HUD Bidding Process: How Does the HUD Bidding Process Work?

Q: My question is about HUD foreclosure homes. I have been watching the HUD listings in my town. Recently, a property that had been previously listed for $59,000 was foreclosed on by HUD and relisted for $21,500.

My sister put in a bid as owner occupant for $1,000 over the asking price. She offered to pay cash.

She was informed today the bid was lost and a real estate investor purchased the home for $1,000 less than our owner occupied bid. It seems odd that the property was marked down by $38,000 and was then sold for even less to a real estate investor when an owner who would have occupied the property offered $2,000 more.

You seem to know the market of real estate. I was just wondering about all these government foreclosures. Are all these government entities cheater home buyers and simply stuffing their pockets with gold?

A: Thanks for taking the time to write. The scenario you describe sounds very different from the automated process by which HUD homes are supposed to be sold.

HUD homes are properties that were financed with FHA loans that went bad. FHA forecloses on the property and it becomes a HUD home. HUD contracts with companies across the country to manage the sale of HUD homes online.

I’ve been told that buyers who will use the HUD home as a primary residence have a two-week lead over investors when it comes to bidding on these homes. I wonder if your bid was placed correctly online.

Supposedly, only HUD-certified real estate agents can place a bid for a HUD home, on behalf of a buyer or investor. But, some agents may be better at it than others.

It’s possible that the agent your sister used didn’t work the system as it was intended or there were other forces at work. You can search through the pending sales to see which agents are listed the most often, and which agents represent the winning bids. This is one way to find an agent with the most experience with these types of homes.

But it’s also possible that the winning bidder said he was going to live in the property as a primary residence but in fact plans to rent it out. I don’t know how you get around misrepresentation like that, but it would be worth following up to find out.

I’d investigate further. You can always file a complaint with the local HUD office.

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8 Responses to HUD Bidding Process: How Does the HUD Bidding Process Work?

  1. GP says:

    HUD uses the “net” bid, which is the bid after closing costs the buyer asks HUD to pay and real estate commission. HUD will accept the highest net bid, unless they have some valid reason to reject the bid. After the initial 13 day owner occupied bid period, the bidding is opened up to both owner occupied and investors equally. Your sister may have bid $22,500, but may have asked for closing costs and real estate commissions which could have totalled as high as $2300 (can vary a little by market), making the net bid $20,200. The investor may have been a licensed real estate agent and not asked for any commission or closing cost. That would mean their bid of $21,500 was also a net bid of $21,500. In this case the investor net bid was higher than your sister’s net bid, therefore they won the bid. I personally think it sinks that owner occupied bidders are put at a disadvantage because the real estate commission is counted against their bid. HUD really needs to change that.

  2. Frustrated says:

    I am currently in the same boat as your sister, and I really believe that HUD is just trying to cheat its own system. We placed an offer on a HUD-owned property during the initial owner-occupant exclusive bidding period. Since the house is in an uninsurable condition, this exclusive period was only 5 days, per HUD guidelines. Our bid was recieved halfway through the bidding period, but instead of accepting our offer, HUD declined to comment on it, hoping to get higher offers during the extended all-bidder period, keeping our owner-occupant bid (over the asking price, by the way) as a backup in case they didn’t get more from investors.

    What’s the point in having an exclusive owner-occupant bidding period if you’re not willing to sell the property for more than the asking price. After this, our second bad experience with HUD (they lost another property we had been interested in offering on for over a year), we won’t be doing any more business with them, and will be pursuing an attorney to deal with this issue. HUD is trying to cheat buyers and cheat its own system, all to make more money for themselves.

  3. jake says:

    I am also in the same boat. there was a hud hud home in my area selling for 9,000 and i offered 12,100 and today i was informed that they rejected my bid and is now open to investors. I dont know what happen and why they wouldnt except my offfer but i do know that they were lots of people bidding on the property and none were excepted.

  4. Marcy says:

    My daughter is buying an “as is” HUD home in Florida. The real estate agent said no need for a lawyer as cash deal and she can handle all the papers. I realize you don’t have all the info on this deal but any general comments? I live in NY so don’t know FL ways.

  5. Jennifer says:

    I think it is a joke and the realtors are in on it. In Fargo, all the Hud homes are getting picked up by the investors and flipped for profit!! We too tried to buy one and bid for over their asking price…it’s a joke! Beware people!!

  6. Wayne says:

    I got a better one than all you guys,I bid $ 12,400.00 above the asking price & fair market value,Hud sends my agent a bid award notice,then 5 days later rejects the offer, & yes this was a house we were going to live in,were going conv finciancing,have the money in the bank to make all repairs & pay down the difference between the appriasial & sellling price,along with a credit score of above 800.
    Now I rebid with the same dollar amount & because it’s Sunday,won’t get a answer until Monday morning ! Waiting to see what they do next & Yes we really want the house to live in.

  7. Ann says:

    I have been with my daughter and realtor looking for a house for 6 months. We have bidded, but have been out bidded so many times for about 15K. Who has that type of money to compete with besides investors?

    Sunday we bidded on a house and got the sucessfully submitted confirmation number. We called on Tuesday (Monday was a holiday). We were told that the bid was opened on Friday and awarded? Huh? I am placing a formal complaint to HUD.

  8. Another Mike says:

    I recently submitted a bid 2.5% over the listed price on day one of the seven-day owner occupied only period, which I was notified by my HUD-certified agent was not accepted at the end of the seven days. I’m now reviewing the public sales records that show the sale closed at the original list price. I intended to live in the home for the foreseeable future and am well qualified.

    My question is: what recourse do I have?

    Is it even worth it to see if the (local) HUD administrator showed favor to the lower bid than mine for whatever reason? Has anyone ever filed an official complaint and got anywhere with it?

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