Rental Property Investor · Cincinnati, OH (45231) · Member since 2013 · 15 posts · 0 votes
My wife and I are about to put a bid in on a HUD home. This will be a bid during the initial owner occupant 10 day period. We love the home and it's in a great area. HUD's as-is and list price is $114K for the property which is way less than the house is actually worth. It's insured with $2000 in repair escrow. Just needs a few minor repairs. The basement will need some form of waterproofing (which they didn't catch on the FHA inspection). **This would be an out of pocket expense after closing if we won the bid. We're approved for $120K FHA 203(b) loan. We've got about $7K-8K cash available to apply toward this purchase. How should we structure our bid to put us in the best position to win??? Our mortgage guy suggested we bid $100 over the list price and ask for 3% in seller concessions. We would then have around 4% total into the transaction but we would be getting a home with a lot of equity in it.
As an agent who works in an office that represents HUD homes and has submitted many, many HUD bids, I always instruct my clients to bid the highest amount they would be comfortable paying for the property. Bid what you can afford and what you think it's worth. In our market (Mpls/St. Paul area), there is a ton of competition on HUD homes. If you have the extra cash, and this is the home you'd most like to own, go big. It also depends on whether you're treating it as an investment that you'll occupy for a year or treating it as your residence. If it's an investment, analyze the deal, do your due diligence and get the comps. If it's going to be your home, and you'd sincerely regret it if you lost the bid, then bid big.
For What It's Worth,
Ted
Hey @Jason Ligon - just what you said sounds pretty good. If you really want to stand out, remove the seller concessions, but if you need em, then include em. Good luck!
As an agent who works in an office that represents HUD homes and has submitted many, many HUD bids, I always instruct my clients to bid the highest amount they would be comfortable paying for the property. Bid what you can afford and what you think it's worth. In our market (Mpls/St. Paul area), there is a ton of competition on HUD homes. If you have the extra cash, and this is the home you'd most like to own, go big. It also depends on whether you're treating it as an investment that you'll occupy for a year or treating it as your residence. If it's an investment, analyze the deal, do your due diligence and get the comps. If it's going to be your home, and you'd sincerely regret it if you lost the bid, then bid big.
For What It's Worth,
Ted
As an agent who works in an office that represents HUD homes and has submitted many, many HUD bids, I always instruct my clients to bid the highest amount they would be comfortable paying for the property. Bid what you can afford and what you think it's worth. In our market (Mpls/St. Paul area), there is a ton of competition on HUD homes. If you have the extra cash, and this is the home you'd most like to own, go big. It also depends on whether you're treating it as an investment that you'll occupy for a year or treating it as your residence. If it's an investment, analyze the deal, do your due diligence and get the comps. If it's going to be your home, and you'd sincerely regret it if you lost the bid, then bid big.
And if you can afford it, leave out the seller concessions. HUD is only concerned with their final net in accepting a bid.
For What It's Worth,
Ted
Good to see another local face on here. @Ted Larson , do you ever attend the REIA minneapolis meetings?
I also agree - come in with highest and best. If this house is an instant equity opportunity, you can bet on multiple bidders. Another tip my agent told me, is he believes in getting your offers in FIRST. Be one of the first offers they look at in their stack of offers.
I bid 82,4XXk on a HUD auction, with 3% seller concessions, yielding an 80k net. I then didnt hear from them for 2 weeks. The two other offers were "owner occupy" all cash (yeah! my a$$ they were owner occupy!). One (possibly two) backed out for personal reasons. I ironically met one of them later, he was going to buy it for his daughter. The 2 other bids were around 101K.
The BPO listed price was 70k on this home. Don't fiddle fart around. Put in your best offer, especially if there is instant equity, and equity to be created in the basement.
Lastly - my agent warned of not going TOO high if you are using financing, they could reject based on the fact that your appraisal may not come in! This was obviously more of a concern last year, than right now in my opinion.
To summarize:
1 - put in an offer, you never know what could happen
2- put in your BEST offer, within the first few days of listing.
Another answer from the northwoods here in Minnesota.
I am putting my lending hat on for this one.
I want to make sure you are aware that because this is a HUD Home this already has an FHA appraisal done (the listing price is most likely the appraised value) and since you are doing FHA financing there will not be another appraisal. That appraised value is the value they will use for your loan transaction so you will need to put pay the additional funds in your down payment to make up the difference between the appraisal and the purchase price.
For instance:
List price and appraisal = $114K
IF excepted offer = $118K
Max base loan amount will be 96.5% of $114K (NOT purchase price) which is = $110,010
Your minimum down payment in this scenario = $7990
Make sense?
So be careful you have the proper funds available to make it all come together. I agree to be as aggressive as you can to get the home if it is the perfect one for you. I only want to make sure you don't get caught without knowing this bit of info. I'm sure your mortgage person can fill you in on these details as well, keep them part of the conversation to make sure everything works.