| You have found your dream home and it is a HUD | | | | net to HUD. |
| foreclosures. You have done a walk-through of the | | | | For example, the HUD house that you want to make a |
| HUD house and it seems to be in good shape, just a | | | | bid is listed at $100,000. Your uncle, the inexperienced |
| few minor repairs. | | | | agent, will be paid 5% of the purchase price for |
| Unfortunately, you have already made a major | | | | commissions and you want HUD to pay $3,000 of |
| mistake. Your real estate agent, who is your uncle, has | | | | your closing costs. |
| never sold a HUD home foreclosure. He does not | | | | What do you offer so that HUD will net 88% of list |
| have any idea how much you should offer for a HUD | | | | price? You need to take what you know and back up |
| foreclosure. Your uncle is not a lone; most real estate | | | | to the figure you don't know, the offer price. |
| agents are not experienced in HUD foreclosure listings. | | | | You know what you want HUD to net and what costs |
| First, a little about what you can and can't do when | | | | HUD will pay. First, you want HUD to net $88,000 |
| buying HUD home foreclosures: | | | | ($100,000 X 88%). You want HUD to pay $3,000 of |
| 1. You cannot buy HUD foreclosures without a real | | | | your closing cost and pay your uncle, the |
| estate agent. A real estate agent does not have to | | | | inexperienced agent, 5% commission. |
| take special training to sell HUD home foreclosures. I | | | | You take $88,000, add $3,000 closing costs, and you |
| personally think they should have mandatory training. | | | | get $91,000. You still have to figure in your uncle's, the |
| An inexperienced real estate agent can cost you | | | | inexperienced agent, 5% commission. $91,000 is the |
| thousands of dollars in mistakes. Again, you have to | | | | figure without the agent's 5% commissions, or it is 95% |
| use a real estate agent to buy HUD foreclosure listings. | | | | of an unknown amount. You divide $91,000 by .95 and |
| 2. You do not have to offer the list price. HUD home | | | | you get $95,790. That is the amount you can bid and |
| foreclosures are listed at FHA appraised "market | | | | HUD will net $88,000 with HUD paying $3,000 closing |
| value". It is my experience HUD foreclosures are listed | | | | costs and 5% Buyer's agent commissions. |
| somewhere within 20% of market value either too high | | | | How did I determine HUD will accept 85% to 88% net |
| or too low. | | | | of list price? HUD publishes Bid Results and Bid |
| 3. If the HUD foreclosure listing is new on the market, | | | | Statistics on all of their HUD foreclosure listings. Bid |
| you will not get it for 50% off the list price. You are | | | | Results are the accepted bids and Bid Statistics are all |
| wasting your time on a low ball offer. But, if the HUD | | | | bids including the ones that weren't accepted. I am a |
| house has been on the market 3 or 4 months then a | | | | CPA so I enjoy working with numbers. I also have |
| low ball offer might work. | | | | brought HUD foreclosures for myself to fix up and |
| 4. HUD will pay up to 5% of the purchase price for | | | | resell. I want to buy HUD foreclosure listings for as |
| buyer's closing costs. The amount of buyer's closing | | | | cheap as possible. |
| costs you want HUD to pay must be on the initial bid | | | | This example is for HUD home foreclosures that are |
| form. | | | | new on the market. It is a different ball game if HUD |
| 5. HUD will pay up to 5% of the purchase price for real | | | | houses have been on the market for 2-4 months. |
| estate agent commissions and it also must be on the | | | | You also need to remember whoever bids the highest |
| initial bid form. | | | | net to HUD gets the HUD home foreclosure. |
| Ok, so what do you offer? The bidding process for | | | | What to offer for HUD foreclosures is not hard to |
| HUD foreclosures is just a numbers game for HUD. | | | | determine if you or your real estate agent have the |
| They don't care about what you offer; they look at | | | | experience or knowledge of buying HUD home |
| what they net from the sale of HUD foreclosure | | | | foreclosures. It is just a numbers game to HUD and it is |
| listings. | | | | easy to figure the numbers that HUD will accept for |
| If the HUD home foreclosure is new on the market, | | | | HUD foreclosure listings. |
| HUD will usually accept 85% to 88% of the list price | | | | |