Monday, January 12, 2015

Bidding on a HUD owned property

Last month we placed a bid on a HUD owned property. I did a LOT of googling and reading to try to make myself as familiar as possible with the process and ultimately, I wish I had trusted my own knowledge a little more along the way. I cannot repeat this enough, BE AN EDUCATED HOME BUYER! Do your homework and make this a priority for however long the process takes. It is obviously important to work with knowledgeable professionals and people you trust but the only person you can really count on to be working 100% for you is you.

The HUD listing process, at least where I live, has a few parts to it. The first bidding cycle is open to Owner Occupant buyers. This must be someone who intends to buy the home and live in it as their primary residence for at least two years. After you close on the purchase you must move in within 6 months. You can only purchase a HUD home as an owner occupant once every two years. If there are no bids accepted during the owner occupant cycle, they open the bidding up to anyone who wants to purchase the home. This is where flippers and those who want to buy rental properties will come in. An owner occupant is usually going to end up spending more on the home than someone buying it during the second cycle would.

When we were looking at the Manor (I've decided my home needs a fancy name but can't come up with anything more clever so for now, The Manor it is) it was obviously in the owner occupant stage. The home was listed and managed by a somewhat local company and they had placed it on the MLS so it showed up on all the house listing sites and apps that we follow. M and I both looked at it several times and talked about it and how it might work for us. We were excited about it and the price was amazing for what we saw in the listing photos. We had already lost one property that we thought was going to be our new home so we had been in the mind set that we weren't even going to look at anything until we had an accepted offer on our current house. The Manor made all those plans go flying out the window. We made an appointment to see the house with our realtor and, as I've already said, that showing ended up being in the dark and pouring rain. But we were smitten even in the dark.

HUD listings have a certain time period in which you must place your bids and you normally will not ever know if anyone else has placed a bid or what price they have bid. The home has a listing price to give you an idea of what the house is worth but you can bid anything you want. If you think nobody else is going to bid on it, you can bid a total lowball offer and hope that you are the only bidder. We knew that this house was listed much lower than what it sold for the last time and that it was worth more so we decided to bid above the asking price. We were pretty sure there were going to be other bids and we didn't want to lose but we also didn't want to bid too much. But, never knowing what anyone else bids makes it just a pure guessing game. Our agent suggested we bid an odd number because she knew a woman who often won bids by a dollar or two.

You must use an agent who has a registered number with HUD to place your bid and they enter it online. Once the bidding period closes you will usually have a response within 2 business days as to if your bid was accepted. We heard back the very next morning that our bid had been accepted! We were so excited but then the realization that we are very soon going to be the owners of two houses (again) set in and we got a little apprehensive. HUD properties are sold as is and will not accept any contingencies. So we knew going in that this was a risk.  But nothing risked means nothing gained!

I told you that you normally don't know if there are any other bidders or what they bid but we found out through the grapevine that there was at least one other bidder on our house. We learned that bidder #2 had placed a lower bid and then last minute they called and raised their bid. Unfortunately for bidder #2, the amount they raised their bid to was just $73 dollars less than the bid that we had placed and we won.

I hope that this is a somewhat helpful walk through the HUD buying process. I would love to answer any specific questions you might have about bidding. Next time I'll talk about what happens after you win the bid. This whole thing is very 'hurry up and wait' and can be frustrating. Even more so when your agent, however much you like them, is not familiar with the process.

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