HUD homes—properties foreclosed on after defaulting on FHA-insured loans—offer new investors a chance to buy undervalued real estate with high equity potential. In Q2 2025, with only 19 HUD listings in North Carolina, these opportunities are rare but rewarding. This guide explains the process, key considerations, and practical steps to succeed, tailored for beginners researching online.
Understanding HUD Homes
HUD homes, managed by the U.S. Department of Housing and Urban Development (HUD), are listed on the HUD Home Store website with property condition reports (PCRs). These reports detail a home’s condition but aren’t inspections, so hire a professional to verify issues like plumbing or structural damage. HUD sells homes “as-is,” meaning no repairs are allowed before closing, so budget for fixes post-purchase. For example, “de-winterization” (preparing pipes for inspection by removing antifreeze) may cost $100-$300.
Types of HUD Properties
HUD homes fall into three categories:
Insured: In good shape, eligible for FHA loans with minimal repairs.
Insured with Escrow: Need repairs up to $10,000, escrowed at closing with a 10% contingency (e.g., $5,000 repair needs $5,500 escrowed).
Uninsured: Require over $10,000 in repairs (e.g., new roofs or HVAC systems, often $15,000-$50,000), limiting financing to cash or hard money loans—short-term, high-interest loans from private lenders, ideal for quick purchases.
The HUD Buying Process
Follow this timeline to buy a HUD home:
Day 1-3: Browse the HUD Home Store, review PCRs, and shortlist properties.
Day 4-5: Secure financing (FHA for insured homes, cash/hard money for uninsured).
Day 6-10: Bid during the lottery (initial), exclusive (owner-occupants, nonprofits, government employees), or extended (all bidders, prioritizing owner-occupants) periods. Submit bids online with your name, Social Security Number or EIN, and contact details within 10 minutes. Agents aren’t required but recommended, as HUD pays their commissions.
Day 11-13: If your bid is accepted, submit a $500-$1,000 earnest money deposit within 24-48 hours, or HUD moves to the next bidder. Investors risk losing this deposit if they back out, unlike owner-occupants.
Day 14-20: Activate utilities in your name (with asset manager approval) for inspections, covering costs like de-winterization.
Why Invest in HUD Homes?
HUD homes are often priced below market value, offering significant equity.
Below-market pricing: Listings often 10–20% under market value.
Equity upside: Repairs can yield 20–50%+ appreciation.
Owner-occupant bidding priority: Live in the property and get exclusive bidding access plus up to 3% in closing cost assistance
Strategies for Success
Act Quickly: With only 19 listings in North Carolina, check the HUD Home Store daily and bid promptly.
Budget for Repairs: Plan for $5,000-$80,000 in fixes, especially for uninsured homes, and get contractor quotes pre-bid.
Bid as an Owner-Occupant: Live in the property to gain bidding priority and up to 3% closing cost assistance, but follow HUD’s occupancy rules to avoid penalties.
Find HUD Experts Online: Search real estate forums like BiggerPockets or local groups on X.com for HUD-savvy agents and lenders offering hard money loans. Verify their experience with HUD transactions.
Explore Good Neighbor Next Door: Teachers, firefighters, or law enforcement can get a 50% discount by living in the home for three years, though such listings are rare (e.g., one in New York currently).
NC-Specific Insight: Cities like Wilmington, Holly Ridge, Surf City, Sneads Ferry, Jacksonville, and Swansboro don’t get many listings. SO be prepared to act within days when listings go live.
Partner with Experts: Work with lenders and agents who understand local trends to optimize financing and purchases.
Real Estate Agent, Sean McDonnell
Conventional Loans: Drew Blakley
DSCR Loans & Fix and Flip Loans: Scott Wolf
All The Rental Info You Need: Heath Sizick
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In Q2 2025, HUD homes are a powerful way to build wealth. Visit the HUD Home Store or email heath@cedarridgemgmt.com to start your investment journey.
