Investor · Albuquerque, NM · Member since 2009 · 118 posts · 43 votes
Hi guys,
I'm new to HUD so this may be a bit basic. I found a great rehab opportunity that I want to pursue. The house is a HUD home 3/2 for 35 k. It has been listed for about 5 days. The houses on the block range between 98k and 137k. It needs some work, but just cosmetic (I'll admit I haven't had a showing yet).
My realtor tells me that it is not available to investors until 2/26. Only available to home-owner occupant now. If this lasts till 2/26, how will the seller decide which offer to go with if several investors all submit on 2/26?
Will they go with the first offer? Or could this potentially turn into a bidding war of sorts? Is it possible to submit the offer a day in advance back dated to be the first in line? What other advice can you give me?
In my area, HUD reviews bids every 24 hours (during the work week) and selects the bid with the highest net to HUD (total amount going to HUD after commissions, fees, etc.) if there are multiple bids, and assuming that the highest bid meets HUD's minimum acceptable threshold. They will also give preference to owner-occupant bids over investor bids if they are apples to apples.
They will not necessarily go with the first offer.
Yes, it could turn into a bidding war if it is a great deal.
No, you cannot submit your offer a day in advance back-dated.
If the house meets your numbers, make your offer that supports your numbers. If you get outbid, move on to the next one.
By the way, I can almost guarantee you that the house needs more that cosmetic fixes at that asking price and ARV. You don't see many paint 'n carpet jobs on $35K houses with that high of an ARV...
In my area, HUD reviews bids every 24 hours (during the work week) and selects the bid with the highest net to HUD (total amount going to HUD after commissions, fees, etc.) if there are multiple bids, and assuming that the highest bid meets HUD's minimum acceptable threshold. They will also give preference to owner-occupant bids over investor bids if they are apples to apples.
They will not necessarily go with the first offer.
Yes, it could turn into a bidding war if it is a great deal.
No, you cannot submit your offer a day in advance back-dated.
If the house meets your numbers, make your offer that supports your numbers. If you get outbid, move on to the next one.
By the way, I can almost guarantee you that the house needs more that cosmetic fixes at that asking price and ARV. You don't see many paint 'n carpet jobs on $35K houses with that high of an ARV...
Thank you for the great input. I think this is very helpful. I agree that something bigger may be wrong with it, however it is available for an FHA loan and my realtor explained that usually means that it is inhabitable and not in dire need. Would you concur?
I'm going to keep an eye on it and if is still on the market before the investor date, I will get a proper showing.
I like your idea about running my numbers and figuring out my best price based on these. I have been advised to this exit strategy: buy and rehab to a rentable condition. Look for a RTO tenant to hold the property for at least 12 months to avoid short term capital gains.
Hey Mark,
I have bought a couple HUD homes and bid on countless others. If it is that good of a deal expect a flood of offers when the OO deadline expires and expect it to go for over asking price. If it qualifies for FHA that means it will need less than 5K in fixes to qualify and HUD will place the necessary amount in escrow for the buyer (only for owner occupied not investor).
Thanks Mike.
I found the property report which listed a repair escrow of $660.00 to replace to bathroom doors and an electrical repair. There was no additional info on that elec repair, so this is something I'll have a look at.
The kitchen is a dog and the carpets are very dirty. Looks like there is wood floor below them. I'm going to estimate the rehab, but if they are in the 25k total range, this still looks very good. My realtor is thinking it will sell for more than asking, and possible to an all cash offer.
What I dont' know at the moment is the rent this would bring in that neighborhood. I also need to learn about RTO scenarios which I know absolutely nothing about. Yet!
Mark,
I am new to investing so if any of this is wrong i would hope someone with more experience would correct me. In my area the opening bids go to Non-profit and other types, after their period is over then it opens to owner occupants, after the owner occupants time passes it moves to investors and everyone else. HUD does not counter back, however they tell you what the lowest net they will take is including listing agent comiss, your agent commis, and closing costs. If it is insured with escrow then it is based off of their (HUD's) inspection and appraisal notes and estimate to fix with contingency.However, I'm pretty sure you can get your own estimate on repairs. If you are planning to do FHA financing then you must have this done either right before closing or shortly after closing, when it is complete they will inspect to make sure the work is completed and then release the escrow funds back to you. Remember they are subject to multiple offers yours getting there first will not matter, it is who offers the highest net to HUD. Hope this helps and if i am wrong on any of this please someone with more knowledge feel free to correct!