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Chapter 2: The Pros and Cons of buying HUD Homes (full)

Although HUD homes offer an excellent nontraditional method of purchasing cheap homes, many consumers are unsure if this is the right path for their homeownership needs. Currently, the market is flooded with HUD government foreclosures, making this option a viable method of achieving homeownership today. However, before deciding to take this route, it is important that consumers closely investigate both the pros and cons of purchasing HUD homes. In this chapter, buyers can get a good overview of the pros and cons before deciding to take this route.

The Pros of Purchasing HUD Homes

For buyers who are considering the purchase of HUD homes, this option comes with many excellent pros to keep in mind. The following are a few pros that can be enjoyed by those who take this non-traditional home buying route:

Pro #1 – Many HUD Foreclosures are Available

One of the top pros buyers should consider when considering HUD homes is that many HUD foreclosures are available on the market today. With so many options available, buyers usually find it easy to find a property that they really like. This makes it easier for those dreaming of home ownership to find the home of their dreams. Of course, with so many options available, buyers must realize that they may need to do a good bit of research before finding the home they want, which can easily be done by using websites like

Pro #2 – Easily Find Government Foreclosures in Most Cities

Another pro for buyers of HUD homes is that it is easy to find government foreclosures in most cities today. For those who already have a specific area or neighborhood in mind, there is a good chance that a HUD foreclosure may be found in that area at a reasonable price. In fact, in many cases the previous homeowner simply moves out of the home, leaving it in excellent condition. In the event the home requires repairs or it has sustained some damage, some homes may come with money in escrow with repairs, while other homes may be eligible for specific programs that offer funding to rehabilitate and repair HUD properties once they have been purchased.

Pro #3 – Owner Occupant Buyers Have Priority

The fact that owner occupant buyers have priority when it comes to bidding on HUD homes is another pro for many potential homebuyers today. When dealing with government foreclosure listings, owner occupant buyers will have an advantage over investors, which rarely happens when bidding for other foreclosure properties. Many homebuyers looking for an affordable way to purchase cheap homes find it difficult to win bids against investors that can pay in cash. However, since investors cannot bid on these homes until the homes have been listed for 30 days, it gives owner occupant buyers a big advantage that can enable them to finally realize the dream of owning a home for a price that is affordable.

Pro #4 – Help with Buyer’s Closing Costs and Escrow Fees

Even if homebuyers find it difficult to come up with closing costs and escrow fees, help is available when purchasing HUD homes. In some cases, HUD may pay up to 3% of the closing costs for buyers, although this must be negotiated in the bid for the home. HUD will also pay the escrow fee, which can save potential homebuyers from $350-$900, depending on the specific situation. This is especially helpful for low-income and mid-income buyers who may not be able to afford purchasing a home in a more traditional manner. Today’s economy has made it difficult for many potential buyers to afford closing costs and escrow fees, since down payments and other costs are higher than ever. The help provided for those that chose HUD homes can make the difference between being able to afford a home and the inability to afford a home for many potential buyers.

The Cons of Purchasing HUD Homes

Although HUD homes obviously come with many excellent pros, buyers also must take time to consider the cons as well. Here are several of the cons that should be considered before deciding to purchase government foreclosures:

Con #1 – Not All HUD Homes are an Excellent Deal

Many of the HUD foreclosure listings offer excellent deals to buyers on cheap homes. However, buyers must remember that not all HUD homes are an excellent deal. Before deciding to purchase a government foreclosure, remember the importance of doing due diligence. Buyers should take the time to investigate the home price to ensure the home they are considering is a reasonable deal. Using the search service allows buyers to easily see if the home price listed is really a good deal. This enables buyers to choose the best deals instead of investing their money in homes that may not be a good deal in the current home market. Buyers should never assume that every HUD property is an excellent buy, which is why doing plenty of research is so essential.

Con #2 – Government Foreclosures are Sold “As Is”

It is important for buyers to realize that these government foreclosures are sold “As Is,” which means that the property may have suffered some damage or may need some repairs. In some cases, money may be offered in escrow to pay for certain repairs, but this is not always the case. Buyers must consider the potential problems that come with purchasing one of these homes to decide if the home is worth the money it will cost to purchase it and the money needed for repairs.

Con #3 – Problems Can Compound as Properties Sit

Last, as foreclosure listings sit, the problems they have can quickly compound, which is another con buyers must consider. While properties are usually secured to help keep them safe, certain problems may occur as the home sits waiting to be purchased. For instance, if a small leak exists around a window or in the roof of the home, a home in a warmer climate may quickly be overrun by mold, both on the outside and inside of the home’s walls. For this reason, a good inspection on the property is always important, which is a topic that will be discussed further in a later chapter.