Hubzu bidding strategies

40 Replies

I have my sights set on a Hubzu listed property.  

They started the bid at 208k and with no other bidders, I bid to 210k at the last minute.  The reserve had not been met, and they Emailed the following day with a counter of 269k (appx 280 after the 4.5% buyers premium they charge).  I declined. 

Now, as expected, they relisted the house with a starting bid of 210k.  There are still no bidders, and it doesn't look like there will be.  

My question: Do I still bid the 210k to keep their system aware of my interest or just let the auction expire and keep watching until they lower the price (and potentially the reserve)?  I think the property is worth about 235k in its current condition.  

On a side note- does anyone know what percentage of the commission the buyer's agent receives?

Thanks!

Matt

@Matt Pieper  

Just bought a property of hubzu. 

From what I understand. The houses go through the auction process over & over again. The lower the reserve price every time it goes to auction. The problem there is no rhyme or reason on how much they are reducing it. But it is lower every time it goes through. I think it is all automated based on some metric they use. I think the offer email is also automated. I don't think anyone really knows if you are interested or not until a offer is accepted.

I think bidding on it is going to depend on how soon you want to acquire it. If you want it sooner than later I would not bid on it. It slows the process down. I personally was looking to push mine out so I bid every time.

One thing I recommend is to wait until ~16minutes before end of auction to bid. If you bid with less than 15 minutes on the clock it tacks on another 15 minutes.

I'n pretty sure that my agent got paid 3%. If you don't have a agent the seller keeps that portion. I made that mistake on the first auction property I bought and left money on the table.

I just closed on one last week as well. That's correct, I received a 3% buyer commission since I'm licensed and represented myself as the buyers agent.

I toyed around with them for 3 months on the one I bought. I agree with @Rusty Thompson . If no one is bidding, then I wouldn't bid either, then they will reduce the starting bid. However it seemed like they would only lower the reserve price that they counter with after 2-4 weeks of not getting a contract. It's very robotic and automated like he said.

I had to outbid people a few times, but just kept declining their counter until I got it to where I wanted it. One time it said it actually went Under Contract with another buyer. I put in a back-up bid, and eventually they offered it to me at the back-up bid.... Which I then declined. :)

Do your homework if you haven't yet. This is very different from other REO purchases. Their contract is very one sided, with no contingencies.

@Matt Overbee is correct about the one sided contracts. They also make you escrow a pretty large EMD. Mine was ~2500 on a 80K property. The only difference between my experience and Matts is that it was reduced every auction.

Yep, I think it's 3% EM generally.

Here's what I typically see. They start out crazy high. Then they come down over time. When nobody bids on the auction a couple of times is when you typically see them lower the reserve. Sometimes, I think they just lower it because the seller is getting feedback from the agent that it needs to be lower.

But once you get some bidding on the property and it goes back to auction because the reserve isn't met, they tend to start the bidding again at the highest point of the last auction.

Best bet is to try to bid about every other auction so you can see what their reserve is but let it go on some auctions so that noone bids so they continue to lower the starting price and the reserve.

As an fyi: I've only gotten one property off the site but it was a phenominal deal. And I did that very same thing. 

It had an initial listing price of 141k. Their minimum was 165k.  I watched the house for several months until the price was even remotely worth considering.  I think I jumped in when it hit 124k just to see what it would take (they were still in the 140's).

I kept at it for another 6 weeks or so bidding on about every other auction. Finally got it for 99k plus another 4.5k or so in fees (103k was my actual price). Put in 20k in rehab. It appraised out at 200k. I kept it as a rental at 1650/month. Had it rented before I even closed on the purchase. It was that good a deal.

So stick with it. And, as long as nobody else as bidding on the house, don't be afraid to let it cycle thru without a single bid. But don't do it too often either just in case their reserve/counter might actually be in your range.

There's always a balance to this - in getting a great deal versus trying to get a bigger discount. As long as I'm getting a great deal, I don't worry about the discount I'm getting.  I'll pay over list price if the deal is still great over list (although that never happens).

Good luck. There are deals to be had on that site. Few and far between for me. But even if its one deal every 5 years like this one, thats still one unbelievable deal every 5 years. :-)

Thanks all for the insight.

I'll keep after this one and if I have any other info on my experience with the process I will post it.

@Mike H.

Hi mike! I read your bio - seems like your doing great! Congrats!

Can I ask how you picked up 10 houses in 8 months? Are u a cash buyer? Thx

@Drew Denham  

re: Cash Buyer.

No. I wish. I am an opportunistic buyer maybe. But definitely not a cash buyer.
If I had to put down 25% plus pay rehab costs out of pocket on every deal, I'd have
about 3 houses right now instead of 31 (will be 32 as of next week).

Nope, I'm just a bottom feeder that watches every source of deals there is and have been able to get lucky that, lately, there seems to be one really great deal almost every month.

My last 5 deals have come from: HUD, hubzu, homepath.com. They were all on MLS. Although the one hubzu deal seemed to have slipped thru the cracks on MLS and wasn't there for several months - which is why I think I was able to get it so cheap.

But my model is very simple. I have to be all in (purchase plus rehab) at 70% or better. I buy with hard money and they fund the entire purchase and the entire rehab - as long as my ARV is under 70%. I pay points/fees/closing costs out of pocket.

That limits my out of pocket on most deals to anywhere from 5k to 8k. In this run, there were a couple of houses I went over that out of pocket just to make the numbers work and because I really wanted the house.   The real reason I did it was because I was so anxious to hit that 20 property mark before the prices went too high and it priced me out of the market. 

That 20 number was really my dream goal when I started 7 years ago. Who knew I'd end up going on such a crazy run like this. Since the end of October of last year thru the 27th of this month (when I close on #32), I will have added 13 homes. And this was after averaging 3 homes a year every year for 6 years.  So that is not a typical pace for me by any means.

I think the deals were always out there. But I never had the kind of financing options I have today. Great hard money lenders. And my end loan financing has really opened up. The local banks are all doing the refi's for me. Whereas, in the past, one bank might be doing them and the others were saying they couldn't do any more. Then that one bank would stop and another would start up again.  It was a huge task trying to find end loan financing during the bust period.  I spent ten times more of a time trying to find financing than I did trying to find deals. 

And I'm sure this run will end. When I first started using one of my new hard money lenders just at the start of the run, he came out to see one of the houses/deals of our 2nd or 3rd deal. He pulled me aside and told me that I needed to take advantage of this run and keep buying every single one of these that I could - because there's no way it was going to last forever.  

Whats helping is that I now have built up a really nice chunk of cash flow so that my rental income is now feeding the out of pockets costs on the deals. 

But I also cashed out my 401k and used most of it to feed some deals right before I went on this run. I really thought the home pricing was done for me so I figured it was ok to put that money into a couple of deals. Little did I know I would get this many homes.  I am now refinancing one of those houses to pull 20k of those funds back out. 

Every single dollar counts when it comes to my reserves and my ability to continue adding homes while I can.

Whats even more amazing is that the cash flow on the deals I've picked up during this run has been even better than on the deals I was getting during the bottom of the bust.

I think the rents have really gone up in my area and thats helping me quite a bit too.

I used to have a target of 350/mo gross profit (rent minus PITI). I'm now getting 400 to 500 a month in gross profit. Which, relatively speaking, is pretty good considering I'm all in on these properties at 5 to 7k.......

I have another recent post on BP showing the actual numbers on my last 3 deals. 

http://www.biggerpockets.com/forums/109/topics/152...

I have a couple of posts in that thread but one of the ladder ones shows the numbers on my last 3 deals - i.e. purchase price, rehab escrow, actual out of pocket, loan amounts, rents, gross profit.


Hi Matt Pieper,

I would be happy to look into this and answer any questions you may have.  Please send me your contact information to [email protected]

-Keith, Hubzu Customer Care

So if you bid the starting bid amount, are you then privvy to what the reserve price is?

Sam & Heather Jones 

No, they never show what the reserve price is. If you win an auction, and the bid is less than the reserve they will send you a counter offer usually after it's over, which will basically give you an idea of where they are. 

Thanks for the info guys, this has been helpful. I just ended an auction being the highest bidder but I didn't get an automated counter offer, just an email saying the bid on the property was unsuccessful. When you guys got the emails with the counter offers, were they in addition to the notification that your bid was unsuccessful? i.e. Did you get 2 emails or 1?

I have been bidding for weeks on a distressed property and have gotten the same run around that others have posted on this forum. The photos they had listed were not current. I enlisted the help of a local agent and then drove over 500 miles to view it myself. It was in MUCH worse condition - no flooring , at least 1/3 of the drywall taken out, appliances in disrepair or gone, all interior doors and facings removed due to water heating flooding the unit while it was bank owned. When I questioned Hubzu before I saw it in person- they stated their contractor had "addressed the needs" ( but that does not mean repaired). I am of the belief that they may have phantom bidders - as the only person that has bid other than me has been the very same person - and those bids appear right after my high bid has been refused and the property has been relisted at a lower bid. I have asked to place a standard real estate bid at a fair appraised price and have been ignored or refused. BTW - my customer service contacts stated they were in Philippines rather than India. Great potential property but no longer interested due to Hubzu practices.

Fouad, 

Only on some occasions do they send an Email stating a buy it now offer price.  Other weeks that Im bidding (Ive been bidding on and off on a specific property for over 2 months now), they will send the "Unsuccessful Bid" Email.  

When people say to plan on waiting a long time, they aren't kidding.  I expect this particular auction to last several months- without any rhyme or reason on the price.  

Matt

I just had an odd experience on Hubzu:

Week 1: Cute little house around the corner comes online. I wait (as suggested above) until :16 before the end of the bid. I have the highest bid, but the reserve is not met. I receive an email later (end of day or the day after) with a counter of $188K+fees ($198K) to my $144K bid (no thanks).

Week 2: The house appears again, this time with a opening bid $5,000 less. Once again, I bid :16 before the end, and leave the auction as the highest bidder. Again, an email, but with the same counter, $188K+fees ($198K). Fine, I think, since I'll play this game next week.

2 days later: I get an email that the house is under contract. The auction has been won at $189K (I assume plus fees). What? There were no other bidders?? How is this so? In the end, I think $199K is a sucker's payment on an occupied house, site unseen (though it could be worth that and more if they can get the owner out and find there are no issues - it is a cute house in a high demand neighborhood). Still, I don't know how this person was able to bid once the auction was closed. 

Just an odd experience.

@Jason Stone  

Keep an eye out for it to be posted again. The one I bought said Under Contract at one point, and eventually was reposted a few weeks later. Seems like most had similar experiences that I've researched.

It might be just a ploy to panic people to throw in back-up bids to try and get it. If it's a legitimate bid, it might have been one sent in as a back-up bid, once it said they were reviewing your bid. 

Good luck, please post a note here at some point if they end up posting it again, I'd be curious to know.

Hubzu is weird--i bid on a home , there were no other bidders. 

Not only did they not accept my bid, they reposted the house for $15,000 more 

and they haven't had 1 bidder to daye . I am waiting for them to come down to reality, 

but don't understand why it's been the same price for almost 4 months now without anyone bidding!. 

There's no rhyme or reason... just be smart and patient.

I have been watching and researching Hubzu for many months and what I found is that Hubzu has a sophisticated calculation to determine reserve and opening bid based on prior bids, BPO as well as a WAG.

Also each property has a local agent/broker associated with it and it looks like the agent/broker can over-ride any number presented by Hubzu.

What I do is determine a fair price (ARV) for the property. Then the price I am willing to pay will determine what I do with the property (Flip, Hold for Rental or no bid).

Bottom line is you have to feel the price you pay is in line with your plans for the property and then bid.

There are good deals to be had on Hubzu, but if it were easy, everyone would be doing it. 

Don't try to figure out Hubzu, because IMHO, I don't think anyone will be able to understand the full logic of Hubzu.

My only suggestion is to have a plan and bid based on your plans and goals and keep emotion out of it. This is a business and should be managed like a business.

Good luck!

I hate HUBZU.   I can understand having an auction that garners buyer interest and raises the price of the property through competition and the group dynamic.  But what I mostly see on Hubzu in my market areas are the endless auctions on the same property, where there are either no bids at all or none that meet the reserve.  Hubzu serves no purpose than to squeeze a 4.5% premium out of the buyer.  Pointless.  This criticism isn't just for Hubzu, but for the banks forcing listing agents to list with an auction site, whichever it might be.

@Matt Overbee As you predicted, the property has just shown back up and the opening bid has dropped another $5K. I'll be bidding, but it seems a bit of a waste of time and effort if the bank (and the agent rep'ing the bank) is not actually interested in negotiating a sale with the only guy bidding (and reaching out via email that I'm willing to chat more offline). I'm a qualified buyer willing to close in 20 days, so it seems a shame not to pick up the phone and chat it out, but I get that that's the system and so that's why I'll bother bidding again. 

I wonder what they're burning in holding costs?

@Jason Stone   Yeah I don't get it either, I also think they could be getting these done quicker and probably for higher sale prices if they weren't so inflexible on negotiating and other policies that drive buyers away. 

Maybe from their point of view, they are making up those losses by paying for very low skilled labor in India to handle these transactions, so they have to make it very standard and robotic in order to make it manageable for those "coordinators".

Hey everyone - I'm struggling to find it on the Hubzu.com site, but is the title clean when it comes to you (i.e., no liens, 2nd mortgages, etc...)?  ....or is it just the same as buying from the courthouse steps, where title search, etc... should be done?

Thx!

I'm new to hubzu, but have found a house with lots of potential. However, the current bid is WAY over what I would pay (due to all the work that needs to be done), so is there no way to put in an offer less than the "starting bid"?

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