How to Wholesale HUD Homes: Government Property Opportunities
HUD homes (properties owned by the U.S. Department of Housing and Urban Development) can be excellent wholesale opportunities. These are foreclosed properties where the previous owner had an FHA mortgage. HUD sells them at auction-style bidding, often at significant discounts. But wholesaling HUD homes has specific rules and restrictions you need to understand.
What is a HUD home
When a homeowner with an FHA-insured mortgage defaults, the lender forecloses and files a claim with HUD. HUD pays the lender's insurance claim and takes ownership of the property. HUD then sells the property to recover their costs. These properties are listed on HUDHomeStore.com and sold through a competitive bidding process.
Can you assign a HUD contract?
No. HUD contracts explicitly prohibit assignment. If you buy a HUD home, you must close in your name (or your entity's name). This means traditional assignment wholesaling does not work with HUD properties. However, you can still profit from HUD homes using alternative strategies.
Strategy 1: Double close
The most common way to wholesale a HUD home is to double close. You buy the property from HUD in Transaction A, then immediately sell it to your end buyer in Transaction B. HUD does not care what you do with the property after you own it.
Key considerations:
- HUD requires a 30-day ownership period for investor purchasers in some cases (the "90-day flip rule" was eliminated, but check current regulations)
- You need funding to close Transaction A (transactional funding or your own cash)
- Factor in double closing costs when calculating your profit margin
Strategy 2: Buy, minor rehab, resell
Some HUD homes need minor work (cleaning, paint, carpet) to be marketable at a higher price. Buy the property, spend $5K-$10K on basic improvements, and resell at a markup. This is more of a quick flip than a pure wholesale, but the profit potential is higher.
The HUD bidding process
Exclusive listing period
For the first 15-30 days, only owner-occupant buyers, government entities, and nonprofits can bid. Investors cannot bid during this period.
Extended listing period
After the exclusive period, investors can bid. This is when you enter. HUD lists a suggested price (the "as-is appraised value") but will accept bids at any amount. Properties that have been listed for a while often accept well below asking.
How to bid
You must bid through a HUD-registered real estate agent on HUDHomeStore.com. You cannot bid directly. Find an agent experienced with HUD transactions — they understand the process and can help you bid strategically.
Bid strategy
- New listings in good condition: bid close to asking (competition is highest)
- Properties listed 30+ days: bid 70-80% of asking
- Properties listed 60+ days: bid 50-70% of asking
- Heavily damaged properties: bid 40-60% of asking (few buyers want these)
Analyzing HUD homes for wholesale potential
Run the same analysis you would for any wholesale deal:
- Calculate ARV using comparable sales
- Estimate repairs based on the property condition code (HUD rates properties as "insurable," "insurable with escrow," or "uninsurable")
- Calculate your maximum bid factoring in double close costs and your profit margin
- Account for HUD's required closing timeline (usually 30-60 days)
HUD property condition codes
| Code | Condition | Typical Discount |
|---|---|---|
| IE (Insurable with Escrow) | Minor repairs needed, FHA-financeable with escrow | 10-20% below market |
| IN (Insurable) | Move-in ready or close to it | 5-15% below market |
| UI (Uninsurable) | Major repairs needed, cash buyers only | 25-50% below market |
Uninsurable (UI) properties are the best wholesale opportunities because retail buyers and FHA buyers cannot purchase them. Only cash buyers compete for these, and many institutional buyers skip them. The discounts can be substantial.
Costs specific to HUD deals
- Earnest money: $500 for properties under $50K, $1,000 for properties $50K-$100K, $2,000 for properties over $100K (deposited within 2 business days of acceptance)
- Buyer's agent commission: HUD pays the buyer's agent (usually 3%), so your agent works for free to you
- Closing costs: HUD may contribute to buyer closing costs on some properties (check the listing)
- Inspection: HUD does not allow inspections before bidding. You bid based on exterior assessment and the condition code.
Finding HUD homes
All HUD homes are listed at HUDHomeStore.gov. You can search by state, county, city, zip code, and price range. Filter by condition code (UI for the best wholesale opportunities) and days on market (longer = more discount potential).
Related guides
- How to Wholesale Foreclosures
- How to Double Close Deals
- How to Calculate ARV
- Estimating Repair Costs
- The Complete Wholesaling Guide