HUD Bidding Question

[Jeremy Mays]

I'm a little confused about how HUD handles backup bids when evaluating offers and how that should affect my bidding strategy. On the day HUD decides to do a price reduction, do they go back and look at all the backup bids that they have on file along with any new bids submitted for that bidding period before awarding the property, or do they just look at the new bids? I'm trying to figure out if I need to be submitting my bid every day so that I don't miss out on a price reduction, or if I just wait to hear from them once they have my best and highest on file? Thanks for the help!

[Mike H.]

You need to submit it every day if you're trying to time that price reduction. They will only look at active offers otherwise.  Now they will send your broker an email if they lower the price on a house that you had previously made an offer on and your offer is now close.  

But they wont' award a house to anyone unless you had put in an offer the previous day/night.

So basically, if you know a price reduction is going to occur soon - and along with the price reduction the usual discount bump as well, and you want to get the house before everyone else sees the discount, then put in your offer every day.

I've done that myself several times.

1) House is listed for 120k and is coming on the 60 day mark. They're currently countering at 102k net to hud (15% off the list).  But I know that when that 60 day mark hits (or pretty close), they will discount the list price 10% to 108k and will bump the discount off the list they'll take to 20%.  So they should accept 86,400 net to hud.  I then add some odd numbers just in case someone else out there knows and I put my offer in at 86,787 or something. I have my realtor put it in every day.  

And there have been houses I've gotten that next day for my offer price based on that formula. Which means nobody else out there ever got to see that the price was dropped from 120k to 108k and very few people even know you can get those kinds of discounts.

So if you see a house that sits awhile and can make it to that 60 or even better 90 day mark, you can get some great discounts - especially if you time it right.

I just got a good deal on a hud a little over a week ago. I wasn't putting in every day but I was putting it in almost every day. Thing was listed sept 14 for 141k.  Dropped down to 126,900 on 11/4. I put in 85k net to hud for about 2 weeks right after there. For the first two weeks, they kept countering me at 110k, not a chance.  And then monday, they came back and accepted the 85k net to hud.  1453 somerset beecher il. Its a 1350 sq ft 2bdrm/2bath duplex unit built in 2010. But it has a good size basement that I'm going to finish to add two more bedrooms. Should appraise out between 140k to 145k. Will easily rent for 1450/mo.  

The upstairs needs paint and to replace the carpet in one of the bedrooms and thats about it. Basement finish will be very rudimentary. I'll use the foundation walls for the walls and will spray the ceiling black. Just tile the floors with some cheap tile and frame up some of the other walls and call it a day. Just enough to qualify for finished space with the appraiser. 

But thats the kind of discounts you're looking at with hud if the house can make it thru to that 60 and 90 day periods. Originally listed for 141k and I got it for 85k net to hud (the actual bid ended up being a little over 90k once its grossed up).