Buy HUD Home | What to Offer For HUD Owned Properties?

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When you want to buy HUD home the first question you may have is what should you offer for HUD owned properties. This is one of the most important items you should know before you make an offer for a HUD foreclosed home. 

You want to buy HUD home, but how much do you offer for HUD homes for sale?

I have had questions like “If I offer 50% of the list price, would that be too much?”, “Can I offer less than list price?”, “Can I offer more than list price?, “Would HUD be upset if I offer less than list price?”. These all are good questions and your real estate agent should be able to answer these questions and any other ones that you may have about buying HUD homes.

This bidding process for HUD houses for sale is just a numbers game for HUD. They look only at what the net amount is to them. No, if you bid 50% of the list price you probably will not get the bid unless the property has been on the market for a very long time. Yes, you can bid over and under the list price.

Buying HUD Home With FHA Home Loan | Very Important Point!

Here is a very important point if you are using a FHA Home Loan to finance the purchase of a HUD home foreclosure. If you bid over the initial list price of the HUD home property then you have to bring to closing the difference from the initial list price and your bid price. I have mention this issue on several pages of this website because it is very important!

For example, if the property is listed for $100,000 and you bid $110,000 you will have to bring an additional $10,000 to closing. The reason most people uses FHA financing is because of the low payment of 3.5%, so most people would not have the additional amount of the over bid.

How Much To Offer For HUD Owned Properties | The First Step

Where do you start to figure out how much to offer for HUD owned properties?

The very first step you should do when buying a HUD home is to get a real estate agent. Not just any real estate agent, but a real estate agent that is experienced in selling HUD houses.

THIS IS THE MOST IMPORTANT POINT ON THIS WEBSITE! If you don’t have a real estate agent experienced selling HUD houses it can cost you thousands of dollars. Also, you CANNOT buy HUD home without a real estate agent. If you have to use one, use one that is experienced.

When I first started buying HUD homes for myself and my clients, I needed to figure what is the lowest net to HUD that they would accept.

Again this is "NET to HUD". NET TO HUD is the offering bid price less any closing costs (HUD will pay up to 3% of purchase price for buyer's closing costs), less real estate agents commissions.

How did I figure this out what HUD will accepted? I am a CPA, so I am fond of numbers. This little fondness for numbers does make me a very boring person, but it does help sometimes.

HUD used to publish the BID RESULTS and BID STATISTICS of each HUD home for sale. The Bid Statistics page gave the information on all bids and Bid Results page gave the information on the winning bids. All I had to do was analyze the winning bids of Bid Results vs the losing bids on Bid Statistics. This works for new listings of HUD houses for sale.

Well, of course HUD had to go and mess that up by eliminating the BID Statistics and Bid Results information from their website. But it still looks like the information below still holds true.

What Is The "Net To List Price" That HUD Will Accept?

It is my experience that HUD will accept about 86% to 88% net to list price. HUD will also reduce the list price after the HUD home for sale has been on the market for 5-6 weeks. Usually the reduction is 10% of list price.

Your real estate agent could pull up the sold HUD homes listings in your area and he/she should be able to give you a good idea what HUD would accept in your area. Your agent should also do a Comparable Market Analysis (CMA) on the property that you want to make a bid on. The CMA will give you the information on what other homes similar to the HUD property you are planning on making a bid on are selling for the same area. Again, this is the function of your real estate agent.

The estimated net to list price of 86% to 88% is the price after the buyer's closing costs that you want HUD to pay for you and the commissions for the buyer's real estate agent.

For example, the list price is $100,000 and you want HUD to pay for $3,000 (3% 0f purchase price) of your closing costs, and Buyer's agent will get 3% commission. You should be able to buy the property for around $91,500 to $93,500. But remember there may be other people bidding for the property also and they may place a bid higher than the 86% to 88% net to list price. That is the chance you may want to or not want to take when you are bidding on a property. 

You can get more important information on how to calculate how much HUD will take for a HUD home foreclosure by clicking How To Calculate Offer For HUD Home Florida.   

You will be able to buy HUD home for even less if it has been reduced. The lowest amount that HUD will accept is based on how long it has been on the market. Sometimes if the property has been on the market for a long time (6-12 months) you may be able to buy it for 50% or more less than the asking price. Usually if it has been on the market for a long time then you most likely will have major issues with it. 

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