How much should I offer on HUD home?

Question

Hello all,

I have been following this HUD home for last couple of weeks. I plan to flip this property. It was originally listed for $55k. After I ran my numbers, I calculated my maximum purchase price of $42k. This property was taken off HUD website for a price reduction and it just came back on the market at $40k, below the maximum I was willing to pay for it.

I was talking to my agent and he said that HUD usually accepts bids at 80% of the asking price, so he said we can go in at $34k, just a little over 80%. I like this property, it has great potential. I am confused as to how much to offer on this one. Should I go in at $34-35k or just make an offer at asking price to be on the safe side?

ARV for this property is $110k (this is very conservative number). A 3/1 rehabbed house sold couple of blocks from this one (in the same subdivision) for $125k and it didn't include any appliances. The HUD house I am interested in is 3/1.75 plus has a 3 season bonus room in the back. It needs $30k in rehab work. What do you guys think?

Mark Yuschak · Answer

Only HUD will see your bid.  The listing agent never sees the bid until it has been accepted.

Chris Sweeney · Answer

I only use listing agents as in this case they hold the combo for the lockbox and may go that "extra mile" for a double-end deal.

I had a HUD deal I lost on about a month ago when they took it off for a reduction and then I offered when it came back on.  I offered 90% of asking, got a counter, and before my counter could get looked at a better offer came in.  Case and point, your numbers work at $40k so lock it up and don't chase the few extra bucks.

Mark Yuschak · Answer

That is typically the case with most REO's, but not HUD's.  The minimum net to HUD amount is never revealed to the listing agents.

Greg B. · Answer

Does that mean someone else overpaid for it or was there a lot of margin for profit?

Sharad M. · Answer

So i found out that HUD didnt accept my bid. I had bid over the asking price, but still ended up losing it.

Mark Yuschak · Answer

I agree with you for the most part, Chris.  But in this case, specifically with HUDs, there's no real advantage by submitting your bid with the listing agent vs any other agent.  All that HUD cares about is the net.  They don't care who the buyer's agent is...and the listing agent never knows ahead of time as to what they'll take.

I do agree, however, that it's better to lock up the deal at the point to which the numbers work instead of risk loosing the deal by chasing the ice on the cake.

Sharad M. · Answer

On HUD properties, when my agent submits a bid for me, does the listing agent get to see how much I am offering on the property or only HUD gets to see all the offers and not the listing agent?

Sharad M. · Answer

Jimmy,

That's a great idea. Thanks! I would normally bid 85-90% of the asking and get a counter offer, but with this property the price has been reduced below the max I was willing to pay for the property, that I think I want to go in at the asking price and get it under contract.

Jimmy C. · Answer

In the future (not on this deal) try going direct to the listing agent.  Sometimes when you do that they will tell you to the dollar what HUD wants to net.  True story

Sharad M. · Answer

Steve,

My agent is registered with HUD, so that shouldn't be a problem.

I am just getting confused as to how much I should offer. I could get this property by offering 90% of the asking price like you said, but I don't want to miss this property if someone comes in at say 95% of the asking price. At this point I am leaning towards a full asking price offer. The asking price is below my maximum purchase price that I was willing to pay.

How much should I offer on HUD home?

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