HUD Bidding Question

9 Replies

I'm a little confused about how HUD handles backup bids when evaluating offers and how that should affect my bidding strategy. On the day HUD decides to do a price reduction, do they go back and look at all the backup bids that they have on file along with any new bids submitted for that bidding period before awarding the property, or do they just look at the new bids? I'm trying to figure out if I need to be submitting my bid every day so that I don't miss out on a price reduction, or if I just wait to hear from them once they have my best and highest on file? Thanks for the help!

You need to submit it every day if you're trying to time that price reduction. They will only look at active offers otherwise.  Now they will send your broker an email if they lower the price on a house that you had previously made an offer on and your offer is now close.  

But they wont' award a house to anyone unless you had put in an offer the previous day/night.

So basically, if you know a price reduction is going to occur soon - and along with the price reduction the usual discount bump as well, and you want to get the house before everyone else sees the discount, then put in your offer every day.

I've done that myself several times.

1) House is listed for 120k and is coming on the 60 day mark. They're currently countering at 102k net to hud (15% off the list).  But I know that when that 60 day mark hits (or pretty close), they will discount the list price 10% to 108k and will bump the discount off the list they'll take to 20%.  So they should accept 86,400 net to hud.  I then add some odd numbers just in case someone else out there knows and I put my offer in at 86,787 or something. I have my realtor put it in every day.  

And there have been houses I've gotten that next day for my offer price based on that formula. Which means nobody else out there ever got to see that the price was dropped from 120k to 108k and very few people even know you can get those kinds of discounts.

So if you see a house that sits awhile and can make it to that 60 or even better 90 day mark, you can get some great discounts - especially if you time it right.

I just got a good deal on a hud a little over a week ago. I wasn't putting in every day but I was putting it in almost every day. Thing was listed sept 14 for 141k.  Dropped down to 126,900 on 11/4. I put in 85k net to hud for about 2 weeks right after there. For the first two weeks, they kept countering me at 110k, not a chance.  And then monday, they came back and accepted the 85k net to hud.  1453 somerset beecher il. Its a 1350 sq ft 2bdrm/2bath duplex unit built in 2010. But it has a good size basement that I'm going to finish to add two more bedrooms. Should appraise out between 140k to 145k. Will easily rent for 1450/mo.  

The upstairs needs paint and to replace the carpet in one of the bedrooms and thats about it. Basement finish will be very rudimentary. I'll use the foundation walls for the walls and will spray the ceiling black. Just tile the floors with some cheap tile and frame up some of the other walls and call it a day. Just enough to qualify for finished space with the appraiser. 

But thats the kind of discounts you're looking at with hud if the house can make it thru to that 60 and 90 day periods. Originally listed for 141k and I got it for 85k net to hud (the actual bid ended up being a little over 90k once its grossed up).

Hi @Mike H.

Your information is very informative. I just posted a similar questions then found your answer here. Anyway, I have a different question now. Is there a way to resubmit a bit or do I have to fill out all the information again every time I put in a bid?

Thanks,

KH

Thanks Mike! That's just the information I was looking for. Can I anticipate a price reduction around the 30 day mark or will that not happen until it's closer to 60 days? Sounds like you got a great deal on that duplex, I'm hoping I'll be able to find some deals like that on HUD as well!

I can only speak to illinois. Here they don't reduce the list price until it hits 60 days or so. Doesn't mean other areas aren't different. And they do have exceptions too so just keep an eye on the site.

But there is no better way to get those kinds of discounts than you can get from hud - at least not on stuff that is listed on MLS.

There are no longer exact timetable for price reductions now a set amount of the reduction. It used to be 10% every 30 days

Additionally, there is no benefit to placing a bid daily.  As Long as the box allowing the offer to be considered a backup offer is checked, at some point your lower offer might be manually received and accepted 

My realtor has always checked the backup offer option and I have never been awarded a house based on that - even if my offer was MORE than their counter offer. I do get an email with the new number that they will accept even if it was a house I bid on two months ago. But I still have to submit the bid that day and wait for it to through the next night in order to get it - which means any other bidders would have received the same email and now they can see the new price as well.

Now maybe its a regional difference there too. So I should have said thats how it works in Illinois at least in my areas.

In terms of discounts, again, if you look at the stuff at Illinois, they are very consistent. Initial price drop of 10% runs at about the 60 day mark and then follows with 10% price drops every 30 days thereafter. Its not exactly 30 days but pretty close almost every time.

In terms of discounting, that also seems to be fairly consistent as well. So not sure what you're seeing in texas, but here in illinois, its real easy to figure out the formula. That doesn't mean they don't deviate from that formula every now and then but I would guess that 90% of the time, they come in right at it.

Its real easy to test. Find a property thats been on the market for 60 or say days and see if it doesn't have a price reduction of 10% already or doesn't get one in the next few days. 

Then start submitting a low ball bid so you can see what their counter is - but not too low or you may not even get a counter. Keep submitting it every day so you can see when their counter changes.  Do this on a handful of properties and you'll figure out the formula real quick.

Those numbers look to be accurate here in Kentucky as well. They've kept countering me at 85% net to HUD of the list price on the property I've been bidding on that's been listed for around 30 days. A recently sold listing received a 10% price reduction somewhere around the 60 day mark from what I can gather from the site and the original MLS listing.

A follow up question, once my initial bid has been rejected and I know what their counter is, should I just wait until I anticipate a price reduction before starting to resubmit my bid on a daily basis, or should I be submitting daily regardless of the age of the listing?  Thanks again for the help!

@Mike H.

Your 10% reduction seems to work with the current property I am bidding on. I will keep watch for this property and hopefully get it once they lower it low enough. Thanks for the info.

Thanks,

KH