This question may seem strange, however, you probably noticed that many of the nicer Columbus HUD homes have been selling above list price. You may wonder, if there are any disadvantages by bidding higher than list price?

Many people fear that they pay too much for a house. When you get caught up in a bidding war with other buyers, you may end up offering more than you had planned. However, many HUD homes are worth more than they are listed for (an experienced realtor can give you the correct value and comparable sales). Sometimes you get a great deal, even if you pay more than asking price.

When it comes to financing your purchase, you may encounter problems when you offer more than the appraised value. Let’s look at different financing options and the consequences of bidding above list price:

As a Cash Buyer you can offer as much as you like, even above the appraised value or list price. Just offer what owning the property is worth to you. Nobody else cares.

Buyers using Conventional Financing are required to get a new appraisal. As long as your lender’s appraised value of the property is equal to or above the purchase price, you are good to go. Should your lender’s appraisal come in lower than your purchase price, you may be able to make up the difference in cash, ask for an appraisal review or even order a second appraisal.

When you finance Columbus houses with a VA Loan, your lender’s appraisal again has to come in at or above the purchase price. If this is not the case, you may ask for a reconsideration of value or offer to pay a higher interest rate, so your lender can credit you back some money to offset the difference.

==> Good News for Buyers Using FHA Financing! Read an Important Update from 8/20/09!

==> Unfortunately the practice of allowing 2nd appraisals has been discontinued!

Depending on which lender you use, you might not have to worry about the following scenario.

Buyers financing their purchase with an FHA Loan must watch their offer closely!  The value of a HUD property is provided by the HUD appraiser and posted on the property detail page as the “As-Is Value”. This is also the initial listing price of Columbus HUD homes. This appraisal is valid for 6 months.

If you offer more than the as-is value of a HUD home and want to get an FHA loan, you will have to make up the difference with your own money. HUD will not allow you to order a second appraisal for an FHA loan, even if you feel the property should be worth more than HUD appraised it for.

The same is true for 203(k) Streamline loans. Although you order a separate appraisal to determine the as-repaired value of the property, the original HUD appraisal (as-is value) still stands for the base amount of the loan.

Here’s the good news: You still can get the $8000 tax credit if you are a first time buyer, no matter how much you offer on the house (as long as it’s at or above $80,000), because the tax credit is based on the purchase price and not the appraisal.

I hope this article is helpful for you and provides you with ideas for your bidding strategy.
Please contact me if you have any questions or want to place a bid on a HUD home!

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