Four HUD Home Bidding Tips for Real Estate Investors

Columbus HUD homes offer great potential for real estate investors and land lords. Unfortunately, there are not too many around. If you follow our blog you know that the number of HUD homes available to all bidders (investors) has shrunk considerably since the beginning of this year. Only 15% of all Columbus HUD homes listed each Friday are available to investors.

So what are the best strategies for investors to win one of the few remaining deals?

I want to offer you four tips to increase your chance of success when you are looking to buy a HUD home as an investor or landlord. Combined with the great information you find on this blog you will surely hit a winner!

Tip 1: Be Ready

You need to be prepared to submit an offer within 24 hours and act immediately, when a deal becomes available. Once the exclusive 10 or 5 day period for owner occupants is over, HUD will accept bids every single day. You can submit your offer in the afternoon and you will know the  next morning, if you are the winner.

The best way to prepare for submitting offers quickly, is to have all your HUD documents signed and ready to go with your real estate agent. With active investors I usually have an earnest money check deposited with our brokerage and the contract documents pre-signed. You can simply call me and I will submit the offer for you before midnight. If you are the winning bidder, we can simply finish the paperwork and overnight it to HUD.

Less experienced agents often lose deals, because they did not submit the original paperwork to HUD within 48 hours of notification!

Tip 2: Focus on Re-Lists

As an investor your best chance to win a low ball offer is when you focus on properties that have been relisted. This means that a previous contract fell through and HUD has to start from scratch. With relists there is a 5 day exclusive for owner occupants, so investor can submit their bids on Wednesdays. 

HUD is more motivated to sell relists to investors at a discount. If we notice that a property has been relisted a number of times we notify our customers. These are the best opportunities for investors, because occasionally HUD accepts discounts from the list price of 50% or more.

Tip 3: Look for HUD Homes that need Work

Owner occupants buy up all Columbus HUD homes that are listed as ”Insured” for FHA purposes. This simply means they don’t need any repairs. A large majority of HUD homes is listed as “Insured with Repair Escrow”.  Again, owner occupants buy many of these homes, but when the repair escrow exceeds $5,000, these Columbus houses become more difficult to finance and most owner occupants don’t want to deal with them.

If you find a home that is “Uninsured” you should take a closer look. It is very likely that a owner occupant won’t get financing for this home. FHA requirements are pretty tough right now. It is best to make a cash offer when HUD notices that they can’t sell a home with FHA financing. We also see that the insured status of properties changes when they get relisted, because a buyer may have discovered problems during the inspection.

The disclosures for most HUD homes indicate that there is mold in the house. Do not automatically reject these homes. Inspect them before you make an offer to decide for yourself what level of mold remediation is necessary.

Tip 4: Bid on Wednesdays

I suggest you submit your offer on Wednesday. Why? Because the HUD homes that were relisted on the previous Friday are reserved for owner occupants for 5 days – until Tuesday midnight. These relists offer a great opportunity for real estate investors to get a lower offer accepted. You probably know that we call these homes boomerangs, because some of them have been coming back every month as one contract after the other falls through.

Here’s One Final Bonus Tip!

When you make an offer on a relisted home, do not offer more than the previously accepted bid. This may sound obvious, but you won’t believe how many buyers and agents submit offers that are substantially higher than previously accepted contracts.

Although HUD publishes bidding results, these numbers are no longer available on their website when a property is relisted. Except for our customers! We keep a database of HUD bidding statistics exclusively for our clients. If you work with us, you will know what HUD accepted previously, and we will submit an offer that is competitive, but not too high.

Call me at (614) 975-9650! I’d like to help you develop a customized bidding strategy to win all your HUD Home offers!

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Thanks for reading our Columbus HUD Homes Blog
Posted by: Susanne Novak, ABR, FIS, GRI 
Columbus Realtors specializing in
HUD Homes, Shortsales, Investment Real Estate
(614) 975-9650

{ 4 comments… read them below or add one }

Nhan (Yen) June 14, 2010 at 12:30 am

This was very helpful. I didn’t think about looking at HUD homes. After reading your article I am now. How can we go see the houses before placing the bid? Do we need to get an agent involve or do they provide one? Thank you. This was a great article.

Susanne Novak June 14, 2010 at 10:23 am

Hi Nhan, thanks for contacting me. Yes, you can and you should view these properties before placing an offer. You will need to work with a HUD registered real estate agent just like myself. Only HUD registered agents can submit an offer on your behalf. Let me know if you have further questions!

David Joels February 1, 2011 at 12:30 am

With HUD having a 30-day waiting period for investors, do you think it’s better for an investor to submit their bid well before the 30 day period is over, or wait until until the first eligible day? That is, do you think the asset manager is more likely to try to hold off accepting a lower owner-occupied offer if a much better investor offer is waiting in the queue? Or is the asset manager more likely to push through a (lower) owner-occupied offer during the 30-day period knowing that an investor will likely get it otherwise.

admin February 1, 2011 at 9:46 pm

David, the exclusive owner occupant period is 30 days if the property is FHA insurable (IN) or FHA insurable with escrow (IE). For properties that are listed as FHA uninsurable (UI), meaning that they need more than $5,000 in work to bring them into FHA acceptable condition, investors can already submit offers on day 6 of the listing .

During the time period a property is offered for owner occupants only, investors CAN NOT submit a bid. They are not eligible yet. You will have to wait till the listing opens up to all bidders.

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