Dr. Watson:
Their use to be a magical formula to determine what the lowest HUD would accept on a property. After seeing HUD
sell properties at 50% of list price, I gave up on using the percentage formula.
What I found is this. HUD only cares about their Net To Hud. For example, if you were to bid $100k on a property and I bid $96k guess who would get the bid? I would! You know why? You would have to pay your broker a 5% commission most likely and I pay my broker $500.00 commission. So the Net To Hud on your deal would be $95k
minus the broad listing brokers commission and mine would be $95.5k
minus broad listing commission. So
my advice to you is to find a Broker and make a deal to pay a reduced commission. You may even want to offer this commission paid at closing to be even more competitive.
Best Riches,
Jeff Adam
_________________
"The only place success comes before work
is in the dictionary."[ Edited by JeffreyAdam on Date 03/21/2004 ]
clear this up for me Jeff..
IF HUD is the"seller" why would I the buyer be paying a 5% commission?
More research on my part in this area, so I'm "collecting" info. care to "enlighten" me?
Thanks,
mcldavid :-?
Dr. Watson:
I have a broker I have been working with for 10 years now. I give her all my referrals as being in the business I always have people asking me who a good realtor is. I also have an agreement with her that she will list all of my houses for 1%. I would recommend you using referrals and back-end listings at a discount for this. Also let them write all your MLS offers where they will make 3% commission!
David, HUD pays what they call a "broad listing broker" a small percentage to list their properties and also up to 5% to the selling agent. So on a 100k deal, they would pay an agent up to 5% making their Net To Hud 95K. All HUD cares about is their Net To HUD. You need to find a broker who will give you your own HUD keys and charge you only $500-1000 per HUD deal accepted on the back end to be competitive.
Quote:Have a question on REO owned by HUD. What has been your experience on what they are willing to accept as a discount offer?DrWatson,
I have purchased only about a dozen HUD properties in the last few years, with my most recent purchase in Jan 2003. From my experience, If the HUD property is in the first forty-five days of its listing, HUD will only consider full price offers. After that, HUD will consider less than full price offers.
A full price offer is one in which HUD will net 87% of the list price on an investor purchase, and 89% of the list price on an owner-occupant purchase. Your broker's commission, the broad listing broker's fee, and any closing cost assistance are all factors that reduce the net sale proceeds to HUD.
As an investor, if your broker takes a full 5% commission, and you do not ask for any closing cost assistance, then to give HUD its minimum acceptable net, your bid price must be at about 92.6% of the list price (or higher). I am allowing for a full 1% broad listing broker fee in addition to a 5% sales commission.
For the property in your example, your minimum offer price needs to be $89,822 or higher. You also need to be aware that the first few days of the HUD offer period are restricted to owner occupant purchasers. Investor bids are not accepted until the owner-occupant bid period has expired, and only then if the property has not sold.
oh yeah, and there is a 10 day owner occupant bid period on all new listings. You could have offered $300k on that property and they still would have taken the $90.2k offer. On listings that have been reduced or are coming back on the market for whatever reason (loan declined...) there is a 4 day owner occupant period, if there are no acceptable owner occupant bids on the 4th day, they open all investor bids. I know these can be frustrating but if you bid enough of them you will not be dissapointed with the 1 in 5 that you do get.
Dr. Watson:
Their use to be a magical formula to determine what the lowest HUD would accept on a property. After seeing HUD
sell properties at 50% of list price, I gave up on using the percentage formula.
What I found is this. HUD only cares about their Net To Hud. For example, if you were to bid $100k on a property and I bid $96k guess who would get the bid? I would! You know why? You would have to pay your broker a 5% commission most likely and I pay my broker $500.00 commission. So the Net To Hud on your deal would be $95k
minus the broad listing brokers commission and mine would be $95.5k
minus broad listing commission. So
my advice to you is to find a Broker and make a deal to pay a reduced commission. You may even want to offer this commission paid at closing to be even more competitive.
Best Riches,
Jeff Adam
_________________
"The only place success comes before work
is in the dictionary."[ Edited by JeffreyAdam on Date 03/21/2004 ]
Thanks Jeffrey insightful point!
I have approached a buyers agent about the property.
It sounds as if I might have more leverage with a general Realtor to negotiate a smaller fee on the front end for a listing on the back-end.
What other ways methods have you used to negotiate the smaller fee?
clear this up for me Jeff..
IF HUD is the"seller" why would I the buyer be paying a 5% commission?
More research on my part in this area, so I'm "collecting" info. care to "enlighten" me?
Thanks,
mcldavid :-?
Dr. Watson:
I have a broker I have been working with for 10 years now. I give her all my referrals as being in the business I always have people asking me who a good realtor is. I also have an agreement with her that she will list all of my houses for 1%. I would recommend you using referrals and back-end listings at a discount for this. Also let them write all your MLS offers where they will make 3% commission!
David, HUD pays what they call a "broad listing broker" a small percentage to list their properties and also up to 5% to the selling agent. So on a 100k deal, they would pay an agent up to 5% making their Net To Hud 95K. All HUD cares about is their Net To HUD. You need to find a broker who will give you your own HUD keys and charge you only $500-1000 per HUD deal accepted on the back end to be competitive.
Best Riches,
Jeffrey Adam
[addsig]
Dr. Watson:
What kind of MD are you? I have some questions for you!
Best Riches,
Jeff Adam
[addsig]
Quote:Have a question on REO owned by HUD. What has been your experience on what they are willing to accept as a discount offer?DrWatson,
I have purchased only about a dozen HUD properties in the last few years, with my most recent purchase in Jan 2003. From my experience, If the HUD property is in the first forty-five days of its listing, HUD will only consider full price offers. After that, HUD will consider less than full price offers.
A full price offer is one in which HUD will net 87% of the list price on an investor purchase, and 89% of the list price on an owner-occupant purchase. Your broker's commission, the broad listing broker's fee, and any closing cost assistance are all factors that reduce the net sale proceeds to HUD.
As an investor, if your broker takes a full 5% commission, and you do not ask for any closing cost assistance, then to give HUD its minimum acceptable net, your bid price must be at about 92.6% of the list price (or higher). I am allowing for a full 1% broad listing broker fee in addition to a 5% sales commission.
For the property in your example, your minimum offer price needs to be $89,822 or higher. You also need to be aware that the first few days of the HUD offer period are restricted to owner occupant purchasers. Investor bids are not accepted until the owner-occupant bid period has expired, and only then if the property has not sold.
Ok here is how it panned out.
HUD placed the house on the market on the 19th for $90k.
I called my Broker to visit on the 23rd thinking I had a few days as an investor.
My Broker called me at noon on the 23rd and said the house sold for $90,200. supposedly an owner/occupy only time will tell.
I only have one thing to say ......NEXT! :-D
oh yeah, and there is a 10 day owner occupant bid period on all new listings. You could have offered $300k on that property and they still would have taken the $90.2k offer. On listings that have been reduced or are coming back on the market for whatever reason (loan declined...) there is a 4 day owner occupant period, if there are no acceptable owner occupant bids on the 4th day, they open all investor bids. I know these can be frustrating but if you bid enough of them you will not be dissapointed with the 1 in 5 that you do get.