HUD initially lists foreclosure homes at what they consider a fair market price. According to the Texas Star-Telegram, HUD listings actually start at about 15% below the current value:
“The typical starting price for a HUD-owned home is 15 percent below market value. Only people who are planning to live in the home can bid on it for the first 10 days.”
It is possible to get an even larger discount by making a low-ball bid, using a budget agent, or taking advantage of a HUD incentive. See: Secrets of HUD Foreclosures.