HUD Properties

Is the list price of a HUD property really the price?

People often ask me how HUD prices their homes. It is very simple. They obtain a FHA appraisal from a licensed appraiser. The appraisal price is the list price. If a buyer is obtaining a new FHA loan to purchase the property, the lender will use this appraisal. So if a buyer using a FHA loan bids over the list price, they will need to bring the difference to the table. If the buyer is using a conventional loan then a new appraisal will be obtained.
I have sold many HUD properties over the years and have seen some incredibly low appraised values on these properties. In these instances, multiple buyers tend to bid the price back up to fair market value—the price an educated buyer is willing to pay.
Sometimes the appraisal price is higher than a buyer is willing to pay. If so, HUD will reduce the sales price in time. It always makes me shake my head when a property has been on the market for awhile, the price is reduced and the buyer then pays more than the new list price. Why that buyer didn’t make an offer before, I don’t know. Maybe they just didn’t see the value at the old price structure.
During the initial bidding period when the bids are sealed for 5-10 days (depending if the property is insured or not, another blog topic) I strongly suggest making your highest and best offer. If the property is past the initial bid cycle and can now be bid on as a daily bid, the buyer may bid more aggressively. Just remember someone else may be bidding on the property also, at what price you are willing to lose the property.
Unless the property has been on the market for a long period of time (120-180 days) do not expect HUD to take a low ball offer.
A few days after the bid is accepted, HUD will post the winning bid amount in the bid review. Remember this is a net amount to HUD so you will need to adjust the amount to cover commissions to get a more accurate dollar amount.
If you want to purchase a HUD property, call a realtor who knows the HUD process and can assist you in getting the property closed.
If you have real estate questions, please feel free to call me at 405-213-2992 or visit my website. And be sure to follow my blogs for more useful info.

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