Hey everybody found an REO that is being sold subject to HUD guidelines. What are they and is there still an investment possibility? should I pass? Thank you.
If HUD is selling it, that means they offer it first to owner-occupant buyers. Once that period is up, it’s on the “extended listing”, which allows investors to bid as well.
You can tell whether a property is on the extended listing by looking it up at HUDHomeStore.com.
The bidding process is a blind offer in a pool of others, from which HUD accepts. The unwritten rule is that HUD won’t take less than about 85% of asking price, but there are many factors that go into their decisions. My experience is that you are better off waiting until the asking price goes BELOW what you think a fair deal is, then OVERBID the asking price back up.
For example, if ARV is $200k and it needs say $30k of work, you want to pay in the ballpark of $110. If they are asking $130k and you offer $110, you will probably lose to another investor. Instead, wait for the property to fall out of contract a few times so they drop it to $100k, then you overbid at $110k.