I bought my house from HUD nine years ago, and I do not regret it. I did not use the 203k loan.
I used local bank financing and I got the house so cheap that the bank appraised it for 120% of the purchase price, so with zero down payment I did not have to pay PMI. (I had saved a down payment but with no PMI I decided to keep that money in my emergency fund). I went from zero down to completely paid off in 6.5 years.
A few things to keep in mind when bidding on a HUD repo:
The bids are secret, so the property may sell for less than the asking price, or on some properties considerably more. Knowing your market (area and price range) is golden.
Or you can just keep bidding low and hope to get lucky. I took the opposite tack when I saw a house that I wanted and I knew it was well under priced, so I bid a few thousand above the asking price.
Pay attention to the “listing period”: Lottery, Exclusive, and Extended. Lottery is first week a HUD property is listed, it is open for bid only by nonprofits, police, fireman, EMS and maybe teachers. They (except the nonprofits) can only buy as owner occupants, not as investors.
This is actually a good thing, as when I bought I had watched the HUD listings in my city for a year and I never once saw a HUD house sell in the lottery period. So that week gave me time to check out the property, the neighborhood, and decide how much I'd be willing to pay for the house.
Exclusive is when you can bid if you will be living in the house.
Extended is when none of the above have purchased the property, so the bid opens to investors (flippers and landlords) also. A lot of the nice houses sell during the Exclusive owner occupant period, so if you are an investor this is a disadvantage.
http://hudgov.prod.parature.com/link/portal/57345/57355/Article/7488/What-are-the-listing-periods-for-HUD-REO-propertiesHUD sells as is. It will not make repairs, or lower the price, or issue any credit for repairs. So be sure to get a good home inspector. Minor defects discovered in your inspection do not provide an excuse to bargain further or to back out of the sale. You'd lose your earnest money. However, if your inspection uncovered a major and expensive flaw that was not previously disclosed, you could back out of the sale.
HUD puts both disclosures and inspection results (“PCR” = Property Condition Report) on the web page for each listed property. If you haven't already, learn to poke about on their website to get the info that they want to give away. Pay attention to the PCR. Sometimes a listed roof defect can be something as simple as a missing or damaged downspout. Disclosures (another document to look for on the web page) are for things like mold, termites, and foundation problems.
Unless you are an agent, you can not bid on a HUD home directly. You have to get a real estate agent. But not all real estate agents can place your bid for a HUD home. They have to have some type of approval from HUD (which I speculate is no more than having a real estate license, and registering with HUD).
When buying any repo, I suggest that you buy deluxe Title owner's insurance. Remember the autopen repossession scandal? I do, and I was damn glad I had the foresight to buy deluxe Title insurance.
