USA: how HUD, Freddie Mac and IRS homes are sold by bid or auction

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Kooky

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A home sold by a federal body in the United States rarely goes under the hammer the way a film would show it. Some are sold by sealed bid on an electronic system, with no auctioneer in sight. Some are listed with an agent like any other house, with a waiting period before investors may offer. And some really are called out by an auctioneer, to a room of registered bidders holding numbered cards, with payment due in certified funds.

Which of these applies depends on who owns the home and how it came to own it. This guide takes four federal channels in turn and sets out, for each, who conducts the sale, who may bid, what a bidder must put down, how the winner is chosen and what the buyer receives. Every rule below is federal and is given as the body concerned publishes it. Worked examples are labelled as such and use invented prices.

Title 24 of the Code of Federal Regulations, part 291; Freddie Mac HomeSteps; IRS Auctions. Read in October 2026.

Four federal channels, four selling methods

The Department of Housing and Urban Development, HUD, sells the one-to-four family properties that the Federal Housing Administration acquires through foreclosure. Its rules sit in part 291 of title 24 of the Code of Federal Regulations. The method the regulation calls a competitive sale is a sealed bid, or another process the Secretary authorises, after public advertising.

Freddie Mac sells the homes it owns through HomeSteps, which the company describes as its real estate sales unit. These homes are listed in the multiple listing service by a listing agent and sold by written offer.

The Internal Revenue Service sells property it has seized for nonpayment of tax. Its auction pages say the Internal Revenue Code requires such a sale to be a public auction or a sealed bid auction.

Finally, real property forfeited under federal law is sold by two bodies. The Treasury sells what was forfeited under the laws it enforces, at public auctions run by a contractor. The U.S. Marshals Service, which handles forfeited assets of its own, says most of its real property is listed with a licensed broker instead.

Only two of the five rows put an auctioneer or an auction contractor in charge. In the others the sale is carried by brokers and agents, even when it is competitive.

HUD homes: a sealed bid filed by a broker

Part 291 opens the door wide. Under section 291.100, anyone may offer to buy a HUD-owned property, with two exceptions: members of Congress and delegates to it, and a non-occupant borrower who defaulted on the mortgage of that same property and caused the insurance claim.

The regulation then sorts buyers into two groups, and the sorting matters at every later stage. An owner-occupant purchaser is one who intends to use the property as a principal residence; a State, a governmental entity, a tribe, an agency or a private nonprofit also falls in this group. An investor purchaser is one who does not intend to use the property as a principal residence. Under section 291.205, a bid that does not show owner occupancy is treated as an investor bid.

HUD sets a list price for each property. According to section 291.100, that price is based on an appraisal, a Broker Price Opinion or an Automated Valuation Model, and an appraisal must reflect the market value of the property as it stands.

A private bidder does not send the bid to HUD directly. The regulation says competitive bidders other than governmental entities and nonprofits must bid through a participating broker, meaning a broker who has agreed to HUD's requirements, and that bids go through HUD's designated electronic bid system. There is no bidding room and no public calling of prices.

The bid period is generally 10 days, and HUD may lengthen or shorten it. A bid that arrives before the period opens is returned. A bid that arrives after it closes is carried into what the regulation calls the extended listing period, provided no acceptable bid came in during the bid period itself. The regulation also lets HUD treat all the bids received during a set period, or all the bids of one day, as if they had arrived together.

Owner-occupants are served first. For properties offered with an insured mortgage, section 291.205 gives owner-occupant purchasers priority for up to 30 days, as HUD determines. For properties offered without an insured mortgage, governmental entities and nonprofits come before other owner-occupants.

How HUD chooses the winning bid

HUD does not simply take the highest price. Section 291.205 defines a net offer: the bid price, less the financing and loan closing costs the bidder asks HUD to pay, less the broker's commission. HUD accepts the bid that produces the greatest net return and meets the terms of the offering, with priority to owner-occupants.

Two limits frame that calculation. Broker commissions on these sales may not exceed 6 per cent of the purchase price, except for cash bonuses HUD may offer on hard-to-sell properties. And help with financing costs, closing costs or commission is reserved for owner-occupants: the regulation says none goes to investors.

A worked example shows the effect. Assume a home listed at US$210,000 and two owner-occupant bids, both invented for the illustration. The first bid is US$205,000, asks HUD to pay US$6,000 of closing costs and carries a commission of 6 per cent, which is US$12,300. Its net offer is US$205,000 less US$6,000 less US$12,300, or US$186,700. The second bid is US$200,000, asks for no closing costs and carries a commission of 3 per cent, which is US$6,000. Its net offer is US$194,000. The second bid is US$5,000 lower on its face and US$7,300 higher in net return.

Several further rules decide the close cases.

• Identical bids. An owner-occupant bid beats an identical investor bid. Two identical bids in the same category are decided by lot.
• Full price. At HUD offices that use this procedure, an offer at the full list price that meets the terms is accepted when bids are opened, and the bid period ends there.
• Counteroffers. HUD may come back to bidders with a counteroffer, including a request the regulation calls "Best and Final".

Winning bids are made public. The regulation is precise about when the sale is actually agreed: acceptance is final only when HUD executes the sales contract, signed by the broker and the purchaser, and sends a copy electronically.

A property that does not sell is not withdrawn. Under the same section, properties unsold within 45 days of being offered are analysed again and may be offered again, and bids received in the extended listing period are considered together day by day.

Earnest money and condition at a HUD sale

Every HUD bid is backed by earnest money, a deposit that shows the bidder is serious. The bid must include the deposit or a certification from the broker that it is held in escrow. The amounts are fixed by section 291.205.

What happens to the money follows the fate of the bid. If the bid is accepted, the deposit is credited to the buyer at closing. If the bid is rejected, it is returned. If the buyer wins and then fails to close, the regulation says the deposit is subject to total or partial forfeiture.

On condition, the regulation is short: competitive sales are generally "as-is", without repairs or warranties.

Financing is where condition comes back in. Section 291.100 separates properties by whether an FHA-insured mortgage can be used to buy them. A property that meets the Minimum Property Standards is sold as-is with FHA insurance available. A property that needs no more than US$10,000 of repairs to meet those standards may also be sold as-is with FHA insurance, on condition that the buyer funds a cash escrow for the repairs. A property identified as uninsurable may be financed, within the FHA programmes, only with a rehabilitation loan under section 203(k).

One disclosure rule applies by age. HUD properties built before 1978 are subject to the lead-based paint requirements of part 35 of the same title.

HUD sales outside the bidding

Not every HUD home goes through competitive bids. Part 291 provides two discounted routes that bypass them, each reserved for a defined group.

The first is the direct sale. Under section 291.210, preapproved governmental entities, public agencies and qualified nonprofits may buy properties offered without an insured mortgage at a discount of not less than 10 per cent off the list price. These buyers must express interest within 5 days of being notified of a property and usually have 10 days to consider and inspect it. HUD may attach reporting duties and resale restrictions.

The second is Good Neighbor Next Door. HUD describes it as open to law enforcement officers, teachers from pre-kindergarten to grade 12, firefighters and emergency medical technicians. Under section 291.510, they may buy designated HUD homes in HUD-designated revitalisation areas at a 50 per cent discount from the list price, with a down payment of US$100 when the purchase is financed with an FHA-insured mortgage. Only single-unit properties qualify.

There is no price competition in this programme, since the price is fixed by the discount. HUD says each property is available through the programme for seven days, and that when several eligible buyers are interested the choice is made by random lottery. The regulation adds that HUD draws a winner and two backups, to be used in order if the winner cannot close.

The discount comes with conditions that last three years. The buyer must live in the home as an owner-occupant for 36 months. To secure this, HUD takes a second mortgage equal to the difference between the list price and the discounted price, and section 291.550 reduces it by one thirty-sixth for each month of occupancy. If the buyer sells or stops living there early, the remaining balance is due. Earnest money is 1 per cent of the list price, with a minimum of US$500 and a maximum of US$2,000.

A worked example, with an invented list price of US$160,000: the discounted price is US$80,000 and the second mortgage is also US$80,000. Earnest money is 1 per cent of US$160,000, or US$1,600, which sits between the minimum and the maximum. Each month of occupancy removes one thirty-sixth of US$80,000, about US$2,222. After 12 months, 24 thirty-sixths remain: about US$53,333 would be due if the buyer left at that point. After 36 months nothing remains.

Freddie Mac: a listed home and a first look

Freddie Mac's homes are not sold under part 291. The distinctive rule of its own procedure is the First Look Initiative. According to HomeSteps, for the first 30 days a home is listed in the multiple listing service, only certain buyers may purchase it: owner-occupants, Neighborhood Stabilization Program grantees, non-profits engaged in community stabilisation, and public entities and their partners. Offers from investors are considered only after those 30 days.

First Look does not cover everything. HomeSteps excludes multi-family homes, vacant land and homes with known extreme environmental conditions. An owner-occupant who buys under it signs a document called the Agreement of Purchaser (Primary Residence), and HomeSteps warns that signing it fraudulently may bring criminal or civil liability.

On the mechanics of an offer, HomeSteps says a buyer's agent approaches the listing agent, and that a buyer without an agent may call the listing agent, who will explain the process or refer the buyer to an agent. The offer must be in writing and signed and dated by all buyers. The package holds the sales contract, a pre-approval letter from a lender or proof of funds for a cash purchase, the earnest money and the HomeSteps addenda. The earnest money must be in certified funds when the contract is executed; personal cheques and money orders are not accepted.

HomeSteps says it responds to or counters complete offers within 48 hours on average. When more than one offer arrives on the same home at the same time, it moves to a procedure that looks very much like a single sealed round.

As with HUD, acceptance at that stage is not yet a contract. HomeSteps calls it an initial agreement and says legal acceptance occurs only when all parties have fully executed the contract.

IRS tax seizures: a live auction with a minimum bid

The IRS is the seller that keeps closest to the traditional auction. Its auction pages explain that the Internal Revenue Code, at section 6335, requires seized property to be sold by public auction or sealed bid auction, that the highest bid wins, and that the law does not let the IRS negotiate a sale beforehand. Nothing can be bought before the auction.

According to the IRS guide for first-time bidders, most sales are live, with bidders present. Occasionally a sale is by sealed bid, with every bid mailed in and all of them opened together. The document that governs each sale is its Notice of Sale: it describes the property, gives any minimum bid, states the format and the terms of payment, and says whether mail-in bids are allowed.

Viewing is limited. The IRS says that for real estate it is usually a matter of driving past, that the property carries a notice against trespassing, and that access is allowed only where the Notice of Sale says so.

Mail-in bids take part in the room. The IRS accepts them as a courtesy to people who cannot attend, on some sales only. At the auction, staff confirm that a mail-in bid exists but not its amount, and an employee bids on the absent bidder's behalf up to the highest mail-in bid received. A mail-in bid that gives a range must enclose a deposit calculated on its top figure; the IRS illustrates this with a 20 per cent deposit on a high bid of US$100, which is a cheque for US$20. Telephone bids are not accepted unless the Notice of Sale provides for them.

Payment is immediate and narrow in form. The IRS offers no financing. It accepts a certified, cashier's or treasurer's cheque, a U.S. postal, bank or express money order, made payable to the United States Treasury, or cash. It refuses personal cheques and credit cards. It adds no buyer's premium to the winning bid. Bidding first and paying later is generally not allowed; where deferred payment is offered, the Notice of Sale sets the terms, and the IRS mentions an allowance of up to one hour after the auction as a common one.

If nobody meets the minimum, the IRS guide says the auctioneer may bid the property in for the government, adjourn the sale for no more than 30 days, or return the property to the person it was seized from.

On 2 October 2026 the IRS auction site carried, among others, a half interest in a house with acreage in Henderson, North Carolina, with a minimum bid of US$81,480 and a sale scheduled for 28 October 2026, and a home in Lakeville, Minnesota, with a minimum bid of US$240,000.

What an IRS buyer holds for the first 180 days

The first of those listings, a half interest, points to the central idea of an IRS sale. The IRS says the buyer purchases the rights of the person whose property was seized.

The IRS spells out the consequences. Property is sold "as is" and "where is", with no warranty of title, quality or condition, and no later claim for adjustment or rescission is considered. Real estate is conveyed by quitclaim deed, a deed that transfers the seller's interest without guaranteeing it. The sale is subject to encumbrances that rank ahead of the federal tax lien. The IRS lists the encumbrances it knows of on Form 2434-B, and says it does not warrant that the list is correct or complete: research is left to the bidder.

This right of redemption comes from section 6337 of the Internal Revenue Code, and section 6338 governs the deed. On the day of the sale the buyer receives a Certificate of Sale. If the property has not been redeemed after 180 days, the buyer surrenders the certificate and is issued the deed. The IRS warns that changes made to the property during the redemption period are at the buyer's own financial risk.

A worked example gives the order of magnitude. Assume an invented purchase price of US$100,000 and assume the interest runs day by day over a 365-day year, which is an assumption of this example and not a formula given by the IRS. Interest at 20 per cent a year is US$20,000 for a full year. A redemption after 90 days would return the US$100,000 plus about US$4,932. A redemption on the 180th day would return the price plus about US$9,863.

Occupation is a separate matter. The IRS says possession, rent and the removal of occupants are governed by the law of the state where the property stands, and refers buyers to a lawyer on those points.

Treasury forfeitures and the Marshals Service

Forfeited property reaches the market by another road. It was not seized for a tax debt; it was forfeited because of a violation of federal law.

The Treasury says about 300 public auctions a year are held across the United States and Puerto Rico to sell property forfeited under the laws it enforces or seized for nonpayment of IRS taxes. For real property, it has designated CWS Asset Management and Sales as the prime contractor that maintains and sells what has been seized and forfeited. The properties come from three enforcement agencies: IRS Criminal Investigation, Homeland Security Investigations and the U.S. Secret Service. The Treasury says these auctions are open to the public, that no real estate broker is needed to bid, and that all proceeds are paid into its forfeiture fund.

The U.S. Marshals Service takes the opposite approach for most of its real property. It says such property is generally listed with a licensed broker at fair market value and advertised on industry websites and on the site of its Real Property National Contractor. The volume of its forfeiture work is large: the Marshals Service reports that it received 9,973 assets and disposed of 12,381 in 2025, across all kinds of asset and not only real estate, and that in 2025 it distributed US$475 million to victims and claimants and shared US$602 million with state and local law enforcement.

What these sources do not settle

Each channel leaves points to the documents of the individual sale.

For HUD, the sections of the regulation on competitive sales set no closing deadline, and the earnest money above US$50,000 is a local decision within the range. For Freddie Mac, the addenda every offer must include are not listed on the HomeSteps page on making an offer, which tells buyers to ask their agent, and the 48 hours is an average for a response, not a deadline for final approval. For the IRS, deposits, payment deadlines and the consequences of a winning bidder failing to pay are set by each Notice of Sale; the IRS also notes that its general answers may not apply to acquired property or to judicial sales. For Treasury forfeitures, the deposit and closing terms sit in the contractor's general terms of sale, which were not read for this guide and are not described.

HUD's own page on homes for sale points to several other federal sellers; their terms were not read here and nothing above should be carried over to them. And everything in this guide is federal: foreclosure auctions conducted under state law, and the licensing of auctioneers, are matters for each state and are outside it.

A federal home sale is defined less by the house than by the seller: the same property would be bid on blind, offered on or called out in a room depending on who holds the title.

Kooky, from Shaka

Kooky edits Agents Estate and builds Shaka, the payment router he made for real estate professionals. One payment comes in, and every agent, agency and party in the deal receives their signed share on closing date.

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