Looking For Advice On HUD Home Bidding...
Hi all! Forgive me if I am posting in the wrong forum!
I'll try to make this short...we live in an unincorporated town in rural Oklahoma. The same 7 houses have been on the market for well over a year, and recently one of them was foreclosed on. The seller's asking price was 117K, too much for our first home...but we love the house! So HUD took over, and the house has now gone up for bid. It is listed on the website at 96K, but our maximum amount is 88K.
My question is, how low can we expect HUD to sell this home for, assuming we are the only bidders? (The house was for sale over a year, and even when the owners tried to short sell at 91K, they had no offers.) I am assuming HUD will take into consideration all these factors...this house appraised at 110K, but in our area, the square footage is just too small for most people to pay even 91K.
We have to bid on Monday, and I don't know if we should bid 88k, or less? And if this is even a reasonable offer, considering HUD will pay 4K for closing costs.
Thank you in advance...this is our first home buying experience, and we really love the house!
Billie
. Are eiher of you teachers? If so, the "Teacher Next Door" program allows you to buy the HUD house at half price (if you agree to live there)!
Otherwise, are you working with a Realtor? Usually HUD sales involve Realtors. Ask around for one who "knows" the HUD system/process, and consider offering, say, $70k-75k. They may counter with more, or take it, or counter with more and take your original offer if you counter with that same offer (it's happened). Sounds like there's not a long line of buyers for your house, and HUD knows that, so it could work. Good luck!
Billie,
I get from your post that this property is a new HUD foreclosure. It has never been listed by HUD before, and is a new listing.
If this is the case, you don't have to submit your bid on Monday. Monday is just the first day of a 10 day simultaneous bid period for owner-occupants. A bid submitted on the first day is considered submitted at the same time as a bid submitted on the ninth day.
If this property is offered with HUD insured financing, and if you qualify as a first time home-buyer, and if you are purchasing this property as your primary residence, then you need to offer full price and request $4000 in closing cost assistance.
Here's why. During the first 45 days of a HUD listing, HUD normally only considers full price offers. A full price offer from an owner occupant is one where HUD will NET at least 89% of the list price, or $80990. If your real estate broker takes a full 5% commission and if the broad listing broker fee is 1%, then the first $5400 of the $91K sale price is used to pay a sales commission. if you take the $4000 in closing cost assistance (you have to ask for it in your bid), then HUD's net from this sale will be $81600. This is slighly above HUD's minimum acceptable net of $80990. Any bid that results in a net to HUD below their minimum is not considered. There is no counteroffer when dealing with HUD. You make your bid, and it is either accepted or rejected.
You only have about $600 room to play with, so you can try offering $90500 but this is probably as low as you should go.
The teacher next door program does not apply to all HUD properties. If you are a teacher, but this property is not participating in the teacher next door program, then you calculate your minimum bid as I have suggested.
If you are a first time home buyer, apply for one of the FHA first time buyer homeloans that require only 3% down with 97% financing. If all goes well, you will only need to bring a $2715 downpayment plus your prepaid escrows to the settlement table.
Are you a policeman? Woould you like to be? Perhaps you could become a wanna be part time deputy sheriff er something. All of which entitles you to priority and reduction in price re: HuD
baby.
I am a Hud certtified Broker. We have nothing for sale out there in North Hollywood that is worth buying. We have one house located practly under the highest high tension power system the world has ever seen.
Atom bombs come to visit just to bask in the reflected energy.
two story house that violates every concept of construction. It is the worst. The car port is just that, Port.
Only listing available in these parts and all that look upon it shun it. So far the price is still way up there. Go figure.
I would try to stay within the limits of HUD thinking. My bid suggestion is $81,000 if you are only bidder or high bidder they still may not take it. They put it through the mess and slowly drop it each time there is a failure to auction.
Your broker should advise you. To play the game you check with a title co. See what it was foreclosed on. Check the original note secured by mortgage, see what it was. All of which should color your bidding. Good luck.
Lucius
Thanks for the responses! I have spent the last month doing my homework on this house...so here goes.
Thank you!
The house was built 6 years ago, and the original owners lived there less than a year, and got transferred. They weren't able to sell at their asking price (130K) so they short sold to the next occupants for 115K. These owners lived there 5 years, and I believe she told me they owed around 96-98K on the house, but the bank offered to let them short sell for 91K. Still no offers, so they went into foreclosure.
(The joys of living in a small town, you know everyone's business, ha-ha!)
Like I said before, there have been 7 houses on the market here for more than a year...none of them have had a decent offer. Which tells me that we'll probably be the only ones bidding on the house (or so I hope), I doubt that many people out here would go to the trouble to research this thing to death like I have!
We are already pre-approved for an FHA loan...I have the letter to take to the realtor with me Monday (Monday is the 4th day of bidding, and Tuesday morning the first sealed bids are opened). We already have the down payment covered, and the banker has said he can roll our closing costs into our loan, raising our rate a little.
Not sure if I'd be better off to let him take care of the closing costs, or ask HUD to pay.
Regardless, we are pre-approved for 88K, and do not want to pay any more than that, PERIOD! This is our first home, and we don't want to get in over our heads, no matter how much we love the house.
Are you still with me? Any advice would be appreciated
Billie
I forgot to add that the realtor we're working with is pretty much worthless. (No offense to any realtors out there, really!)
She has been NO help whatsoever, what exactly is she getting a fee for? I've asked around, and none of the realtors in our area are too familiar with the HUD process. I am going in Monday to talk with her, so we'll see what advice she offers then.
I cannot believe she will be getting such a big fee for simply pressing enter to submit a bid. I've done all the legwork myself!!!!!!!!!!!!!!
Sorry to post so many times...I called her 3 weeks ago to look at the house, never heard back from her. All calls have been initiated by me, and she's never had any answers.
Is there any way she will lower the fee to 1 or 2%?
Your Realtor may know less about the HUD process than you (esp. now!), ergo her hesitation. Also HUD involves substantial paperwork, and the payoff isn't as high as those pretty 6-figure homes most Realtors will work the hardest to sell. You've done all the legwork, maybe you could still find a more eager HUD-approved Realtor to work with.
You still have time to call around. The conversation might begin, "I'm pre-approved for a home loan and have a letter from my bank. I've found and extensively researched a HUD foreclosure home I want to make an offer on today. Who do you recommend as the hungriest HUD-approved agent in town who can present the offer for me?" Then hope they don't recommend your current agent...
HUD typically sets the max. fees a Realtor/broker can charge, and unless you're paying her a voluntary 'buyers agent' fee, her fees are paid by seller's proceeds anyway. Few Realtors--esp. if there's not a lot of competition, which seems to be your case--will want their commission get cut to make a deal (esp. below 5%), even if you can demonstrate that 'the deal's off unless...'
Just one thing to be aware of regarding offering (and getting accepted) a bid on a HUD home and using an FHA loan. In order to receive final approval on an FHA loan, the property must pass an FHA inspection or they will not loan money on the property. Necessary repairs must be performed before an FHA loan is settled. On a HUD home, any repairs that must be done to the property are NOT allowed to be done until after closing. HUD strictly forbids any work being done on the property prior to settlement. Kinda catch 22 situation. If your bid is accepted and the house needs something to pass inspection (and you cant perform the repairs) you will lose your $1000 deposit to HUD.
Not trying to scare you, just wanted to make sure you are aware of this.