Buying HUD Foreclosures

22 Replies

I have recently came across a possible deal that I am considering making a offer on. It is a HUD foreclosure. I would purchase it to remodel and then resale the home. What is the process when dealing with HUD? What are some tips when dealing with HUD?

The process while not difficult has strict timelines and requirements.  Only and I mean only:

-Use a Broker(You cannot purchase without one) that has a lot of experience with HUD homes specifically

-Use a title company that has experience with HUD. You choose the title company. Things must be done Hud's way and hud's way only and many title companies refuse to comply therefore the property does not close

@Thomas Weidner You for sure need an agent. Can’t buy it by your lonesome. Also, their usually is a period where only owner occupants can bid. It’s usually a 10-20 day period. After that period is over then investors can make offers through a licensed broker. I pray all goes well for you.
@Thomas Weidner I’ve bought them personally and assisted clients with them. Yes, go ahead and make your offer, whatever if may be, and HUD will respond with a counter giving you their current minimal acceptable bid (net) amount to HUD if your offer is below that threshold.

I currently reside in a home that I purchased as a HUD foreclosure. The first 15 days are reserved for owner occupants to make offers. But generally, the HUD price is close to the market value. Mine had been on the market for at least 6 months and drastically reduced. You are REQUIRED to live in the property for 1 YEAR unless you tell them you are an investor! Yes, they make exceptions but mostly for things like job transfer, illness, etc. However, I have been given an exception because I have the worst neighbor ever on the planet. Make sure you have financing pre-approval BEFORE you place the bid as they want the letter from the lender pre-qualifying you 2 DAYS after the bid is put in. You can always offer less than the listing price. My understanding is that HUD opens all the bids received the day before at one time and the highest bidder gets the property - if it is above their listing price. I have no clue if they do counter-offers. If like mine, it is now at a price that is attracting a lot of attention, you're not likely to get it for less than listing price as they'll be looking at multiple bids. For instance, mine was listed at $275k. I went to see it over the weekend. On Monday, it was lowered to $250k and the flow of viewers went way up. I offered $261,500 to make sure I got it and it worked. (I had been willing to pay the $275k.) Total fixer upper BTW.

Originally posted by @Thomas Weidner :
@Greg H. Have you flipped HUD properties in the past? Is it possible to get these properties below listing if it has sat on the market awhile?

Yes, I have done hundreds. The automatically accepted number is a net to HUD of 88%. How long has it been on the market ? Number of price reductions ?

Originally posted by @Thomas Weidner :
@Brit Hale if there is multiple offers do they just automatically take the highest bid?

Highest net to HUD wins even if it is a dollar. No counters or highest and best. The HUD counters is just an invitation to rebid

88% net to Hud is the only number for automatic acceptance. A lower number might be acceptable at some point 

@Jason Hirko thanks for this info. It was very informative! Do you know what happens if you put in a bid lower than asking?Do they except it or tell you the minimum number they will take as someone stated ealier?

@Thomas Weidner They used to have a formula that if your bid was below their minimum acceptable offer, but higher than a certain threshold, they would counter with their lowest number. But they have since changed it to most of the time saying  "Your offer isn't high enough, please submit a higher offer." Once the property price has been reduced once, they are more likely to give you an actual counter offer.

@Thomas Weidner

HUD will almost always counter with the generic 87-88% net to Hud. There are some scenarios where they do not but it is rare and the explanation is long !

Keep in mind “the counter” is not a counter at all as you cannot accept it. Your option is to rebid the next day and hope you do not get beat out. Like I said, a dollar is a dollar to Hud 

You can put in a lower number and it might get accepted at some point. Days , weeks or months. However, if they receive a higher offer during that time you are out. Your lower offer will never be automatically accepted 

I am not sure that it is accurate that HUD accepts the highest offer, based only on my experience. Many years ago I bought a HUD home for a residence. After I moved in the neighbors knew what I had paid because it was in the newspaper. Some of the neighbors had relatives that bid on the home for their use as a residence at much higher amounts.

When I asked the HUD experienced realtor he said that locally HUD was under pressure to sell to a more diverse clientele--and I was a single female so that was likely an incentive for HUD to give greater consideration to my offer. And my offer also had a loan where as some of the other offers were cash.

Anyone know if HUS has diversity criteria to consider?

@Greg H. thanks for the information.  I always wondered why I got that house when other offered so much more.  The neighbors all thought I 'knew someone', but I knew that I did not.  It was the 1980's, so maybe there was consideration back then?

@Lynnette E.

The system has changed many times of the years. When I started buying HUD homes in the 1989, paper bids had to be delivered to the San Antonio HUD office and were manually processed. The agent had to call a phone number and listening to all the bid results to see who won. Back then there was an owner occupant preference where a lower bid was accepted over a higher investor bid. They did away with that preference years ago

@Greg H.

Hey Greg....seems like you are pretty familiar with this process. If the property was just listed, and during the exclusive owner occupant period, is there a chance that they would still accept up to 88%? Not sure how aggressive I should bid.


Originally posted by @Michael Bridgett :

@Greg H.

Hey Greg....seems like you are pretty familiar with this process. If the property was just listed, and during the exclusive owner occupant period, is there a chance that they would still accept up to 88%? Not sure how aggressive I should bid.


Yes, 88% net to HUD is the automatically accepted amount no matter the days on market or bidding period