was on the hud website today and found a home i would like to bid on it’s been on the site for about two weeks with an as-is value @ 246
thinking thats a little high, i go to the assessor’s website and find out that the same house was sold in 2003 for 230 and the same house just four houses down sold for 242 on 06\06 and others in this neighborhood went for 240,247,248,272and285 in the last three years
so my questions are
1 am i to understand that the comps in the neighborhood are around 240-250?
2 how much earnest money will hud be looking for?
3 should i use my own broker or one from the hud site?
4 should i use 240 for the 70% rule meaning my bid should be 165 minus repairs
5 would a hard money loan be a option if i plan to filp or wholesale this?
I agree with Jared. I’d just like to highlight a few points.
HUD listings for the first few weeks are for owner occupied buyers only. They will remain on the list for several weeks before investors are allowed to bid.
HUD has a requirement by law to get the best possible price it can from the sale of the house. That means when they first list them they will list them for what they believe is Fair Market Value. Generally, they will not change the price or consider drastically lower pricing for several weeks, or even several months for sale.
However, after enough time has passed with no activity on the property they will begin to consider to lower the price some, then when they still don’t get activity they will get desperate, and start entertaining all offers.
So the key with them in most areas is to put in a bid at the level that makes economic sense to you. Realize they will probably turn it down. However, keep tabs on it and if a few weeks later it is still available bid again. Then a couple weeks later again. Keep this up until it either sells or they finally counter your offer or accept your bid.
As far as the amount to bid, in the past investors would buy at 70% minus repairs and holding costs (the additional costs from HML, taxes utilities and selling expenses for the property). However, with the market the way it is many investors won’t look at at property unless it is at 60-65% ARV minus rehab and costs. If you are going to wholesale, you need to be low enough on your purchase price so that you can resell at the 60%ARV and still make a profit. That is why buying as a wholesaler at 50-55%ARV minus costs OR LOWER is necessary for you to make a profit.