HUD Homes

Don’t know if this is the correct place to post this, but I have a couple of questions regarding HUD homes because there seems to be a lot of them in my area, and most need work (according to web listings). It seems that only certain realtors can make offers on these homes, is this true? Can investors buy them inorder to rehab and flip? Any info would be greatly appreciated.

That is correct, you can only make HUD offers using certain Realtors…but there are a lot of HUD-authorized agents around. Ask your Realtor. If he/she is not, someone in their office probably is.

Investors can buy HUD properties AFTER the Owner Occupied period (9 day period when only people that are going to live in them can bid)…if the property hasn’t received a qualifying bid after 9 days, it will be opened to “All Bidders”…that’s when you, as an investor can bid on it. If you legally purchase it during the “All Bidder” period, it is yours to do as you wish with.

I had one in Louisiana that I bought for $51,500 and put about $3,500 in Rehab into…it rented for $675 a month and I sold it after about 2 years for $75K.

The right HUD can make a good flip/rental…IMO.


How likely is it to get these homes purchased at a discount, and is there anything in particular that you can look for when scanning through the listings?

It is likely to get them at a discount. Check for past sales on the site and you can see what they actually sell for. Some go for 20-30k under asking price.

Here’s a bit of advice when making a HUD offer …

  1. Find a number that works for YOU.
  2. Minimum Allowed Offer = HUD List Price x .8701
  3. If #1 >= #2, submit offer for #2 price, otherwise, pass on deal.

Example #1:

You find a HUD home listed for $100,000. You do your calculations and figure you can’t offer more than $90,000 for it. So:

  1. Your number: $90,000
  2. Minimum Allowed Offer: $87,010
  3. $90,000 >= $87,010, so submit offer for $87,010

Example #2:

You find a HUD home listed for $100,000. you do your calculations and figure you can’t offer more than $60,000 for it. So:

  1. Your number: $60,000
  2. Minimum Allowed Offer: $87,010
  3. $60,000 < $87,010, so pass on deal

Now you know.

(Please note the 87.01% floor limit may be regional, but it’s what my agent passed on to me, and after getting rejected offers <87%, I started submitting them for 87.01% and got the first one at that amount accepted - that I wasn’t outbid on, anyway.)

Where I am now, HUDs go for very near or just over listing price…but most of the HUDs are mobile homes…


Most of the time, HUD homes in my area go for well over the HUD list price, too, mainly because they each have 10-20 bidders who bid it up. I got beat out of a lot of deals, but every so often a property comes along and for some strange reason it either doesn’t get (m)any bids, or the bids are REALLY low and you can get it at 87.01%. I closed on my latest yesterday that sat for a week in the “All bidders” period without ANY bids. I offered 87.01% and the next day found out I won. That’s where persistence (and patience) pays off. I bid on one a couple of months ago and lost by $200. You just never know.

What I find interesting about HUD’s is the fact that even after someone has won them, you might find them back on the market a month or two later. HUD has some VERY strict guidelines that they are quick to enforce. It takes an investor with an iron gut to deal with a lot of their rules - the worst being if there is an error in the paperwork, you only have 48hrs to get it fixed. You better hope your agent and/or mortgage broker didn’t decide to take a vacation, or HUD won’t hesitate to cancel the deal. Like any other gov’t agency, you have to play their “hurry up and wait” game to the hilt.

So if agents know the 87.01% rule it would probably be best to offer something like 87.02% to outbid the other savvy investors that might have been tipped off by an agent?

Acutally an invester can bid during the owner occupant period. The owner occupant just gets priority during this period. I recently won a bid @ 60% of appraised value during the owner occupant period, because no owner occupants bid.

If a property is in an owner occupant period and huds minnimum acceptable bid is $100,000 as long as the owner occupant bids this amount they win even if the investor bids $120,000. However, if the owner occupant bids $99,000 and the investor meets the minimum acceptable bid the investor wins.

But the bottom line is you can bid in the owner occupant period.

But the bottom line is you can bid in the owner occupant period.

This is definately new news to me. I’ve spoken to many HUD agents and brokers, and all of them have said as an investor, you cannot bid during this period (legally, anyway). If the property is not sold during that period THEN it will go to “All Bidders”. Can you provide proof that this is allowed by HUD?

Actually, 87% is the cut-off, so 87.01% is the “next up”. :wink:

Here is a cut-n-paste from the HUD processor’s web site for my area:

[i]Q: Who can buy a HUD home? Are they only available for low-income buyers?

[…] There is an initial period when only owner-occupants are allowed to purchase, after which time investors may also buy. […]

Q: Can I buy a HUD home as an investment property?

Yes, but owner-occupant purchasers are given priority for an initial period of time that the house is on the market. These are persons who will affirm in writing that they have not purchased a HUD-owned property in the last two years and they will live in the home as their primary residence for at least one year. After the initial listing period, investors may purchase the houses for resale or for rental.[/i]

IMO, this is: Not correct! Bad advice!

During the O/O period, investors CANNOT make offers. The agent that does so knowingly can be subject to a lot of penalties including removal from the HUD program, license sanctions, etc.! Additionally, it is a violation of the HUD program and the investor can be invetigated for this. The investigative organization is the FBI.

From the HUD website:

Who can buy a HUD Home?
Almost anyone! If you have the cash or can qualify for a loan (subject to certain restrictions) you may buy a HUD Home. HUD Homes are initially offered to owner-occupant purchasers (people who are buying the home as their primary residence). Following the priority period for owner occupants, unsold properties are available to all buyers, including investors.

Owner Occupant Periods and When Investors Bids Can be Placed
During the first 10 days a property is listed it is available for Owner Occupant Purchasers only. All bids placed by Owner Occupants that are submitted from Day 1 through Day 10 are opened on the 11th day and are considered as though they were received simultaneously. If there are no acceptable owner-occupant bids on day 11, then bidding becomes available to all purchasers on a daily basis.

These instructions seem pretty black and white to me! Theinformation about sanctions and penalties was provided to me by a HUD-authorized agent.


I bid “investor” and my agent discloses this to Hud. I have won bids as investor in the owner occupant bid period as have many of my investor friends. They review all owner occupant bids and if no bid meets the cutoff they then review all investor bids. I bid in Georgia, but i would assume the rules are the same in all states.

These are fully disclosed as investor bids.

It seems strange to me (bordering on “unlikely”) that HUD would establish and publish written guidance on bidding practices and then violate them as they wish…in reality, the difference between the O/O date and the “all bidders” date is one day because all of the O/O offers received during the period are reviewed on the last day and are treated as if they were received at the same time and the “all bidders” are opened daily.



I thought this forum was to help other investors, so I tried to provide some information.

If anyone is interested in winning more bids, please call a HUD officer or contractor that handles HUD’s bidding, and ask if an investor can bid during the owner/occupant phase. The contractor in GA is First Preston.

I dont need convincing. I just closed on one, and I have another under contract.

Keith, I am sorry you got your feelings hurt. You can continue to lose bids to more knowledgeble investors.

When can an investor submit a bid?

An investor may submit a bid any time, but it will only be considered at the conclusion of the 10-day Owner Occupant priority.

What is Owner Occupant Period?

The Owner Occupant period is delegated to the first 10 days the property is listed. All owner-occupant offers received are reviewed and the property is awarded to the highest acceptable net owner-occupant bidder. At the conclusion of the 10-day Owner Occupant priority period and the property remains unsold, bids from investor purchasers will be considered.

This is from the AFR HUD site–the actual bidding contractor

Property Listings and Submitting Bids

New properties listings are posted each Wednesday. Bids can be submitted by all potential purchasers once listed. However, priority will be given to bids received from Owner-Occupant purchasers for the first 12 calendar days of the initial listing period.

Owner-Occupant Priority Period
All Owner-Occupant offers received during the first 12 calendar days of the initial listing period, shall be considered to have been received simultaneously. In order to be valid for the 12 day priority period, bids must be completed and confirmed within 12 days of listing.

Owner-Occupant bids received during the initial 12 day priority period will be opened and reviewed on Day 13, and the highest acceptable net bid to HUD will be selected. Should there be no acceptable Owner-Occupant bids during the 12 days of the priority period, investor bids will be opened and reviewed on Day 13. Investors may bid at any time during the 12 day Owner-Occupant Priority Period, but investor bids will not be considered until day 13.

Okay. I got a personal message from you, and I think the confusion started when you said …

I recently won a bid @ 60% of appraised value during the owner occupant period, because no owner occupants bid.

You didn’t win the bid during the OOO period, you won AFTER the period. You just placed the bid during that period, HUD waited until the period was over, and your bid was one of the first in line to be reviewed AFTER the OOO period was over. I encourage investors to bid during the period, but they cannot WIN during the owner occupied only period (only after the period is over).

ROFL…it would take a whole lot more than that to hurt my feelings! You should see how some people treat the Moderators - think of a name and we’ve been called it…if I had thin skin, I would have left a long time ago…I sent you a response to your note…it appears to me that there is conflicting guidance around because I have been told several time that you can’t even bid as an investor until the “all bidders” timeframe…