I'm not an investor, looking at a particular HUD property as an owner-occupant. I'm using a real estate agent, who is registered with HUD and can make bids on my behalf.
House recently went from exclusive bidding period to extended, and I'm quite positive it will sit there untouched, until at least one price reduction (and probably past that). The list price is just way too high, especially for investors, so the only real competition is OO bidders like myself.
After reading valuable info in this forum, and cross-referencing reduced property prices on HUD Homestore against Zillow, I know that 10% for the first reduction is an accurate figure for the area I'm looking in. Where it gets fuzzy is - how much does HUD (their software, to be exact) expects to get, for the bid to be accepted?
While 88-89% Net to HUD seems to be the rule of thumb for newly listed properties, it's much less clear for those that have been reduced. Different posts here mention the following, quite different, tactics:
- bid 85% of reduced price (which means Net to HUD will be under 80%)
- bid so that Net to HUD is 80%
- 88% Net to HUD rule still applies after 1st reduction
Could anyone share actual experience with successful bidding after 1st reduction?
i can tell you the formulas for the process for the last 25+ years, but none of them apply today. My research does not show a set pattern of acceptance of the last several months .
-Price reduction are more random. Some are 20 to even 40%. The standard has always been 10%
-If you placed a bid previously, you would receive the generic counter by email almost daily. Seems to be more sporadic now
-The only bid that will automatically be accepted is 87-88%. At some point if no other higher offers are received, you offer may be considered
-Saying that, as an agent Hud no longer pays you a commission on a purchase. However, you can forfeit and reduce the price 3%. So there is a built in discount
Greg H., many thanks for the response. It appears that the money needed to have a bid accepted will be still too high after 1st reduction. I had a chance to look at the house before it even became foreclosed - extensive updating is needed, and there's a problem with septic, disclosed by the owners at the time.
Of course, the problem with sitting and waiting for 2nd reduction is that it might get much more attractive to everyone else, including investors.
First, let me thank you for all of the knowledge you have shared on the forums. I have been reading your posts for some time, they always seem to be friendly, genuine, and accurate.
I have been tracking HUD data in my state for about 15 months. Every day I download the Case List and Bid Results. I have noticed that for investors the most frequently accepted bid 88% net to HUD. But I have seen other percentages that seem to be popular too. For example there seems to be many accepted bids at 84% net to HUD, 79% net to HUD and 76% net to HUD. I have even seen an accepted bid of 25% net to HUD of the original list price.
I'm sure there is some value in the HUD data I've collected. I'm wondering if you could provide some insight into how to analyze the data I have collected? Historically what variables determine what the minimum accepted bid will be? Days on market? Number of price reductions? Listing period? FHA financing? Is it helpful to compare the minimum accepted bid to current list price or original list price? Any insights you could provide would be greatly appreciated.
Thank you again for you all of you contributions.
I am still a bit fuzzy on how to approach 1st and 2nd price reductions as well. Any help would be greatly appreciated.