If HUD says a house is appraised at $78,000, what should I bid for it?

Question

How low will they go?

I would be an owner-occupant.

It needs a lot but not a ton of work.

Answer 1

Hi Amanda,
The HUD forclosures sometimes are good deals and sometimes not. Being an owner occupant gives you an advantage, if the property is still in the bidding period (not "daily").

The "as is value" is what the FHA appraisal says the house is worth. Sometimes they are wrong, but once it's in the computer, it's kinda carved into stone (the "Value"). The computer system they have does the chosing - there is not a "real person" on the other side, thinking "well, I think this might be ok".

HUD will not tell you how low you can go - nor will the Broad Listing Broker (the listing agents that have the sign in the front yard). They work specifically for the seller, and their contract does not allow them to work on behalf of a buyer, or even as an intermediary - they are required to do the best they can for their seller (HUD). So be sure to get a buyers agent - not one that works for the listing company. From tracking the sales, I have been able to determine approximate amounts as to how low you can go, assuming nobody outbids you. This is for Texas, I expect it will be similar in other states.

Let's say the original FHA appraisal says $100k. (round numbers are easier) While the list price is also $100k, the lowest NET that they will take is about $87,500. I don't go under a net of $88k, just to be on the safe side (someone else might also be bidding at the bottom). This is the NET, so you must add to that the Realtor commission and any help you want in closing costs.

If nobody offers enough for the house, after about 46 days, HUD will re-price the house (drop it 10%). Now, at $90,000. I have not been able to make a sure determination on the 90% list price, but I know that a net of $80,000 at this point is enough. They might take lower, but I haven't come accross one.

At the second price drop, (still hasn't sold) now it is priced at 80% of original = $80,000. Again, I have not made a real good determination as to how low, but I know that a net of $70,000 is enough.

At the third price drop, I know it gets interesting! Once the house is priced at 70% = $70,000. HUD needs to net 60% of the current list price, so 60% of $70,000 = $42,000.....

At the fourth price drop - this happens very seldom - HUD will accept a net of 50% of the current list price. So the fourth price drop would price this example at $60,000. The net needs to be $30,000. That's on a house that was originally listed at $100,000.

Email me if you have any more questions on HUD houses.

Answer 2

Bid what the house is worth to you up to the $78,000. You would feel terrible if you lost a house you love over a few grand. If you dont like the house that much and just need a place to live then bid low and hope for the best.

Answer 3

Give yourself $35,000 as a break even, this way you can offer $34,200 and consider $40,100 as a top price. I have adjusted in my figure for 10% ownership, that you will deserve just because you had the work done.

If the house is just sitting there, try to buy it at the lower figure and get a bank to provide the cost to acquire the property and make property improvements. It is worth more to the bank if it is improved. The bank may be interested if you are willing to agree to the purchase and have their security taken care of before they release the money.

Answer 4

You could try 10% less and then 5% less if they counter.

The best is look at what other property is selling for and how much $ is needed to bring this one up to par.

It may not be a deal if houses in the area are selling for $110K and you have to put in $50K in repairs.

Answer 5

87% of the asking price. About 67900 is the least they will take if it has been reduced once you can go to 80% of the reduction.