Where Can I Find Available REO Property?

Each major owner of foreclosed homes lists its REO property in its own place: HUD on HUD Home Store (hudhomestore.gov), Fannie Mae on HomePath (homepath.fanniemae.com), Freddie Mac on HomeSteps (homesteps.com), the Department of Veterans Affairs (VA) through its contractor's site and the local MLS, and USDA on its resale site. For homes owned by banks and other private lenders, search the MLS (multiple listing service, the database agents use) through your agent. A real estate agent or broker submits your offer for most of these sellers (USDA also accepts offers through its servicing representatives), and HUD accepts bids only from a broker registered with HUD.

Where each seller lists foreclosed homes

A head start, or exclusive period, is the window when the seller considers offers only from buyers who will live in the home, plus some nonprofits and public agencies. Freddie Mac, for example, takes investor offers during First Look but considers them only after the 30 days end. These homes reach the market after a failed foreclosure sale; how foreclosure works explains that process. What an REO property is covers the pros and cons of buying one at all.

How do you buy a HUD home?

HUD Home Store says plainly that you cannot submit an offer on a HUD home yourself. A broker must register with HUD and receive a name and address identification number (NAID) before it can show HUD homes or submit bids. HUD Home Store has a broker search tool to find one.

Rules that change your bid:

• Owner-occupant status. You must certify that you will live in the home as your main residence for at least 12 months and that you have not bought a HUD home as an owner-occupant in the past 24 months.
• Exclusive period. The 15-day period applies to homes coded IN (insurable as-is) or IE (insurable with a repair escrow, meaning money set aside at closing for repairs estimated at no more than $10,000). Homes coded UI (uninsured, needing more than $10,000 of repairs) get a 5-day period, and HUD gives government agencies and approved nonprofits priority over owner-occupants on them. On insurable homes, HUD opens all bids received in days 1 through 10 at once, then reviews later bids daily.
• Winning bid. HUD picks the bid with the highest net return after any closing costs and commission it pays, as long as the bid meets HUD's terms for that home. Within 2 business days of winning, your broker must send the signed sales contract, a prequalification letter or proof of funds, HUD's addenda (add-on forms that modify the contract), and an earnest money deposit, the good-faith deposit credited toward your price at closing: $500 for homes priced at $50,000 or less, or $500 to $2,000 as HUD sets it for higher prices.
• Special programs. Good Neighbor Next Door sells some homes in revitalization areas at 50% off to teachers, law enforcement officers, firefighters, and emergency medical technicians who live there 3 years; the program's requirements covers eligibility. Some HUD homes also qualify for a $100 down payment with an FHA loan.

How do you buy from Fannie Mae or Freddie Mac?

The Federal Housing Finance Agency (FHFA) set the First Look period for both companies at 30 days in 2021. During it, only owner-occupants, public entities, and nonprofits can buy. Fannie Mae's owner-occupant certification requires you to move in within 60 days after closing and live there at least 1 year, unless Fannie Mae agrees in writing to an exception, such as a longer timeline under rehabilitation financing.

Fannie Mae (HomePath). Your agent must register on HomePath and submit the offer online; if you also register on HomePath, you can follow the offer's status. A prequalification letter or proof of funds is required before Fannie Mae accepts an offer, and earnest money is due within 2 calendar days of a signed contract. At least one named buyer must be a person, rather than only an LLC or other company, for the offer to count as owner-occupant. With multiple offers, Fannie Mae weighs owner occupancy, price, financing type, requested concessions (money you ask the seller to pay toward closing costs), and closing date. How to buy a Fannie Mae foreclosure walks through its contract.

Freddie Mac (HomeSteps). Your agent contacts the listing agent, who enters complete offers into HomeSteps' system. Include the sales contract, a preapproval letter (or proof of funds for cash), earnest money in certified funds (a cashier's or certified check, not a personal check or money order), and HomeSteps' addenda. Freddie Mac says it responds to most complete offers within 48 hours, but it does not start negotiating until a home has been on the MLS for 48 hours. First Look covers HomeSteps homes on the MLS except multifamily homes, vacant land, and homes with known extreme environmental conditions; the MLS listing shows whether a home qualifies. During First Look, you and your agent sign an affidavit that you will live in the home. Freddie Mac also sells some homes through online auctions on Auction.com and RealtyBid.com.

VA, USDA, and bank-owned homes

• VA. VA acquires homes when VA-guaranteed loans end in foreclosure. Its contractor, Vendor Resource Management, lists them through local listing agents on the MLS and at vrmproperties.com, and VA directs buyers to a local broker of their choice.
• USDA. The USDA resale site lists homes and farms from Rural Development and Farm Service Agency loans. Anyone can search, but an agent, broker, or servicing representative must submit the offer. Contact the local servicing office named on the listing to confirm the home's status and your eligibility, since the bidding method varies by property.
• Banks. Private lenders have no shared listing site like HUD Home Store. Ask your agent to search the MLS for listings marked bank-owned or REO, which name the bank's listing agent. Each bank sets its own addendum and offer rules.

Who can help you buy an REO property?

• A buyer's agent who handles REO sales. For HUD homes, the agent's broker must hold a NAID. Ask how many REO purchases the agent has closed and whether they know each seller's addenda. If you have no agent, a HomeSteps listing agent can explain the process or refer you to one.
• A lender, before you search. Most REO sellers want a prequalification or preapproval letter, or proof of funds, with or soon after the offer. Financing an REO property covers which loans work when the home needs repairs.
• A home inspector, booked in advance, since REO homes sell as-is and inspection windows are short.
• A closing agent. On a HUD home, you choose a closing agent that meets HUD's requirements.