Under HUD contract; can I revise bid/offer based on inspection?

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Under HUD contract; can I revise bid/offer based on inspection?

Kelly G.
Florissant, CO · Member since 2013 · 184 posts · 69 votes

Greetings;

So . . my offer on a HUD house was accepted; used the 89% rule - Thanks. But just read the "successful HUD bidding strategies" and there's sooo much I didn't know. Using a 'not-so-HUD-experienced" broker (but she is Awesome in so many other ways!). Bid as Owner Occupant. So: I don't know if the house was "insured" or not. I DO know that the previous offer fell through due to financing. So I probably could have bid a bit (a lot?) less. anyway . . .

If the house was in the condition the HUD site 'suggested' - with plumbing issues and some bad outdoor steps, I would have been very pleased with my bid. BUT . . just had my house inspection: house will need new roof, new furnace, and the sill plate on the garage 'fixed' somehow as it's rotting fast! That's just the big stuff. My contract states (suggests) that I can only cancel if an inspection reveals problems that were not addressed in the property disclosure. OK - but I don't want to cancel. I want to revise my offer based on the work needed as identified in the inspection. Like I could with any "regular/typical" offer and seller.

Will HUD "negotiate" based on my inspection?? Or will I have to cancel and hope I'm the best bidder again? My agent is not clear on this and looking into it.

Thanks

Kelly

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Greg H.Pro Member
Moderator
Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
9y

Your only options are to buy the property as-is or terminate.

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  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    9y

    Your only options are to buy the property as-is or terminate.

    3Reply
  • Kelly G.
    OP
    Florissant, CO · Member since 2013 · 184 posts · 69 votes
    9y

    Thanks @Account Closed    I didn't think it would be possible but hope always springs eternal!

    I get the whole 'as-is' thing;  but how do you approach a 'fair' price when 89% of listing price doesn't account for the $12k+ in repairs that were not included in the property disclosure?  the 89% level covered the costs for repairing the stated problems (plumbing and steps).  

    . . .  and how do you 'know' about other needed repairs until you bid and do your inspection??

    How long might it take for HUD to put it back on the market so I can bid lower?

    Appreciate your comments.

    Kelly

    0Reply
  • Dante Pirouz
    Investor · Almont, MI · Member since 2015 · 360 posts · 302 votes
    9y

    I bought a HUD duplex for what I thought was a good price and found out that all the plumbing had been ripped out...you just have to eat it and shift it into your contingency budget (you have one right?). It is just a part of the pluses and minuses of buying HUD...

    1Reply
  • Seth Nadreau
    Real Estate Agent · Cape Coral, FL · Member since 2015 · 167 posts · 89 votes
    9y

    If it were me, I'd terminate. Wait 1 day. Put a new offer on the house (much lower to account for needed repairs) and submit a copy of the inspection report with the offer.

    Cross fingers. Hope for the best. Be prepared to start over.

    Good luck!

    1Reply
  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    9y

    @Kelly G.

    My responses are missing that you are buying as an owner occupant which is why you have the opportunity to get your earnest money back. The property will be put back on the market with in a week but since I am assuming that you purchased during the owner occupant period you will need to wait for a price drop which could be +-30 days or so

    There is no trick to being aware in advance of needed repairs. Most of my purchases (300+) have been properties that have been on the market for some time, so I only buy at a price to cover any unforeseen repairs

    0Reply
  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    9y
    Originally posted by @Seth Nadreau:

    If it were me, I'd terminate. Wait 1 day. Put a new offer on the house (much lower to account for needed repairs) and submit a copy of the inspection report with the offer.

    Cross fingers. Hope for the best. Be prepared to start over.

    Good luck!

     Hud properties are online bidding only so there is no opportunity to submit any documentation.  At this point assuming very few days on market , the bidder is not going to get a discount 

    1Reply
  • Seth Nadreau
    Real Estate Agent · Cape Coral, FL · Member since 2015 · 167 posts · 89 votes
    9y
    Originally posted by @Greg H.:

     Hud properties are online bidding only so there is no opportunity to submit any documentation.  At this point assuming very few days on market , the bidder is not going to get a discount 

    Haven't dealt with one in ages. Good to know. :-)

    0Reply
  • Shannon K.
    Buffalo, NY · Member since 2015 · 252 posts · 109 votes
    9y

    I just went through a similar situation. HUD will not budge. In my experience, they are very strict on most things and I also had to cancel the bid I won and resubmit.

    My house bid was put in the wrong person's name and HUD wouldn't change it or accommodate me in any manner. Made me cancel the whole sha-bang and start over the next week it was relisted.

    Thank heavens it worked for me and I got the house $3K cheaper the 2nd time. (I won the bid by 9am. By 10am several other offers higher than mine poured in!) I lucked out big time. You may risk losing this house to the waiting competition...

    1Reply
  • Leigh C
    Brooksville, FL · Member since 2012 · 429 posts · 220 votes
    9y

    Just got one with a bunch of open permits that they (hud/AM and listing agent) knew about but didn't feel like disclosing.    100 dollar a day fines on some of the permits which has climbed into the 10s of thousands total.   

    Buying from hud is a full contact sport.    Wear a helmet.     Your agent sounds like a great friend but a bad expert in one of the most important financial decisions of your life.    

    3Reply
  • Kelly G.
    OP
    Florissant, CO · Member since 2013 · 184 posts · 69 votes
    9y

    Wow!  Thanks for all the input - really appreciate it.  @Leigh C Love your comment: "Buying from HUD is a full contact sport. Wear a helmet." That will keep me smilin' all day!

    I am weighing my options - I have nearly 2 weeks to do so, though I doubt I will need that long.  Asking my agent to run some comps, getting very rough estimates for work needed etc.  I may keep it and hope to break even.  Thing is:  It is winter, I am currently camped in my rental house in WI losing money while I sit here, my current "house" is a small RV, I need a place to live and get on with my life - this has been a great vacation but . . .

    I like the house, I love the lot it's on (1.4 acres!). I really don't want to start over and risk losing it. There's been nothing new on the market in more than 1 week. I've gone through 4 other agents in CO who, in my opinion, Sucked!! My current agent is not well versed on HUD - but w/ your help we're moving through it. But she has been Fantastic in other regards! I'm in WI and am trying to buy a property in CO - in winter! Right now I need numbers to make a decision. this is a short-term solution; I need to be in CO to actually decide where I want to live - permanently.

    Will keep you posted - if you're curious . .   Cheers

    Kelly

    0Reply
  • Chuong Pham
    Real Estate Investor · Plano, TX · Member since 2016 · 39 posts · 13 votes
    9y
    HUD is strict. If you do not buy as is they will sell to someone else.
    0Reply
  • Payton Law
    Denton, TX · Member since 2016 · 10 posts · 0 votes
    9y

    @Dante Pirouz Do you mind sharing how you found the HUD duplex? I have been searching the HUDhomestore for my county everyday for last couple months and I can only find SFR's. I was reading online the other day that you could get on a HUD multifamily buyers list but it said you have to have all cash. Is this the route you went with? Also, did you use HUDhomestore.gov or a different site? Thanks.

    0Reply
  • Dante Pirouz
    Investor · Almont, MI · Member since 2015 · 360 posts · 302 votes
    9y

    @Payton Law we bought our duplex in early 2015 from a listing on HUDhomestore. I regularly check there for possible buys but there have been almost no multiunits in 2016 in our area and the prices are getting closer to retail than they have been in the last 3 years...everything we purchase now are from sellers other than Homesteps/HUDhomestore/Homepath since that's where some deals still are.

    0Reply
  • Payton Law
    Denton, TX · Member since 2016 · 10 posts · 0 votes
    9y

    @Dante Pirouz Thanks for the information. I hope the multi's pick back up because I am looking to buy my first within the next 8 months. Not sure how vetted you are, but you should check out the forum I listed below for tips on buying HUD homes. I've read through the feed and learned a lot!

    https://www.biggerpockets.com/forums/20/topics/262286-successful-hud-bidding-strategies 

    0Reply
  • Mark Gallagher
    Flipper/Rehabber · Allentown, PA · Member since 2011 · 1k+ posts · 701 votes
    9y

    @Kelly G.

    The reason HUD doesn't renegotiate is because they have disclosures up front. You can view property condition reports online. There are 3 types - Insured, insured with escrow, and uninsured,

    Insured means you can get an FHA loan on the property with no issues. Essentially nothing wrong with the property.

    Insured with escrow means you can get an FHA loan with a repair escrow. Means some things are wrong with the property but can be fixed with $X amount of escrow.

    Uninsured means there is a good deal wrong with the property and you can not get an FHA loan on the property no matter what.

    Given the amount of documentation available up front, this is why there is no room to negotiate.

    0Reply
  • Kelly G.
    OP
    Florissant, CO · Member since 2013 · 184 posts · 69 votes
    9y

    Hey @Mark Gallagher - thanks for the post.  I have read this elsewhere, but only about 2 categories. I have no idea what category my prospective house is in, but am inquiring about this.    Right now - I see no reason Not to buy it.  

    Kelly

    0Reply
  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    9y

    @Kelly G

    Your agent can provide you the answer in about 2 minutes. He/She can look at the bid itself or pull up the PCS(Property condition summary) from his bid account 

    For the most part , if the property needs $5000 or more in repairs from the PCR report the property is listed as uninsured.  There are a few non monetary reason it could be uninsured but most apply to mobile homes

    Also uninsured does not necessarily mean it cannot be insured as insurability is "subject to an FHA appraisal " since Hud stopped providing the appraisal a few years ago

    0Reply
  • Mark Gallagher
    Flipper/Rehabber · Allentown, PA · Member since 2011 · 1k+ posts · 701 votes
    9y

    @Greg H.

    When it is UI you can't submit an FHA offer to the best of my knowledge. Which means it could get a little hairy if buyer tries to cancel the contract. I'd have to verify this 100%, perhaps you know.

    1Reply
  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    9y
    Originally posted by @Mark Gallagher:

    @Greg H.

    When it is UI you can't submit an FHA offer to the best of my knowledge. Which means it could get a little hairy if buyer tries to cancel the contract. I'd have to verify this 100%, perhaps you know.

     You are correct. I wasn't in a hurry and worded it backwards. Just because it is insured does mean it will be insured as it is "subject to appraisal ".  This is a procedure to turn it from Uninsured to insured but it was a pain in the **ss and I would never spend the time to do it again especially now with Sage

    Additionally, if the property is uninsured , the system will now allow insured bids to be made

    0Reply
  • Greg K.
    Rental Property Investor · Boston, MA · Member since 2018 · 34 posts · 20 votes
    8y

    @Payton Law I've found multi-family HUD homes just by eyeballing the bed/bath ratio. I've never seen them listed as multi-family though. The first picture can usually give you a sense if its a multi-family and the property condition report may reference Unit #1 or Unit #2. Zillow and MLS are a good way to verify. For example, here is a 6/4 which is case #251-370198. Clearly a side-by-side two-family but listed on HUD Home Store as a single family home.

    0Reply
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