HUD Foreclosure
scenario: A house in my area is owned by HUD and they currently have it open to bidders until Wednesday. They have a minimum bid requirement of $73,000 which is what it is appraised at. If no one bids this amount then they will open up the bidding to any offers on thursday. HUD purchased it for $69,000 six months ago when the owners defaulted. I would like to wait and try to get a great deal next thursday. Does HUD typically accept bids for substantially less then they have invested or am I just wasting my time?
From what I've seen, and I've not bought HUD house, only investigated them, and talked to a couple of realtors that specialize in them, the longer the property stays on the market, the more HUD will discount them, just like anybody. They say that typically, after it's been on the market a couple of months, they'll come down 10-15%. If anybody's seen this differently feel free to jump in here... Good luck with whatever you decide....
We have worked a good number of HUD deals, and we've found that a 5-10% drop is not unusual. I personally haven't seen anything over 10%.
Don't forget the most important thing.
All HUD cares about is their net to HUD.
You need to work with a broker who will take a discount commission on the backend for around $500.00 - $1000.00.
Otherwise, you wont be competitive.
If you were to bid $100k with a normal HUD certified broker, the net to HUD would be around $95k. If I bid $96k on the house, if we were the only two bidders, I would get the house. You know why? Because the net to HUD
from my bid would be around $96k.
Hud also has a broad listing broker to pay so my figures are estimated.
Best Riches,
Jeffrey Adam
[addsig]
i don't know if this differs from state to state, but in Michigan it works like this:
HUD listing agent grosses 1% commission
Selling agent grosses 5% commission
A conventional transaction each agent would gross an average of 3%.
The HUD listing agent is not getting screwed here, because he has the exclusive right to list all HUD properties in his market area.
The selling agent on a HUD is making out like a bandit. Keep in mind, tho, that it is a more specialized process, so he deserves to be compensated.
The only thing agents are more concerned with than commission is referrals. If you send him business, and promise to sing his praises all over town, I'd bet he will drop commission .5% to 1% on a HUD deal for you.
G/L[ Edited by af7850 on Date 02/28/2004 ]
I have done hud and va repos for over 10 years. In the past few years the good deals have been few and far between. It has been my experience that both of these government agencys couldnt care less about the investor. You have to look very close to make sure the property is worth the effort. In many cases the Broker who is showing you the property is looking more for the commission they will make than assisting you in making a profit. Since you must use a Broker in order to submit a bid,you should interview several and prompt them to lower the net commission they will recieve. Its best to work with a broker who owns or manages the office,they will be in a better position to discount the sales commission. Once again these repos are not the deals they used to be, you can find great deals in the regular market as well,but takes work.
I appreciate everyones great advice and I will let you know what happens next week.