One advantage of HUD Homes over most bank-owned foreclosures is the property condition report. HUD actually has somebody go through the home and create a 20+ page report disclosing defects that they are aware of. However they do say that the report is not a warranty, but only for informational purposes. The property condition report is a good start. It can alert a potential buyer to problems. But it is not a substitute for the buyer getting their own inspection done after HUD has accepted their bid.
First, with the buyers present for their own inspection, they know that the inspector will inspect the attic and the crawl space. I have seen problems such as mold in a crawl space and fire damage in an attic that were missed in a property condition report.
Second, the buyer can get an inspection that is done with utilities turned on. As an example, the person doing the property condition report will use a compressor to pressurize the water lines. That will show some problems, but it could also miss some. In one home that passed the pressure test, I observed a line that had frozen and busted. It was probably located downstream of a valve that was turned off for the pressure test. There is a drawback to depending on a report where the plumbing, electric and heating and air conditioning systems are not functioning.
Third, it is helpful to talk to the inspector rather than just read a report. If there is an issue, the inspector might be able to give the owner an idea of how serious the problem is or how quickly it might need to be fixed.
Bottom line: The property condition report is great, but not perfect. One of the reasons I like showing HUD Homes over bank-owned foreclosures is the property condition report. If you understand its limitations, it can be a great tool to help a buyer decide about a home.