part of community revitalization efforts.


An agent at McNaughton Real Estate can help you make this process easy if you find a HUD home you want to purchase. Call our office at (479) 442 – 9099 or visit our website at



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