Like other types of foreclosure properties, HUD homes are generally sold "as is". Any required repairs identified, estimated, and disclosed to you up front as a potential buyer are the result of an FHA appraisal in the context of FHA financing. If you pay cash, then you don't have to worry about these issues. If you're using an FHA loan, then any required repairs are very much an issue. With standard FHA financing, any required repairs must be completed prior to closing. That leads to an impasse in many would-be foreclosure purchases, because the seller (a bank, or a government agency like HUD) is selling the property as is and will not make any repairs, and the buyer is prohibited from making any repairs until after closing. However, FHA rehab loans are available that allow qualified buyers to finance the purchase and the repairs into a single mortgage, and the repairs can be completed after closing. These rehab loans can be used for many foreclosure properties, regardless whether they are HUD homes. There is also a very special FHA program available only for HUD homes that allows minor repairs (up to $5000) to be escrowed into the purchase and completed after closing, without the extra expense and hassles of a rehab loan - and instead of FHA's normal minimum down payment of 3.5%, only a hundred bucks is required (yes, just $100). This is a great program, ideal for first-time buyers and anyone else who wants to buy a primary residence without putting down a lot of their own money.
Buying a HUD home is much better than buying bank-owned properties because you know the appraised value up front (HUD supplies a valid appraisal), you know the nature and estimated cost of any required repairs up front, the repairs can be financed into the purchase and completed after closing, HUD's paperwork is even-handed (unlike the one-sided contract addendums commonly required with bank-owned properties), and the bidding process is crystal clear. If you have any questions or would like to discuss this further, please feel free to contact me: James Wheeler, 813-600-3428. I'm an experienced loan officer at an FHA-approved lender, and I firmly support HUD's mission of promoting homeownership.