A “HUD home” is a residential property acquired by the US Department of Housing and Urban Development (or HUD) as a result of a foreclosure action on an Federal Housing Administration (FHA) insured mortgage. HUD becomes the property owner and offers it for sale to recover the loss on the foreclosure claim.
That’s it! In other words its very much like a Real Estate Owned (REO or bank owned) property except HUD is handling the sale instead of a corporate lender. Thus… HUD Home.
One significant difference between a HUD Home and a Real Estate Owned property is how the sale is handled. HUD does a blind auction.