HUD Bid in California

6 Replies

I am about to place a bid on a HUD property. The agent I am working with is saying I will need to bid about 117% of asking price to win the bid. Is it common to have to bid this high? From what I read 88% of ASKING price usually wins the bid. The asking price currently is 72% of the appox(based on surrounding houses) ARV. Bidding at 117% would make this 85% of the ARV. I would be living in the house for the first year while fixing it up so the bid would for owner -occupy.

I find this questionably worth it since the place does need complete remodeling. New floors all around, kitchen, 2 bathroom remodels, full interior paint, and some minor repairs.  

Is this a no brainer 'dont do it' or is 85% of the ARV for a fixer HUD home an average deal?

The amount for automatic acceptance by HUD is approx 88% net to HUD. Keep in mind, if another bidder nets HUD $1 more then they win as there is no highest and best or negotiation

My guess is your agent is basing their number based on comps in the area ?  Unless this is your must have home, my best advice is bid the number that works for you and be prepared to move on if you are outbid

Thanks for the responses. 

Now I have questions regarding the net amount. From what I researched the place is worth about $350k and has potential for much more given the added professionally built additions that are not included. Here are the numbers on my bid confirmation. 

  • Agreed purchase price: $312,000
  • Seller will pay reasonable and customary costs of obtaining financing, closing (not including agent): $6500
  • Seller agrees to pay to the  broker a commission: $9,000
  • Seller agrees to pay to the broad listing broker commission(if broker identified is not the broad listing broker): $9,000
  • Net Amount to seller: $288,000

My questions are: 

How does HUD decide the bid? Do they look at the offer amount or do they solely look at the net amount?

Is the broad listing broker actually the asset manager because my agent is shown as the listing broker on the HUD site?

This is also from the HUD site: The Asset Manager is the HUD contractor responsible for the sale of the property. The Listing Broker was hired by the Asset Manager to assist with the marketing of the home. The Field Service Manager is responsible for maintaining the property.

addendum: The asset managers org is called BLB Resources. So I assume he is the BLB?

To make things even more confusing the HUD housing site says to completely ignore the broad listing broker amount.

Line 5. Closing Cost Closing cost up to 3% of the purchase price. Note: This line must be left blank for GNND sales

Line 6a. Selling Agent Commission up to 5% of the purchase price. Note: This line must be left blank for GNND sales. Sales commission must be negotiate independently of this contract

Line 6b. Broad Listing Broker Commission. This line is no longer used. Leave blank or enter zero.

Line 7. Net to HUD Subtract lines 5 & 6a from line 3 = Net

Updated over 2 years ago

New contract now includes broad listing broker commission. https://www.hud.gov/sites/documents/9548.PDF

@Robert Jensen

HUD only considers the Net to HUD when evaluating a bid

The broad listing broker is the listing agent who receives 3% of the bid price with a $1000 minimum.  When placing a bid their commission is auto populated and cannot be altered

There is not a new contract as the system has not changed for close to a decade

@Robert Jensen As mentioned, the 88% Net of listing price only applies if there are no higher bids. In your case here, that is irrelevant since you are offering higher than that. The commissions and closing costs are set, so unless you, or other bidders, are asking for Additional closing costs to be paid by HUD, or a buyer agent is asking for less than 3%, then all you need to worry about is your bid price verses the other bid prices.....what HUD considers the Net would be irrelevant to you.