What is the Deal with HUD

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During my research in preparation for bidding on a HUD home, I read several articles and forum posts from bidders expressing suspicion about the process. They described odd occurrences such as being told they were the only bidder, only to have their above HUD net requirement offer rejected at the last minute. Some of them flat out alleged insider dealing and corruption.

Like most, I dismissed these "conspiracy theories" and attributed their situation to a misunderstanding of the process on their part or bad luck (higher bidder swoops in at last minute).  I figured the bidders were upset that they didn't get the house they wanted and were grasping at straws for sinister explanations for their misfortune.

Of course, that's still a pretty good explanation. However, I just had my own experience with HUD that has at least softened my original conclusion.

So for about 2 months I appeared to be the only bidder on this house. The day it came out of the exclusive period, I offered 88% net to HUD. HUD essentially countered (which I didn't know they did), "recommending" that I offer 91% net to HUD. At first I figured if they were sending counters then we were negotiating, so I sent back 89% net to HUD, but they just responded back with the 91% again. At this point I was unsure if I wanted this deal or another one, so I stopped bidding, but kept monitoring the house.

Almost two months go by, so we're getting close to a price decrease.  Interest rates are skyrocketing.  It's close to Christmas.  I put in a bid that is $10,000 above what the price decrease would be if it gets to that.  They counter me again with a recommendation.  This time, the next day I offer the recommendation.  The following day I'm told I was outbid.

So to recap.  The house doesn't sell for 2 months.  Yet the day I offer them what they want--on a day when a price decrease is imminent, it's 2 weeks to Christmas, and the interest rates are going up significantly--on that day, and only on that day, they got a higher offer. 

Possible?  Of course.  Probable?  No.  In fact, very unlikely.  No one was interested for 2 months, but suddenly someone was interested enough to outbid me on that particular day even though supposedly they had no idea I was bidding.