HUD Homes
HUD Homes: Homes that are financed with an FHA mortgage loan that go into foreclosure end up being taken over by HUD, the US Department of Housing and Urban Development.Part of the cost of an FHA loan is MIP, Mortgage Insurance Premium, to provide an insurance fund to cover losses when an FHA mortgage is foreclosed. Every FHA borrower pays an upfront MIP as well as a monthly MIP premium. Currently the fees are 1.5% of the mortgage amount paid upfront plus .5% payable monthly as part of the monthly mortgage payment. The upfront payment of 1.5% can be financed into the mortgage. This insurance fund helps the FHA loan program to remain solvent and allows for the availability of mortgage loans with as little as 3.5% down payments. Once an FHA loan goes into default and the bank foreclosures on the property and takes title, the bank is eligible to sell the home to HUD and be reimbursed for the total amount owed on the loan. The bank is made whole and is out of the picture. HUD now owns the home and begins the process of selling the home through the HUD property auction system.
From the "About Buying HUD Homes" website:What is a HUD Home?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. HUD becomes the property owner and offers it for sale to recover the loss on the foreclosure claim. Who can buy a HUD Home?Almost anyone! If you have the cash or can qualify for a loan (subject to certain restrictions) you may buy a HUD Home. HUD Homes are initially offered to owner-occupant purchasers (people who are buying the home as their primary residence). Following the priority period for owner occupants, unsold properties are available to all buyers, including investors. How are HUD Homes sold?All properties available for purchase by the public are offered for sale at Internet listing sites maintained by management companies under contract to HUD. Any real estate broker 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. Are there any special programs?Properties in designated areas are available at a reduced sales price to law enforcement officers, teachers, firefighters, emergency medical technicians, nonprofits and local governments. Read more about these Good Neighbor Initiatives. Should I get a home inspection?We encourage you to get an inspection after your offer is accepted. All HUD Homes are sold AS-IS, without warranty. HUD will not make repairs nor pay to correct any problems. What about financing?Although HUD does not offer financing directly, some of our homes qualify for FHA-insured loans. Shop around for a lender to find the best loan terms. Find out how an FHA loan can help you. It mentions above about buying a home through a "HUD registered" real estate broker. Not all real estate brokers are registered with HUD. You need to find one that is if you are interested in bidding on a home offered through the HUD auction process. To find a registered HUD broker in your area, "Google" - "Find a HUD Registered agent" plus "Your 2-letter state code". You will find websites for the local HUD property management vendors. Look for a link that says, "Find a HUD Registered Agent", generally located on the left side of the site. For example, if you are looking for a HUD registered agent in the Albany, NY, area start with an Internet Search, "Find a HUD registered agent NY". Here is the results page. I clicked on the "HUD1.TowerAuction.net" website link resulting in a page listing cities in New York State. I then clicked the box for Albany and scrolled down to the bottom of the page and clicked on "submit". That took me to a page listing the HUD registered brokers and agents who handle offers for HUD auction property in the Albany area. 
You then can contact one or more of them to help you. My suggestion if you are interested further in buying HUD homes to first check all the links we've included above and study up on buying property through a HUD auction. Then call one or more of the HUD registered agents or brokers in your area and actually go and meet with them and have them explain the HUD auction process to you. Have them show you the bid forms. Have them explain the bid requirements. Have them go over the bid process. Ask them to show you an example of a HUD purchase that they were involved in. If they aren't helpful find another HUD registered agent or broker. You will find one eventually who is interested in forming a relationship with you and who will give you the information you need and the guidance to participate in a HUD purchase. Keep in mind that HUD pays a HUD registered broker up to a 5% real estate commission on your behalf in essence. You should not have to pay a HUD broker out of pocket unless it makes sense to do so. HUD accepts bids based on the "net" they receive, which would mean that HUD deducts the broker commission to arrive at the "net". If you agreed to pay the HUD broker out of pocket instead of as part of the transaction, it might increase the "net" to HUD such that your bid is accepted and someone else with the same or higher gross bid which included a HUD broker fee would have a lower "net" to HUD and you would win the auction. Discuss this and other bidding tactics with the HUD broker before bidding to give yourself the best opportunity to win the auction.
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