HUD offer question, increasing chances of winning bid

I have been searching all over the internet and can't find the answer to this... Hypothetical situation: Person 1 puts a bid in on a HUD property for $30K using a buyers agent, person 2 also puts a bid on the property for $30K BUT uses the listing broker. Both offers are cash. Will HUD be more likely to accept person 2's offer because he used the listing agent and HUD doesn't have to pay a fee to the buyers agent? I know HUD always goes with the best net offer (most money in their pocket). Would the net be better for HUD if someone didn't use a buyers agent???

Cheers to whoever answers this as I failed to figure it out after extensive google searching...

Thank you BP! :D

J Scott

Real Estate Investor · Atlanta, Georgia

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Sep 10 '11, 04:40 PM

I don't know for certain, but I would imagine that the listing agent would collect both sides of the commission if there is no buyer's agent involved...

But again, just a guess...

J Scott, Lish Properties, LLC
Telephone: 770-906-6358
Website: http://www.123flip.com
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John Chan

Real Estate Investor · Cincinnati, Ohio

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Sep 10 '11, 05:15 PM

It doesn't matter. HUD is looking for the best NET offer. The buyer's agent can actually alter his commission. The higher the commission, the less that HUD nets. When HUD counters, they give you a minimum net price that they will take.

Brett O

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Sep 10 '11, 05:46 PM

So John Chan, you are saying that when my buyers agent puts the offer in he can choose weather to give himself a 1% or a 8% commission? I never knew that. I always imagined it was something like a fixed 3%, or a fixed $1250 or something. I'm in Ohio if that makes any difference.

The way I'm looking at this according to what you said is I find a stellar HUD house, I put my offer in, and because my agent chooses to give himself a 6% commission I get outbid by somebody else. Maybe the person that outbid me made the exact same offer but his agent only asked for 4% and that's why he won.

If that is the case that really annoys me...

I would love more clarification/opinions on the topic. As much as I currently like my buyers agent I would have to consider weather to use him or not if doing so is hurting my chances of winning a HUD bid.

John Chan

Real Estate Investor · Cincinnati, Ohio

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Sep 10 '11, 06:54 PM

I bid on HUD properties in Cincinnati, OH everyday as an agent or buyer. If I'm purchasing for myself, I put the buyer's agent commission as $0. I can choose a high commission for myself but then my broker would just take a bigger cut. The listing agent commission is set at either 3% or $1,250, depending on the property.

Many buyer's agents usually take the default HUD commission, which is 3% or $1,250. However, if the price of the property is 10k, and HUD is only paying 3%, which is $300, then the buyer's agent really isn't making anything after his broker gets a cut. This is why some agents modify the commissions on lower price properties. On higher priced properties, some agents even put their commission under 3% if it can make the sale by meeting a HUD counter (minimum net price).

If you need more help or need to put an offer on a HUD in Ohio, feel free to private message me.

Brett O

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Sep 10 '11, 08:29 PM

Thanks John, that helps clarify things for me. So if I were to make an offer directly through the listing agent instead of using my buyers agent would the listing agent get both sides of the commission, or would HUD just not have to pay a buyers agent commission thus making the net offer look better to them?

John Chan

Real Estate Investor · Cincinnati, Ohio

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Sep 10 '11, 10:02 PM

The listing agent would get both sides of the commission. It doesn't matter who is your buyer's agent, HUD is paying two commissions regardless. On HUDs, it doesn't matter if the listing agent gets both sides of the commission since the listing agent has no influence.

Chris Martin

Real Estate Investor · Holly Springs, North Carolina

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Sep 11 '11, 06:13 AM

Originally posted by Brett O

So John Chan, you are saying that when my buyers agent puts the offer in he can choose weather to give himself a 1% or a 8% commission? I never knew that. I always imagined it was something like a fixed 3%, or a fixed $1250 or something. I'm in Ohio if that makes any difference.

The way I'm looking at this according to what you said is I find a stellar HUD house, I put my offer in, and because my agent chooses to give himself a 6% commission I get outbid by somebody else. Maybe the person that outbid me made the exact same offer but his agent only asked for 4% and that's why he won.

If that is the case that really annoys me...

That's how the system works. See Line 6a and 6b on the bid submission form which has the seller paid commissions. Just click on the "Filling in the Bid Screen" on the left to get directly to the form.

John Chan has the right idea in putting in a $0 commission for his own deals. You can always ask that your broker pout in $500 or 1% or something comparable. That's what I did when MCB and HMBI were the broad listing brokers. I frequently won bids through my own broker that were not the highest price because Line 5 (seller paid concessions) was $0 and Line 6a was $500.