Posted by phil fernandez on February 26, 1999 at 10:44:01:
Duane,
HUD contracts can not be assigned.
HUD Bid question - Posted by Duane
Posted by Duane on February 25, 1999 at 22:32:14:
A 2 bd/1 ba has been listed for three weeks now on the HUD list. Codes indicate possible lead based paint and some plumbing repairs needed. I’ve seen this home from outside, the bedrooms must be upstairs, downstairs has nice open living room and dining room with hardwood floors, plaster/stucco walls look to be in good shape and kitchen is large but only has old cabinets on one wall. Also has basement, sits on small lot with no garage. The front porch also needs a little work and the siding is that OLD shingle material.
Listed at $20,000, comps came in at $42,000. I will view the inside this weekend before bidding, but… I’m interested to know how far under the list price would someone bid? I would originally try to flip to rehabber, but if I can’t find a taker, I figure $10,000 should go a long way on this place. Would a $15,000 bid take it? Thanks.
Re: HUD Bid question - Posted by Irwin
Posted by Irwin on February 28, 1999 at 07:00:21:
I suggest you forget about formulas for HUD bidding and bid what makes sense to you as an investor. If you get it, fine. If not, you go on to the next one. Nobody can predict what HUD area offices will do on any given day with any given bid. Nor can one predict who else will bid that day and how much they’ll bid. I’ve been a regular HUD bidder for a while, but I’m still surprised sometimes at bid results.
Re: HUD Bid question - Posted by Tim (Atlanta)
Posted by Tim (Atlanta) on February 26, 1999 at 08:04:06:
The normal minimum accepted bid is 80% net to HUD of the list price. This means that as an investor, you take the list price, subtract the repair escrow (you don’t get that as an investor), multiply that number by .80. This will give you the net to HUD. After that, add back to the result the realtor’s commission. I currently pay 3% on my HUD bids. I deal with the Real Estate Asset Manager for HUD in the Atlanta area. The same company has real estate brokers and agents who will be happy to submit a bid for you. Also I am able to get the HUD inspection report from this company. This will tell you all of the things wrong with the property.
Good luck.
Re: HUD Bid question - Posted by Dave T
Posted by Dave T on February 25, 1999 at 23:03:12:
My experience is limited to HUD properties in MD. In that area, I have been successful with bids at about 15% below list. You have got to leave some room for your broker’s commission as well. HUD does have a minimum acceptable bid for each property, but they won’t tell you what it is. Align yourself with a broker who specializes in Government foreclosures, and follow his guidance on what HUD would probably accept.
Re: HUD Bid question - Posted by Tim
Posted by Tim on February 28, 1999 at 24:21:51:
Do you normally bid so you come in just over the minimum bid?
Do you find that the properties you bid on need a lot of work?
I didn’t bid on a condo last week that looked in pretty good shape - but the agent thought the list price ($109K) was not going to get the place (neighborhood comps at $118K).
Any advice, or just check 'em all out and bid what makes sense?
Thanks,
Reif
Re: Follow up - Posted by Duane
Posted by Duane on February 26, 1999 at 07:47:02:
You said that I need to leave some room for the broker’s commission. Are you implying that my agent needs to collect her commission from me? I’m in MO, and the realtor that I used to pull the comps, who would also bid for me, said that HUD pays a standard 6% commission.
Anyway, you’re thinking a bid of about 15% below list would do it? Thanks
Re: HUD Bid question - Posted by alafin
Posted by alafin on February 26, 1999 at 24:49:15:
bids can only be submitted by a hud authorized broker anyway. at least this is how its done in florida
Re: HUD Bid question - Posted by Tim (Atlanta)
Posted by Tim (Atlanta) on March 02, 1999 at 08:31:24:
I normally bid about $400 over the minimum. I have lost several bids this way, but I am willing to be patient and wait.
Most of the properties I buy do need cosmetic fixup (carpet, paint and appliances).
If your realtor is telling you to bid over the list price, get a new realtor. He is NOT looking out for you, he is only trying to make a sale (commission). In the two years that I have been watching the HUD list for my area, I have only seen ONE property where HUD made a mistake, and it was worth much more than list. This was a duplex that HUD had on the list as one unit. They were selling two units for the price of one. Needless to say, that property went on the first week of bidding for about 1 and 1/2 times the list price.
In summary, I never bid very much over the minimum. I am playing a game of patience, you have to have a good deal of self-control to make this work. This principle is also true when buying properties that are not on the HUD list. You must look for the bargains.
Happy hunting and hope to see you at the convention.
Re: Follow up - Posted by George (NoVa)
Posted by George (NoVa) on February 26, 1999 at 08:18:05:
HUD will take your bid and add in any expenses they will incur. Expenses include the Realtor’s commission, closing costs, etc. Once all the costs are added together, they will compare it against their minimum acceptable offer.
Your Realtor should be able to expalin all of this to you, and help you develop an acceptable winning bid.
Remember, you are not the only person bidding on this property.
Re: Follow up Example - Posted by Duane
Posted by Duane on February 26, 1999 at 08:57:31:
So if I understand you correctly:
HUD List $20,000
I bid $15,000
HUD adds 6% comm $ 900
HUD adds closing cost $ 1,000
I bring to close $16,900 ??
Thanks for the help, also, do you know if a HUD contract can be assigned?
Re: Follow up Example - Posted by Dave T
Posted by Dave T on February 27, 1999 at 11:10:42:
HUD pays the RE commission. The net to HUD is your 15K minus RE commission and whatever closing costs assistance you request in your contract. This final number should be at or higher than the HUD minimum for the property for your contract to be accepted.
In your example, if you win the bid, you bring 15K, plus your prepaid escrows, plus your closing costs to the closing table.