Finding a bargain today isn't difficult due to the soft real estate market. There are plenty of investors who would like to see the foreclosure of homes as a great way to earn some money with all the HUD homes now coming on the marketplace. But, as an investor, you need to be aware of the limitations that arise through the purchase of these HUD homes.

After the subprime crisis that has increased over the past few years, the mortgages that are insured through FHA are becoming more popular with investors because of the potential for earning even more money. Keep in mind, though, that many of these homes are not in areas that are considered well-to-do areas. In addition, the homes are sold ‘as-is' with selling prices discounted based on the extent of repairs and renovations that are needed.

So, what is the process you need to follow to buy a HUD home? With a regular purchase of a home, the buyer makes a bid to the owner, usually through a realtor. This can be accomplished in a short time if the buyer and the seller are close in price. If not, then the deal could take longer or not be consummated at all. HUD homes are sold through a bidding process that puts investors in line behind intended owner-occupants. With a HUD foreclosure, the owner-occupant actually has the first right of refusal for the first ten days. Only after that time can an ‘outsider' makes a bid.

The HUD homes that are listed for sale on the internet can only be sold through HUD approved agents/brokers. HUD will sometimes pay for closing and sales commission costs. HUD will pay, in some cases, up to 5 percent for broker fees and 3 percent for closing costs. If the deal goes through a HUD-approved agent, all fees have the potential to be paid. But, these fees are subtracted from the net worth of the bid.

Then the investor must provide a deposit towards the offer, called earnest money, when they make their electronic offer. It can be as low as $500 for a home under $50,000 with the money going directly to the HUD agent should the bid be accepted.

With the bid accepted, there is a time line that must be followed. This timeline is specified by the closing agent with the correct sales contract having to be submitted within two days. Then closing will be set for between 30 to 60 days.

All this may sound good and expedient to the real estate investor. It might sound too good to be true to others. But, with all business transactions and investments, the you need to be wise and research the process. You should also know what you are getting into and proceed cautiously yet knowledgeably through this process. If you want to get more information about this process and the role an investor plays, go to: www.hud.gov/homes.