All Forum Posts by: Michael Scarbrough

Jon,

I am in Louisiana and the inspection we see from HUD properties are very generalized and basic.

Also, I just recently purchased a HUD property and it was contingent on financing and on OUR inspection, we actually found several things that needed repair from our inspection and were given an allowance from HUD for some of these issues. After the inspection took place we had the option to ask for allowances or void the contract the whole deal was pending our inspection and financing. May be different in your area but this is what we see in Louisiana.

Kevin,
Hud does a very vague inspection on their homes it is not near in as much detail as a home inspection should be. If it were me i would have an inspection done. It will be better for you in the long run, that way you know exactly what you are dealing with instead of just a general look around inspection that was already performed.

Hope this helps!

Alvin,

You can use the 75% off the list price if the price has yet to make a drop, also if the price has dropped i use the 75% off of the new reduced price as well.

However, you must determine the number you have to be at in order to profit from the deal so don't just use 75% as a basis to bid on make sure you have the number you need to be at in order to profit and from there decide on the appropriate bid.

Hope this helps and Happy Investing!

Alvin,
75% is just the number i have been seeing in my area it. I was just using this a general rule of thumb. What i meant by this was you could essentially throw a super low ball number out there and they wont treat it like most banks and counter you back $500 off list. They will send you what the lowest NET allowable to HUD is after Realtor fees and closing costs are taken out.

You are right on the your 5% calculation it seems too easy but it's true. They will tell you what they will accept as an offer from you.

So for example this is a deal i just got with a HUD proerty.

List $135,000
My offer $105,000
Hud counters lowest NET $114,751
New accepted offer of $126,100

3% Realtor fees $3,783
3% Listing Agent Fee $3,783
3% Closing Asst. $3,783

Total net to HUD after all of this:
$114,751

Good Luck!
Mike

Mike,

It depends on what you are trying to do with this property, if you are trying to flip it then yes i would factor these costs in.

The utilities may be fine just make sure they are up to code.

With a HUD home i would take it into account as a possible repair and make sure i allowed myself enough room in my number to cover these costs if they needed to be replaced. But, with a HUD home in my opinion, which could vary from others on here, unless your number is inside of 75% of the list price then odds are they will just respond with the lowest NET allowable counter.

So in my opinion i would reach my max offer for profit or cash flow and send it to them and you will know if you are within or outside of their acceptable limit by their accepted response or lowest NET response.

Most of the time your offer probably will not be inside of their acceptable percentage.

But as for the repairs you mentioned, these could get costly so i would say you have to factor them in because if you are nervous about them already then they probably don't have much life left.

Hope this helps!

Mike,

HUD does not counter offer regardless of your requested purchase price. They will tell you what their lowest NET allowable to HUD is and this figure can be reached by subtracting the listing agent, your agent ( if you have one), and any closing assistance you are asking for up to 3%.

If you waited for the property to mature on the market then maybe you could get a lower acceptance price. How long has the property been listed for?

Mark was accurate on the 80% of listed price being the accepted price most of the time. I just purchased one for 85% net to HUD which was the lowest they would take and this is the average i have been seeing in my area.

Also, in my area HUD doesn't care when you close as long as it is within 45 days of signed contract. The way you fund at your closing doesn't matter to them.

Just make sure you figure out what you want to do with the property and come up with your number that will make you profit or cash flow and stick to it, it their NET is too high for you to profit or cash flow then move on and find another.

Hope this helps and Good Luck!

Mark,
I am new to investing so if any of this is wrong i would hope someone with more experience would correct me. In my area the opening bids go to Non-profit and other types, after their period is over then it opens to owner occupants, after the owner occupants time passes it moves to investors and everyone else. HUD does not counter back, however they tell you what the lowest net they will take is including listing agent comiss, your agent commis, and closing costs. If it is insured with escrow then it is based off of their (HUD's) inspection and appraisal notes and estimate to fix with contingency.However, I'm pretty sure you can get your own estimate on repairs. If you are planning to do FHA financing then you must have this done either right before closing or shortly after closing, when it is complete they will inspect to make sure the work is completed and then release the escrow funds back to you. Remember they are subject to multiple offers yours getting there first will not matter, it is who offers the highest net to HUD. Hope this helps and if i am wrong on any of this please someone with more knowledge feel free to correct!