NEW YORK (MainStreet) — Midway into the summer, Atlantan Lance Payne knew he did not want to spend another season in the heat and humidity of Georgia, but, as a retiree, he also knew he was in no position to go shopping for vacation getaways in pricey locations.

The Housing and Urban Development (HUD) inventory of foreclosed homes solved his problem when he found a condominium - in reasonably good condition - for $27,500 in Spokane, Wash. He paid cash, then he painted, put down new floor covering and now is installing new kitchen appliances. To boot, said Payne, for well under $35,000, he will have a perfectly nice unit in a decent part of town.

Payne is not alone. HUD is where homes can be bought with cash advances on credit cards and that is no lie. Every day HUD has for sale many thousands of foreclosed homes at prices that sometimes are in the hundreds of dollars. Rarely are prices over $200,000. Many condominiums and free-standing homes sell for well under $50,000.

What's the catch?

Good question, because there are several, said professionals who have been mining the HUD marketplace for many years.

One fact: rarely are homes found in the best neighborhoods, mainly because those typically are snapped up long before they could find their way into the HUD inventory. If your heart is set on Manhattan, this isn't for you. Exactly zero homes in Manhattan were in the HUD inventory in a recent check. Same for Venice Beach, Calif.

"It's the average to low end homes that typically show up in the HUD inventory," said Erica Ramus, a Pottsville, Penn. realtor who has handled numerous HUD deals.

"Most HUD homes are in average to poor condition," she added. "There are bargains, but you have to be very careful in your shopping."

Many of those homes also have been unoccupied for some months, sometimes years.

See a house - and there are many - for under $2,500 and, said Bruce Ailion, a Georgia realtor who has been involved in 60 HUD purchases in the past couple years, you'll find a typical scenario: "The roof is leaking, it has no doors, and the plumbing has been removed."

Most HUD homes are in much better shape than that, said Ramus, but she stressed that buyers need to go into buying a HUD house with open eyes and an understanding that the dwelling may need substantial repair before it is inhabited.

Don't think, however, that buying a HUD homes has to be an all cash deal. Many can be bought with the government's FHA financing - requiring as little as 3% down - but, advised Ramus, work with a lender who is familiar with HUD's idiosyncracies, because she has seen otherwise good deals fall apart because the lender just did not get that it is HUD's way or the highway. Period.

A sliver of good news: in some cases the houses may be sold with the possibility of also borrowing substantial fix up money. On the HUD site look for the notation "203K eligible...Yes." This can make significant repair monies available - sometimes exceeding the selling price of the home - if an appraisal shows that doing the work will be reflected in a bump in the home's value.

On that same site, look at the notation, "FHA Financing." If it says "no," the place is a total wreck, because HUD is saying it will not even think about lending on the property, cash only buyers need apply.

And never forget the HUD quirks. Swan Workman, who has recently bought three properties in Mississippi and who has offers in on "another 15," said he had one deal fall aprt because he filled out the HUD forms in black ink.

"It had to be done in blue," he sighed.

Even so, said Workman, the payoffs are worth the irritation. He sid he has bought very nice homes around Vicksburg, Miss. for "under $6,000" and, after some cosmetic repair, he's able to rent them out for $650 month and that makes the deal cashflow positive.

His advice to HUD shoppers: don't ever fall in love with a property and always, be ready to walk away from a deal if HUD won't accept the price you want to pay. "I'll walk away from nine for every one I buy," said Workman. "You need that attitude to succeed with HUD."

--Written by Robert McGarvey for MainStreet