are HUD counter offers meaningless?

8 Replies

I missed out on my first rehab project. It was a 3/2 with vinyl siding near my home - the perfect amoutn of rehab for me to start with. My realtor and I agreed the list price of $157,500 was accurate for ARV since it was in the 25% with no garage in the area (Roanoke, VA). So basically HUD offered at ARV. I figured if I could get it at $115,000 I could repair front stoop, paint, carpet, repair small drywall holes, replace a few fixtures and pay realtor fees to sell and still make enough to satisfy me for my efforts.

I made an offer of $101,000 with $500 deposit to HUD.

HUD countered stating "minimum acceptable net to HUD offer amount for this property as $133,875".

That was too much to make any profits so I sulked and waited a few days since that was over Thanksgiving.

A few days later the HUD website shows HUD accepted an offer at $112,800.

So my question is -- are the HUD counter offers meaningless? I lost this one because I assumed there would not be any need for HUD to be so deceitful. I don't understand why they countered with a specfic number that is not anywhere close to what they accepted.

Thanks in advance to anyone willing to advise.


I am not sure about the specifics on HUD, but I would have taken that response as a counter, rather than an absolute. It maybe that your offer was seen as a low ball offer, so that is the standard response for those. It looks like the possible discount is between 15% and 30%.

@Account Closed  

welcome to the site.

HUD will always counter. If you offered list price they would counter with a closing date change or counter your EM amount.

For EM HUD is looking for 10% of purchase price.

Good luck.

We also had a similar experience. They were asking for $140,000 in a house, but it was not worth it for us over $125,000, so we did offer $125,000 and they came back with a counter offer of $138,500.-

Sometimes I think the person responsible for these sells are just playing with us... 

@Account Closed HUD's counters are not counters as we know them, they are just the minimum offer that HUD will take at that time. If you rebid at their counter and a higher bid comes in, the higher bid will win. HUD's earnest money requirement is $500 for offers less than $50K and $1000 for offers greater than $50K. HUD will reduce the price after a certain amount of time, so you have to monitor on a regular basis. The scenario you wrote about happens frequently with HUD, it is just a function of how their asset managers work. Their are a lot of posts regarding the HUD bidding process on BP.

The counter you received from HUD is a generic "counter" usually in the 85-87% of the current list price and is in the range of what would be automatically accepted by HUD without Asset Manage/HUD further review. HUD typically will only accept 85-87% of the list price until the property has been on the market for 60+ days but I have seen some slight variance in the % accepted under 60 days

Keep in mind that HUD's counter is not really a counter but an invitation to re-bid that will not be opened until the next day with any other bids submitted. So even if you bid that amount if another bid exceeded your by $1 they would accept the higher

The accepted offer at $112,800 was a net to HUD and the actual bid could have been as high as $121000 or so when commissions and potential 3% closing costs are added back in

Earnest Money for HUD is always $500 for properties under $50,000 and $1000 above $50,000

Always, answer the counter offer with the price you can offer. Here is what happens, Let's say they can not take your offer. But the clerk in charge gets to know you, believe I have had situation that HUD called and said, this one property gone through the system 5 times, can you make it happen at this price. Go look at it and send me an offer for this price ASAP.

What happened to you, was they dropped the price and you did not know about it, than someone else took the deal.

Soon, someone will create a data scraper that it will go through their site and look to see anything changed from the day before than send you an alert for those.

Yes hud counters are meaningless unless it is within your budget ;)

Bidding on hud homes is more of a waiting game (depending on the location) if you're trying to get a "deal". If you wanna buy n hold just below market value than those counters will work. But if you're trying to flip Huds you're gonna lose properties you like for whatever reason... Owner occupant or someone willing to take less of a spread.

The key with hud is to keep bidding at your number.

But you do need to remember that there are two types of offers - one is a net to hud number, the other is an absolute number. Hud really only cares about the price net to hud - at least based on some of the discounts I see. They are almost always an exact calculation based off the net to hud price.

But the other issue you run into on the bidding is you just never know when hud is going to drop their price. You may put your bid in on monday and they review it and counter at 120k. Then the next day's bids on tuesday hud will drop their minimum acceptable bid another 12k and take it that very next day. 

I've actually seen it where an offer I submitted one week was rejected and another offer was accepted that same week for less than what I put in (both bids were net to hud) and they got it.

It wasn't that they were playing any monkey business at all. It was that they have to follow the HUD rules on discounting to the letter. And those rules include so many days on market, the area, the repairs, etc. There is a method to their madness.

So after that one deal occurred several years ago where I lost the house even though I was actually willing to pay 2k more, I now put my bids in every day or every other day (well my agent does).

I just keep submitting the same offer over and over. And,yes, eventually some of them hit. Its not that I'm submitting 10k on 180k houses though. That is never going to hit. But typically, I'm seeing houses that are overpriced at say 140k and I'm bidding 65k. They're probably worth about 110k in the condition they're in. They sit and sit and then hud drops the list price 10% and bumps the discount. Then they do it again if it sits another 30 to 60 days.

And thats usually when I start peppering the listing with bids. If a house has had at least one price drop and been on the market for 60 days or more, I'm guessing there's a 50-50 chance that I can get it for a discount of 60% NET TO HUD. I've had some at 55% and some at 65%. But that 60% seems to be in the ball park.

So if the list is dropped to 120k, I think I can get them for 72k net to hud - which works out to about 76 or 77k actual bid.

But believe me, nobody is playing games with the hud bids other than hud and the rules they create to come up with their formula. Those asset managers have little to no say in how/when they discount and how/when they lower their minimum acceptable bid.

And the best part is, you can get some unbelievable deals that way so don't rock the boat. :-)

Homepath discounts seem to top out around 10% at best. They just won't budge off their list prices and they are far slower to move off their list prices too. Sometimes it takes them 3 months to drop their list price......

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