Just made my first offer on a flip!

Norman, OK · Member since 2014 · 19 posts · 2 votes

I saw a HUD foreclosure in my hometown today and ended up making a cash offer. This is my first offer of any sort for what will/would be a flip property. Now I'm full of nervous excitement. I am told that I will find out tomorrow.

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Tom MolePro Member

Investor · Sunland, CA · Member since 2013 · 260 posts · 240 votes

12y

@Andy Hailey, HUD is weird. They don't act like a traditional, emotion motivated seller. They're more like a machine. Their counters are designed to convince you to pay more than you need to in order to get your offer accepted. They will often accept much less than you'd think.

The funny thing is that they don't seem to care. Repeated lowball offers don't piss them off. I know a few investors who, after getting a counter, simply resubmit their prevous offer plus $1 until they get accepted.

Do you plan to keep doing HUD foreclosures? If so, take a look at some of the posts in the HUD, VA and Tax Sales forum (and by "some", I mean "all") There's a lot of expertise out there to tap.

I hope this helps.

All the best.

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Curt DavisBusiness Member
Flipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
12y
Do you actually have the cash to purchase the home or do you have a POF that is legit?
Good luck!!!
Curt Davis - KAIZEN Realty538 Reviews
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Andy Hailey
OP
Norman, OK · Member since 2014 · 19 posts · 2 votes
12y
Thank you! I do have cash for the purchase. I've made a conservative offer as I'm sure I've underestimated renovation cost this being my first experience.
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Matt Slykhuis
Iowa City, IA · Member since 2014 · 22 posts · 9 votes
12y
@Andy Hailey Did you hear back on the offer?
I submitted an offer last week on a VA foreclosure that would be my first flip as well -- although I plan to live in the house while I'm stationed in Alaska and flip it after -- but I have not heard back. Apparently there are 4 offers pending, and even though mine is a cash offer I doubt they will accept it since I also offered conservatively.
Hope you get it!
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Andy Hailey
OP
Norman, OK · Member since 2014 · 19 posts · 2 votes
12y
Thanks Matt! Well I did hear back just about an hour ago, and received a counter offer. Here's a little background on the numbers. The house was listed for $85,000 after viewing the home I came up with a rehab budget of $20,000. The house has a target sale value of about $115,000. In trying to follow the 70% rule I offered $60,000. They countered today at $75,000. I'm still mulling over my next move. What do you guys think?
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Greg H.Pro Member
Moderator
Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
12y
Keep in mind that the counter of 75K is the net to HUD meaning commissions and any closing costs you are requesting is added to that number. A counter of 88% net is the generic counter number and is not a real counter in the sense of how we think of counters. It is more of this is what we would accept is you bid again for tomorrow. However, if someone else bids $1 more net for tomorrow's opening, it will be accepted over yours
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Andy Hailey
OP
Norman, OK · Member since 2014 · 19 posts · 2 votes
12y
Thanks for the info Greg. I was informed of the "net to hud" concept today, and heir actual counter was $70,500, which for me would mean $75,000 plus closing. Do you know if I offer below this again, will that offer be considered if there is no other higher offer? Or is that a hud minimum of sorts?
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Greg H.Pro Member
Moderator
Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
12y
It will probably be considered at some point but you will probably get the same generic counter for several days/weeks before it would be accepted provided there are no higher offers. There are factors such as days on the market, who the asset manager is and and how many offer have been received on the property
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Tom MolePro Member
Investor · Sunland, CA · Member since 2013 · 260 posts · 240 votes
12y
@Andy Hailey, HUD is weird. They don't act like a traditional, emotion motivated seller. They're more like a machine. Their counters are designed to convince you to pay more than you need to in order to get your offer accepted. They will often accept much less than you'd think.
The funny thing is that they don't seem to care. Repeated lowball offers don't piss them off. I know a few investors who, after getting a counter, simply resubmit their prevous offer plus $1 until they get accepted.
Do you plan to keep doing HUD foreclosures? If so, take a look at some of the posts in the HUD, VA and Tax Sales forum (and by "some", I mean "all") There's a lot of expertise out there to tap.
I hope this helps.
All the best.
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Andy Hailey
OP
Norman, OK · Member since 2014 · 19 posts · 2 votes
12y
Thank you Tom! I will definitely do some more research into the hud bidding works. Last night I countered with $65,000. My realtor seems to think that there are a lot of bids on this home, and that it will take $75,000 to get it. Would you suggest holding strong on my offer? I guess there's no way to tell how many offers the property really is producing right?
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Jessica H.Pro Member
Flipper/Rehabber · Easton, PA · Member since 2013 · 224 posts · 36 votes
12y
Stick to your numbers especially being new, there will be others that come along!
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Andy Hailey
OP
Norman, OK · Member since 2014 · 19 posts · 2 votes
12y
Stuck to our numbers and another bid was accepted. I may have overestimated the rehab, but played it safe. The search continues.
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Joseph Cox
REALTOR® · Altamonte Springs, FL · Member since 2013 · 71 posts · 32 votes
12y
Originally posted by @Andy Hailey:

Stuck to our numbers and another bid was accepted. I may have overestimated the rehab, but played it safe. The search continues.
Good for you for playing it safe!
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Jessica H.Pro Member
Flipper/Rehabber · Easton, PA · Member since 2013 · 224 posts · 36 votes
12y
Congrats on taking the step and making your first offer! Many here can attest to putting in many offers before you get your first one. It really is all about the numbers and especially on your first few ( speaking from experience here) you want to make sure it is a really good deal and you have room in there for all the "opps" that come along with learning.
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