HUD is short for the federal agency called the "Department of Housing and Urban Development." The agency offers homes to "owner-occupant purchasers"; in other words, to people who are buying the home as their primary residence.

However, there are opportunities for us, as investors, in this market. Owner-occupants have first crack at foreclosed properties. But, if these re-possessed properties aren't sold, then we can have a shot at them. In this session, I'll show you how to approach this market. HUD Repossessions A HUD home is a 1 to 4 unit residential property acquired by HUD as a result of a foreclosure action on an FHA-insured mortgage. When this occurs, HUD repossesses the property and offers it for sale to recover the loss on the foreclosure claim.

All HUD properties available for purchase by the public are offered for sale at Internet listing sites. Go to www.hud.gov to find these sites. They're maintained by management companies under contract to HUD. The site also provides complete information on HUD rules, programs, and properties and can direct you to realtors in your area affiliated with the HUD programs.

Real estate brokers registered with HUD may submit an offer and contract to purchase on your behalf. HUD pays the real estate broker's commission, if included in the contract. At the time of this writing, the highest maximum FHA mortgage is $362,790 while the lowest maximum amount is $200,160.

Generally speaking, the conditions of HUD homes range from average condition to terrible. Foreclosure is never a happy time for the former owners so they may not have kept the homes in good condition or even damaged them. In addition, if the properties are vacant, there may be damage from vandals.

To present an offer on a property, you must make it through a realtor representing HUD in your area. Contact that realtor and arrange for a walk-through of properties to find out what condition they're in.

HUD prefers to sell its properties at fair market value. However, the condition of these properties does vary. So, if you're really on top of local property values, you may be able to find some real bargains. Financing for HUD Homes HUD doesn't make direct loans; instead, it works with lenders in a variety of programs. As an investor, you may be able to get a property for 10% down. HUD tends to like offers that are a cash-out; that is, you find your own outside financing.

If a HUD home is in really terrible condition, you may be able to get a fix up "allowance" from HUD. The allowance may take the form of a price reduction or a special loan. To get the allowance, you must make it part of your purchase offer.

In the event HUD wants to move a property quickly, you may be able to get a price reduction ("bonus"). So, if you've got your financing in place and can close within a week or so, you can get a real bargain. Do Your Due Diligence! Always have the property inspected by a professional before you commit to a purchase. In fact, HUD doesn't like to tie up homes with contingencies that involve inspections so you'll need to have the inspection done beforehand, anyway.

Key Point: Understand HUD rules and regulations thoroughly before making offers for foreclosure properties. Also, establish good relations with local HUD-affiliated realtors so you can stay on top of the market.

Jack Sternberg