Bidding MORE than listing price for HUD home

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Bidding MORE than listing price for HUD home

Michael Yoder
Member since 2020 · 6 posts · 0 votes

I'm currently looking at a house on the HUD home store website. I would move into the house so I have priority in the bidding process. The market down here in Virginia Beach is very hot and the house I'm looking at is priced well below market value. I want to offer more than the listing price. I was told by my agent that if I offer more than the listing price I have to have in cash whatever I offer above the listing price in order to make a valid offer. So the house is listed at $120,000 and I want to offer $130,000 therefore I need to have $10k cash in addition to any down payment I want to make. Is there anyone out there who can verify that this rule is true? Or have they heard anything like this? I have searched all over the internet but I have not been able to find any information about this. Please help me if you have any experience with bidding on HUD homes.

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Greg H.Pro Member
Moderator
Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
6y

@Michael Yoder

I cannot stress enough to have an HUD experienced agent, lender and title company as HUD has guidelines that are different from regular transcations

In regards to your lender, make sure upfront that:

-They have closed HUD transactions and are familiar with their funding process

-Make sure the lender has a work around if you are not able to turn on utilities for the appraiser as this is the case with many HUDs 

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  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    6y

    IF and only if you are going to get an FHA loan your agent is correct . If you are using conventional financing or any other type no

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  • Michael Yoder
    OP
    Member since 2020 · 6 posts · 0 votes
    6y

    Okay.... Thanks for clarifying... I'm considering conventional financing so that answers my question that I'll NOT need to have the cash for the difference in listing price and offer.. Thanks

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  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    6y

    @Michael Yoder

    I cannot stress enough to have an HUD experienced agent, lender and title company as HUD has guidelines that are different from regular transcations

    In regards to your lender, make sure upfront that:

    -They have closed HUD transactions and are familiar with their funding process

    -Make sure the lender has a work around if you are not able to turn on utilities for the appraiser as this is the case with many HUDs 

    2Reply
  • Michael Yoder
    OP
    Member since 2020 · 6 posts · 0 votes
    6y

    @greg H. 

    do you know why that is? Why are they looking for cash if you offer more with an FHA loan? Thanks in advance for your help.

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  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    6y
    Originally posted by @Michael Yoder:

    @greg H. 

    do you know why that is? Why are they looking for cash if you offer more with an FHA loan? Thanks in advance for your help.

     The reason is:

    When HUD puts a property on the market they order an FHA appraisal and then list the property at 100% of market value and that appraisal stays with the property for 120 days by rule.

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  • Michael Yoder
    OP
    Member since 2020 · 6 posts · 0 votes
    6y

    Okay.. Thanks for your response...two more questions 

    1. Why is this any different than a conventional loan? In normal cases (ie conventional loans) if the appraisal is less than my offer the bank will ask me to make up the difference. 

    2. Does my lenders appraisal have anything to do with this process? The house I'm looking at has a tax assessment of 190k and it's listed at 120k so I'm not sure how my bank appraisal will compare with FHA appraisal.

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  • Danielle Bulla Isenhour
    Real Estate Agent · Virginia Beach, VA · Member since 2019 · 34 posts · 17 votes
    6y

    @Michael Yoder,

    Your agent is correct.

    The Verbiage in HUD contract under "OFFER EXCEEDING APPRAISED VALUE":

    I/We understand that if our offer exceeds the appraised value and the property is being purchased with FHA/Conventional financing, I/We will be responsible for the difference in cash.

    I hope that this helps.

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  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    6y

    @Michael Yoder

    1. It differs only that the price(appraisal) is already set on the HUD property for FHA and that appraisal stays with the property(even if the buyer changes) for 120 days. With Conventional, you can get a different value via a new appraisal

    2. I caution you against using the Tax Assessment as the value of the property as it may or more likely may not reflect the market value. If you go conventional on a HUD, your lenders appraisal it all that matters. Hud's list price means nothing

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  • Michael Yoder
    OP
    Member since 2020 · 6 posts · 0 votes
    6y
    Originally posted by @Danielle Bulla Isenhour:

    @Michael Yoder,

    Your agent is correct.

    The Verbiage in HUD contract under "OFFER EXCEEDING APPRAISED VALUE":

    I/We understand that if our offer exceeds the appraised value and the property is being purchased with FHA/Conventional financing, I/We will be responsible for the difference in cash.

    I hope that this helps.

    0Reply
  • Bruce Lynn
    Real Estate Broker · Coppell, TX · Member since 2011 · 5k+ posts · 4k+ votes
    6y

    Tax value is often wrong.  It can be way too high or way too low.   There's a lot of reasons for this, but I would never rely on the tax value as any indicator of value.

    FHA appraisal stays with the house....someone has actually looked at it, looked inside it, and signed off on a value for it. Now everyone has their own opinion. If you're going to use conventional loan, that lender will send another appraiser out to put a value on it. Could be the same, more, or less than the FHA appraisal. So if you bid more than the asking price, potential you could have to pay in cash the difference between your lender's appraised value and what you bid, and in addition to your down payment.

    It could well be worth it.   You may know values in your area as much as any of the appraisers. Price is just one person's opinion at any given time, with input from plenty of other people surrounding the transaction.

    Go for it and good luck and best wishes.   Hope you get it.

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