Questions about obtaining the best offer?

Question

I still have not heard back from the bank regarding an offer I made on another property and that offer's deadline has now closed, so until then, I'm making looking to make an offer on other properties.

I just got back from doing a walk through in a foreclosed HUD property, which is listed at $17,100.  The property is in a very quiet neighborhood and is less then 100 yards away from an elementary school. The property isn't in too horrible shape.

Now, here's the question:

There is a posting on the window, a warning stating that this property contains mold. I inspected the mold, and it is not the black mold, but more of a green type mold. The roof needs replaced, the bathroom needs gutted and replaced along with the kitchen to be habitable.

The property right next door sold for $11,000 on 5/4/2012. Can or should I take pictures of all of the issues (especially the mold), include estimates for the repairs needed to make the property habitable with an offer in hopes of leveraging my offer? I'm thinking $12,500, which would be about 75% of their asking price.

Mark Ferguson · Answer

I am a HUD listing broker.  :)  HUD will counter if your offer is close.  Their counter is just a notice of what they will accept net to them. You have to bid  again for the amount they counter and someone else can still outbid you if they bid higher tht same day. HUD usually lowers the price between 35 and 45 days. They lower it about 11%.

Mark Ferguson · Answer

You'll be wasting your time for a couple reasons. 
1.  HUD doesn't care.  They list thousands of properties every month and rely on the appraiser to value the property and base their price soley off the appraiser.  They don't have time, nor will they review any supplemental documents.

2.  There is no way to send those items to HUD.  All bids are submitted online by a realtor and there is no option to upload any documents.

3.  HUD has very strict pricing guidelines.  The asset managers review the bids and are only allowed to accept bids that fall within these guidelines.  Typically about 11% less than ask price not counting realtor commissions. Basically they will take 5% less unless the property is aged.  Aged means it has been active for more than 90 days.  They can get special approval on aged properties to take a Lower bid, but it is rare.

Mark Ferguson · Answer

J  Scott, thank you!  I appreciate the kind words.  I have been listing HUDs for 2.5  years, teaching classes every month and attending HUD trainings and I still learn new things about the HUD system al the time.  It can be very confusing for someone who has never dealt with it before.

J Scott · Answer

Just wanted to acknowledge Mark  Ferguson for the great responses above.  We get a lot of HUD questions on BP, and some of us have a good big of experience on the acquisition side of HUD listings, but Mark's insight from the listing side is invaluable.

Thanks for all the great info, Mark!!!

Mark Ferguson · Answer

Actually no. 
HUD does not turn on utilities.   HUD gives you permission to turn on utilities. The utilities must be out in buyer or their agents name Nd any cost associated with them beig on is the buyers responsibility. If the home needs dewinterizrd Huds company will do that after your inspection but they make pay $150 before your inspection To re-winterize.

Not sure where the 15% refund is coming from.  Never heard of that.

Scott Bartlett · Answer

HUD properties at the moment sound like a little bit more risk than I'd like, as it being potentially my first deal.

I like the contingency of inspections so that way I have an out, but if HUD won't allow me to have an out, I'd have to put in a minimum EMD, which I would guess is $500 since the purchase price would be under $50,000.

It also appears that once a bid has been accepted, that HUD will have all utilities turned on for inspections to insure that everything works (heating, water, gas, electric and ect) and if they don't, HUD will return 15% of your EMD?

Mark Ferguson · Answer

1.  Every financed offer HUD allows 45 days to close. On cash offers they allow 30 days to close.  You can close sooner if your ready but the Ryle company may require 8 business days to review figures!  Don't count on closing any quicker than about 3 weeks on a cash deal.

2.  HUD allows a 15 day inspection period for owner occupied buyers and investors.  However HUD will not return an investors earnest money for inspection findings.  They will in most cases return owner occupants earnest money for Inspection issues.

Scott Bartlett · Answer

Mark  Ferguson,

If you don't mind, I'd like to ask a couple of other questions (Did a search about HUD Properties on BP.com) and found a few interesting items, and would like your thoughts.

1.) I'm reading HUD does not accept quick closes, and requires 45 days to close on a property? Actually read this a couple of times on here...

2.) I've read that someone stated the HUD did not allow inspection contingencies, and it appears that was just a erroneous post.

Scott Bartlett · Answer

Your right on both counts in regards to this property. They lowered the asking price 10% after 44 days on the market.

It's worth a shot for a lower offer, but I won't lose any sleep over it.  One thing I've been learning, there are a LOT of properties to choose from, and allows me to be selective.

Thanks for your quick responses!

Scott Bartlett · Answer

Mark  Ferguson,

Thanks for the great replies! Sounds like you've dealt with HUD properties before.

On Tuesday (March 19th) the property will have been on the market for 56 Days (8 Weeks).

Do you know if HUD Counteroffers at all?

Looks like I'll make an offer of between 12K - 13K. The property will need about 15K in repairs, and should rent out for roughly $550 a month.

Questions about obtaining the best offer?

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