Buying a foreclosed home: HUD Homes and bank-owned sales

Three ways a foreclosed home is sold

1. Before or at the auction. The foreclosure process is still running. Rules come from state law, as the next section explains.
2. After the auction, as real estate owned (REO). If nobody buys at auction, the lender takes the property and lists it. Fannie Mae calls its listings HomePath. Freddie Mac sells through HomeSteps, which lists homes for sale nationwide and says it offers homebuyers and select nonprofits “an exclusive first look at listings.” Fannie Mae’s HomePath site did not display its buyer terms without JavaScript when we checked on October 20, 2026, so read the current terms on each site before you bid.
3. From HUD. When a borrower defaults on an FHA-insured mortgage and the lender is paid the insurance claim, HUD becomes the owner and sells to recover that claim (Handbook 4000.1, Section II.A.8.o). These homes are listed on HUD Home Store.

Judicial and non-judicial foreclosure

A foreclosure is judicial when the lender must first get a court order, and non-judicial when a power-of-sale clause lets the lender sell without a court (Legal Information Institute). Law is set by the state where the home sits. Judicial cases “can even take several years.” Non-judicial sales follow statutory notice and waiting periods before the auction.

Federal rules add one check on timing: under Regulation X, a servicer may not make the first notice or filing for a foreclosure unless the loan is more than 120 days delinquent, with limited exceptions (12 CFR 1024.41(f)(1)). Everything else a buyer needs to know, such as how the auction is run, how title passes and whether an owner can redeem, is state law. See the pages linked in the last section.

Buying a HUD Home

As-is condition. HUD markets each home by its condition as listed: insurable, insurable with repair escrow, or uninsurable. Which category applies decides what financing you can use.

Who can bid when. The “exclusive listing period” lasts 15 days for insurable homes and 5 days for uninsurable ones. During it, only owner-occupant buyers, governments and HUD-approved nonprofits may bid, and HUD picks the winning bid with the greatest net return. If no bid is accepted, the “extended listing period” opens to all buyers, including investors.

Owner-occupant rules. You must certify that you will live in the home as your principal residence for at least 12 months, and you must not have bought a HUD-owned home as an owner-occupant in the past 24 months. A HUD-registered selling broker must submit your bid.

Special programs. Good Neighbor Next Door gives law enforcement officers, teachers, firefighters and emergency medical technicians a 50 percent discount on designated homes in HUD revitalization areas, in return for living there for 36 months and signing a second mortgage for the discount. With FHA financing the down payment can be $100. A separate “$100 Down” incentive also exists for HUD Homes with FHA financing.

Disclosures. For homes built before 1978, HUD provides lead-based paint information, and the broker must give you the EPA pamphlet.

Before you bid on any foreclosed home

• Inspect. As-is means you carry the risk. See home inspection cost.
• Check title. Read title search and title insurance explained for what to look for.
• Check occupancy. Federal law (Protecting Tenants at Foreclosure Act) requires a successor owner to give a bona fide tenant a 90-day notice to vacate, and lets tenants with a bona fide lease stay until the lease ends, unless the buyer will live in the home.
• Line up financing. Ask what the sale terms require before you bid. See FHA loans and mortgage preapproval.

Where states differ

States decide whether foreclosure goes through a court, the notice periods, how auctions run, whether the former owner can redeem the home and how buyers get title. Compare them in foreclosure by state, or read the state pages for Texas and California.