Worth making an offer on a Hud home well below asking?

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Worth making an offer on a Hud home well below asking?

David RobertsonBusiness Member
Flipper/Rehabber · Kansas City, MO · Member since 2010 · 755 posts · 778 votes

I found a HUD home listed at $88k that has been on the market for 90 days...it's first price drop was from $100k which is the 'As-is' value...it also had a pending contract that fell through in the last week...

Comparables are selling at $120-130k

Remodel Costs are $28k

Fixed Costs are $12.5k

Profit=$19k

Maximum Purchase Price=$66k

My maximum offer is $22k below asking or 25%...

Is it worth my time to make an offer? How are HUD offers generally treated?

What is usually your approach when the MPP is well below asking? Do you go ahead and make an offer or move-on?

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J ScottPro Member
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Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
14y

The nice thing about HUD offers is that it would take less time for your agent to write up an offer than it took for you to write that post asking if you should make the offer.

Give it a try and see what happens...

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  • Monica Breckenridge
    Rental Property Investor · Colorado Springs, CO · Member since 2010 · 476 posts · 305 votes
    14y

    I would make the offer, it doesn't hurt to try. From what I've seen with HUD is they won't take a certain % below the list price as an offer. I'm not sure what the % is and am curious to know what that is. Is there anyway you can do a light rehab and sell the property for less and adjust the numbers any to increase your chances in getting the house? You would have to see what other owner occupied houses are selling for or other lived in short sales and that should be the price to sell. I just did a light rehab and my profit will be $30K and my rehab was only $5k. I've been noticing a lot of our short sale listings are selling at really high prices lately and if you offer a non short sale at the same price yours will sell fast.

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  • J ScottPro Member
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    Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
    14y

    The nice thing about HUD offers is that it would take less time for your agent to write up an offer than it took for you to write that post asking if you should make the offer.

    Give it a try and see what happens...

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  • Brian LevredgePro Member
    Investor · Chattanooga, TN · Member since 2009 · 1k+ posts · 903 votes
    14y

    I've purchased (recently) two HUDs at 35%-40% below list. These were cash offers.

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  • David RobertsonBusiness Member
    OP
    Flipper/Rehabber · Kansas City, MO · Member since 2010 · 755 posts · 778 votes
    14y

    Thanks for the advice...My repair #s were just preliminary so far...I'll schedule a walkthrough tomorrow to view the property...with preliminary #s coming in at 25% below asking I just didn't know if I would be wasting everyones time?..

    Do you typically make offers on the majority of houses you walk through or do you have a good rule of thumb for moving-on? It seems like you can make money on just about any property as long as you buy it at the right price...what are the factors that deter you from making an offer? (amount of work, schedule, etc?)

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  • Brian LevredgePro Member
    Investor · Chattanooga, TN · Member since 2009 · 1k+ posts · 903 votes
    14y

    David Robertson - I find it to be more advantageous (and not as big a waste of time) to write offers and get them accepted first before figuring the finer details. Anything that may be in the ballpark price wise (I never let list price deter me) warrants checking out. If we don't like the neighborhood then we don't bother going any further with the eval.

    If we like the property, we'll write an offer based on a ballpark guess of what repairs will be. If the offer is accepted by HUD, you have 48 hours to get the signed contract and EMD to them via FedEx. We actually use this time to fine tune the estimate and see if the numbers are what we think they are. If it doesn't pencil out, you don't send the contract or EMD, and the property goes back on the market. Nothing lost, except a little more time. Trying to figure out the rehab budget to any real degree has literally cost us properties in the past.

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  • Matt Kearney
    Real Estate Investor · Springfield, MA · Member since 2009 · 142 posts · 103 votes
    14y

    Make the offer!!

    HUD has been known to take some nice discounts

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  • David RobertsonBusiness Member
    OP
    Flipper/Rehabber · Kansas City, MO · Member since 2010 · 755 posts · 778 votes
    14y

    Hey Matt,

    I made the offer at $65k, they rejected and cancelled the offer...Apparently, somebody else made an offer the same day, and they accepted their offer...

    It would be interesting to see what they took...

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  • Chris ClothierBusiness Member
    Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
    14y

    David Robertson - I like the fact that you made the offer, regardless of outcome. As always, this is a game of numbers. We bid on 100+ HUD homes each week and it takes less than 20 seconds to make each offer. I would tell you that we may make an offer at 1/3 of the listing price or several thousand over listing price - it all depends on what price are we paying in that neighborhood. That was the one other point I would make about the renovation costs. When you concentrate on one particular area of town you can develop a reliable model for average costs on properties both for renovation and purchase. This allows you to make a lot more offers on properties.

    Best of luck

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  • James H.
    Investor · Fort Worth, TX · Member since 2011 · 1k+ posts · 450 votes
    14y

    I work with a realtor that specializes in HUD homes. Specializes in that she has bought 20 HUD homes for herself and handles HUD purchases for other investors. This, as most things, probably varies by region; she told me that she doesn't bother making really low offers relative to the first list price anymore as her experience is that HUD will relist at a lower price before taking a bid with a DEEP discount. She said she notices the lowest bid that she gets accepted is usually about 15 percent below list on first listing. After HUD relists, they tend to be more aggressive accepting deeper dicounts.

    Anyway, that is just what I was told. I'm sure their are exceptions, but it makes sense to me. But as others have stated it doesn't hurt to make the offer if it is easy to do.

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  • J ScottPro Member
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    Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
    14y

    15% is the exact discount HUD is willing to accept upon first listing in my area. They will always counter at 15% below list and will never settle for less (until there is a price drop).

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  • David RobertsonBusiness Member
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    Flipper/Rehabber · Kansas City, MO · Member since 2010 · 755 posts · 778 votes
    14y

    Chris Clothier I am not an agent so it takes around an hour for me to make an offer from getting a certified EMD, walking the house, and signing the paperwork...How have you streamlined the process to just 20 seconds?

    Generally, remodel costs are around $25 to 35k, but usually I have built a preliminary estimate prior to walking the house based upon photos, and tweek the #s at the agents office before we make the offer...I can typically create a full remodel estimate in less than 5 minutes...

    J Scott Brian Hoyt
    Sounds like a good rule of thumb for 15% below list on first listing price...do you typically wait until the first price drop before you make an offer if your Maximum Purchase price is well below the first listing (<85%)?

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  • Chris ClothierBusiness Member
    Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
    14y

    David Robertson - It depends if you are making HUD offers online or not. And to be fair, I am not an individual making the offers, we have a pretty big staff and part of the responsibility for two of them are to look at properties every day. We physically walk thru about 100-120 a month but will offer on another 300 simply because we have already renovated and manage so many properties in the area. We have developed a model and that model tells us the price to offer. I know it is a lot harder if you are the one walking the houses, estimating repairs, grabbing earnest money. When you take that into account, there is a lot going on for one person and it will slow it down.

    Usually the HUD listing has taken a price decline before they well it to us at steep discounts, but not always. There are cases, and I would assume it is because we are the only bidder, where HUD will accept a 50% discount on listed price. But, a majority of the time it takes a price decrease, we submit the same low offer and then they accept it.

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  • J ScottPro Member
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    Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
    14y
    Originally posted by David Robertson:

    J Scott
    Sounds like a good rule of thumb for 15% below list on first listing price...do you typically wait until the first price drop before you make an offer if your Maximum Purchase price is well below the first listing (<85%)?

    I don't bid on too many HUDs these days...they're gone too fast! I live in one of the largest counties in metro Atlanta, and as of this minute, there are only 4 active HUD properties that are open to investors!

    But, in general, if I'm going to offer on a HUD, I'll offer whatever numbers work for me -- to make an online offer takes about 2 minutes, so there's little downside to giving it a try. But, invariably, if it's a new listing, I'll either get rejected or countered at 15% below list.

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  • James H.
    Investor · Fort Worth, TX · Member since 2011 · 1k+ posts · 450 votes
    14y
    Originally posted by David Robertson:

    Sounds like a good rule of thumb for 15% below list on first listing price...do you typically wait until the first price drop before you make an offer if your Maximum Purchase price is well below the first listing (<85%)?

    David Robertson,

    I have not bid a lot of HUD homes personally, but have my knowledge second hand from my agent. In regards to waiting for price drops to bid; that would just depend on the property, the list price and my goals. In fact, I bid 5 percent over initial list on one property because there was a lot of equity and I thought there would be plenty of full price bids since I was bidding in the OO period (was going to move into it and convert my current home to a rental).

    As an aside, I did win the bid, but even though it was twice the house of my current residence and in a comparable if not better neighborhood and twice the tax appraisal, the mortgage balance would have been less than the one I have and that prevented me from getting FHA financing. Apparently you need to show that you are upgrading if obtaining FHA to get a second mortgage and the only way to prove that is by the new mortgage having a higher value (more debt) than the one you already have. Since there were some repairs that I wanted to roll into the mortgage, it didn't work out. I could have gone conventional, but would have been high and dry after using all my cash for the repairs.

    ANYWAYS...short answer is there is no steadfast rule on when to bid and how much to bid, how much to discount, etc - at least not in my world. Just the observation that HUD doesn't usually accept less than 15 percent of list price on initial list.

    I highly recommend hooking up with an agent that does a lot of HUD sales. Most agents claim to be great at it, but that isn't true. I don't know how to verify how much HUD or Fannie Mae experience an agent has, though. I was referred to my agent by another investor.

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  • David RobertsonBusiness Member
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    Flipper/Rehabber · Kansas City, MO · Member since 2010 · 755 posts · 778 votes
    14y

    An update...

    I logged on to the HUD website, and apparently you can see what the net offer was that was accepted by HUD...

    The offer that was accepted was $58,200, and I believe my net offer was around $56,000.

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  • Chris ClothierBusiness Member
    Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
    14y

    David Robertson that is really good info. to have. If you are one to keep track of those types of things, a spreadsheet with all of the data including zip code, sq footage, list price, bid price, accepted price, etc... is a great way to start tracking and eventually have a model for pricing in an area. It does not take that many for you to be able to come up with a pricing strategy that helps you win deals without as much time spent on the streets.

    Best of luck on snagging the next one -

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  • Bala P.
    SFR Investor · Dallas, TX · Member since 2009 · 71 posts · 12 votes
    14y
    Originally posted by David Robertson:

    Hello David,
    I could not find the bid history on their website. I would like to track the trend in my area like Chris suggested.

    Thanks

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  • David RobertsonBusiness Member
    OP
    Flipper/Rehabber · Kansas City, MO · Member since 2010 · 755 posts · 778 votes
    14y

    Bala,

    You can see the bid results for properties as long as they have been accepted within 14 days... After that 14 day period, the bid result expires...

    'Bid Results' is a tab at the top of the page.

    Here is the direct link:

    http://www.hudhomestore.com/hud/BidResults.aspx?sLanguage=ENGLISH

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  • J ScottPro Member
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    Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
    14y
    Originally posted by David Robertson:

    I logged on to the HUD website, and apparently you can see what the net offer was that was accepted by HUD...

    Cool, I've never seen that...where specifically are you finding this information on their site?

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  • Bala P.
    SFR Investor · Dallas, TX · Member since 2009 · 71 posts · 12 votes
    14y
    Originally posted by David Robertson:
    Bala,

    You can see the bid results for properties as long as they have been accepted within 14 days... After that 14 day period, the bid result expires...

    'Bid Results' is a tab at the top of the page.

    Here is the direct link:

    http://www.hudhomestore.com/hud/BidResults.aspx?sLanguage=ENGLISH

    Thanks David.

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  • Bala P.
    SFR Investor · Dallas, TX · Member since 2009 · 71 posts · 12 votes
    14y
    Originally posted by J Scott:

    Cool, I've never seen that...where specifically are you finding this information on their site?

    J, David Robertson replied to my post with the info and here it is

    "You can see the bid results for properties as long as they have been accepted within 14 days... After that 14 day period, the bid result expires...

    'Bid Results' is a tab at the top of the page.

    Here is the direct link:

    http://www.hudhomestore.com/hud/BidResults.aspx?sLanguage=ENGLISH
    "

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  • David RobertsonBusiness Member
    OP
    Flipper/Rehabber · Kansas City, MO · Member since 2010 · 755 posts · 778 votes
    14y
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  • Bala P.
    SFR Investor · Dallas, TX · Member since 2009 · 71 posts · 12 votes
    14y

    Thanks David, also found out in case if you do not have the hud property number saved the page lets you search by other parameters like, state, county, city, etc... which is nice.

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  • Samantha M.
    Landlord · Dallas, TX · Member since 2012 · 505 posts · 34 votes
    14y

    This again may be variable by area, but here in DFW TX I was under the impression HUD would go no lower than around 88% listing price. Anything below that and they will counter you.

    If you can indeed get a HUD at 1/3 value after being re-listed thats great news.

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  • Billy Smith
    Shawnee Mission, KS · Member since 2016 · 716 posts · 313 votes
    9y

    Here they will accept no more then 10% off of list.

    Just bought one in July looking to buy another one ,found a big fish who wants to go fishing.

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