Calculate An Offer For HUD Home Florida

We are going to use a HUD Home in Florida for an example to calculate an offer.

Let’s say the HUD home in Florida is listed for $100,000 with $3,000 Escrow for repairs. It needs some plumbing repairs. The list price of $100,000 is also the appraised price by a FHA appraiser. What should you bid for this HUD Florida home?

The property has been listed for 12 days. It is beyond the 10 days period for Owner-Occupants bidders only. Anyone can bid on it and it is a Daily Bid process. You will know the next business day if you are the successful bidder on the HUD home Florida.

HUD is only concern with what they net to list price. HUD does not care what the purchase price is.

HUD will pay certain expenses on a HUD home for sale. They will pay your real estate agent commissions up to 5% of the purchase price. They will also pay up to 5% of the purchase price for certain Buyer’s closing costs. Both the real estate commission and the closing costs have to be on the Submitted Offer.

Closing Cost Paid by HUD

It is my experience that HUD will accept offers of 86%-88% of the list price.

Using the $100,000 list price for the HUD home Florida, HUD would accept an offer that would NET them $86,000-$88,000. The $3,000 Escrow for repairs does not come into play on the bidding process. It only comes into play if you are financing the purchase of a HUD home for sale with a FHA mortgage.

If you ask HUD to pay your real estate agent 5% commissions and 3% in closing costs assistance, HUD will deduct 8% from your purchase price.

Here is an example of a bid for the HUD home Florida:

List Price of HUD home Florida $100,000

Your Offer $100,000Agent Commission (5%) -5,000Closing Costs Assistance (3%) -3,000 ________

Net Amount to HUD $ 92,000

The net amount to HUD of $92,000 is what HUD will look at, not the purchase price.

Another example of a bid for the HUD home in Florida:

Your Offer $96,000Agent Commission (3%) -2,880Closing Costs Assistance 0 _______

Net Amount to HUD $93,120

Which of the two bids would be the winning bid?

Even though the second bid purchase price is $4,000 less than the first bid, the second bid would be the winner. It NETS HUD $1,120 more than the first bid. Again HUD does not care what the purchase price is. Your lender may care, but not HUD.

How do we get to the lowest net amount HUD will accept for a HUD home for sale? What is the formula?

Here is how you do it.

Step 1. Take 86%-88%(You can start with 86%)times(X) the list price. In this example, take $100,000 X .86(86%). You will get $86,000. We now believe HUD will take $86,000 net to them.

Step 2. Add together the 2 percentage for the commission and the closing costs assistance.

In the first example 5%+3%=8%. Deduct that percentage (8%) from 100%=92%. We know $86,000 is the lowest net amount HUD will accept and we are asking HUD to pay 8% in agent commissions and closing costs. That means $86,000 is 92% of an unknown about. Divide $86,000 by 92%=$93,478. $93,478 is what you need to bid in the first example for HUD to net $86,000 for this HUD Florida home..

In the second example, take 3% for the agent commissions(you didn't ask HUD to pay any closing costs), deduct it from 100%=97%. Divide $86,000 by .97(97%)=$88,660. In this example you can bid $88,660 and HUD will net $86,000.

Remember that other bidders may be bidding against you. If you don't want to take the chance of losing the HUD home for sale, you may want to bid more than what the net amount HUD will accept.

This photo is an example of one of Florida HUD homes. It is an Orlando HUD home. This central Florida HUD foreclosure is listed at $87,000. There are only a few Orlando HUD homes currently available, but there is a good selection of Florida HUD homes throughout the state.