Wholesaling HUD properties?

Question

Hi BP Community. Does anyone have experience or know anything about wholesaling HUD properties? One of the well-known wholesalers out there says it’s a great way to find/purchase below market real estate. Apparently the idea is to start bidding low and increase your bids until you hit the “threshold” for the particular market you’re bidding in. This wholesaler has also indicated that it’s a great way to wholesale virtually without ever viewing the property. Any thoughts, opinions or experience would be most welcome!

Priscilla Z. · Answer

Christina L. - You are very welcome! Yes, I am a licensed agent so I can put the offers in myself.  I also have a SUPERSTAR Realtor that I work with, she is a very important part of my team, and she was willing to put in the offers, no matter how low they were, but it was tedious for me to be emailing her the offers and sometimes I would want them to be put in late at night at that was not reasonable.  So, I started doing it myself.  In talking with other investors I have found out that it is difficult for them with their Realtors because the Realtors don't want to be putting in low ball offers.  Honestly it's not worth it for most Realtors.  Build a relationship with one, show them you are the real deal by closing some houses with them, and then they will realize that it is worth their time even for a smaller commission.

I secure all my HUD properties (and most MLS properties for that matter) without even going to see them.  It's a waste of time if you do.  I can usually tell by the pictures and the inspection report how much repairs it needs and therefore base my offer on that.  I only go see the house when I get an offer accepted.  Then if I realize it's a complete dump, I don't send in the contract.  If I decide I want it, then I move forward with the contract.

It's rinse and repeat.  Honestly, with HUD, time is of the essence, at least in my market.  If you see a house you want tonight, you better put a bid tonight because it will be gone the next day.......

Priscilla Z. · Answer

Hi Jerald,

You need to have a proof of funds letter to send with your contract once it gets accepted. You then have 30 days to find an end buyer.  If the house is $50K or less, your escrow deposit is $500.  If it's more, your escrow deposit is $1,000.  Don't count on getting this money back if you cancel the contract because you can't close on it.

You get your end buyer, go into contract with them, and close the transaction by using transactional funding.  Since you are in FL I can recommend a title company you can use, same one that I use that makes it super easy and already knows how to work with us wholesalers.  Just PM me and I will give you their information. They send mobile closers to you so it doesn't matter what part of the state you are in.

Priscilla Z. · Answer

Christina L.  - Hi David.  Yes absolutely, you only bid on the period for investors.  On the HUD website you are able to choose "Investor" properties.  You absolutely CANNOT bid on owner occupant and try to get away with buying it as investment.  BIG NO NO.

I don't even look in the owner occupant section, I only look in the investor section.

There is an amazing article here on BP about HUD homes that has a lot of information there, just search for it.  I learned from that article the difference between when an "uninsured" house comes out to investors as opposed to an "insured" house.  Check out the article as he explains it clearly there.

HUD will accept a % lower than asking price.  I have heard that it depends on your market.  In my market right now I am picking up HUD houses at 92% of asking price, if they have come out recently.  If they are old, you can get them for considerably less.  I have gotten them as low as 59%, that is rare though.

They close the bidding nightly, except Friday, Saturday, Sunday.  That closes on Sunday night.

Hope this helps!

Recia Davis · Answer

very helpful posts. Thanks all :)

David P. · Answer

Hi @Priscilla Z. so do you need to wait for the period so non-investors can bid on properties?  Can you please explain how this process works as I have only purchased a HUD home as a personal residence a long time ago.  Also, I have heard that most of the time HUD will accept a percentage below asking price of the property, do you find it is at 90% or lower???  Also, do they close the bidding nightly, weekly, or on a specified date?

Thank you in advance,

- Dave

Christina L. · Answer

@Priscilla Z. Thanks for the great information!

@Jerald Alford Hope the HUD wholesaling works out for you.

Jerald Alford · Answer

Hey ladies , your post caught my eye. @Priscilla Z. how does that work exactly, I know in wholesaling (which I'm a newbie at) I get the property under contract and it usually for 30days. How does this way work and what about closing and what not?

THIA

Christina L. · Answer

Thanks for the info Priscilla! I'm not a realtor but know you have to use a realtor to make the HUD bids. Are you a realtor yourself?  If not, have you been able to find one who has been willing to make these bids on your behalf?  I'm not sure how "worth it" it is for a realtor to do this so that's why I'm asking.

Also, have you been able to secure the HUD properties virtually without going to look at the them in person?

Priscilla Z. · Answer

Hi Christina - I love HUD homes. I have wholesaled a total of five so far. I stick with the closing company that HUD had for years here in FL and have established a relationship with them that they know exactly what we do.

Do not overbid....

Keep both transactions in the same closing company. My very first one I had my AB closing at one title company and my BC at another. Total nightmare.

Any specific questions?

Wholesaling HUD properties?

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