| Individuals who want to invest in real estate often get excited by HUD foreclosures, thinking that they are going to buy a house for half of what it's worth. However, real estate investors know that this isn't too likely. However, there are opportunities for flipping these HUD foreclosures for a profit, so let's see where.
HUD foreclosures are properties that had loans on them guaranteed by the Department of Housing and Urban Development. When the owners default, they lose the house, the HUD pays off the bank and takes possession of the home, which they try to sell for market value.
In most markets today, they probably sell close to market value. Government bureaucracies may be inefficient and they certainly make mistakes, but then it isn't some bureaucrat putting the price on the houses. Normally HUD foreclosures are sold by real estate agents, and they should have some idea of what a property is worth when they recommend a listing price.
Also, when it comes to HUD foreclosures the HUD takes bids first from owner-occupant purchasers first. Only after this initial offering period are investors allowed to buy the property. In other words, if there is a truly underpriced home, an investor may never have a chance to buy it anyway.
Fortunately, there are some opportunities here for the real estate investors who are willing to do some work. You can sometimes flip HUD foreclosures for a good profit if you're willing to run the numbers and do a little work. Why work? Because HUD foreclosures are sold "as is," and oftentimes these properties have enough problems to scare away most home buyers.
So they may sell near "market value," but a beat-up house will often have a market value that leaves some room for a good profit after you fix it up. Real estate investors will pay only what works for making a decent profit.
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