Placing bids on HUD homes

[tbodley74]

Does anyone know a good formula to use like the formula you use when you wholesale deals to end buyers? I want to place bids on HUD homes and purchase them with transactional funding. All I need is a formula I could use to calculate what the offer price should be and how much my profit will be after all the closing costs and expenses are paid off. I want to create this HUD offer formula in my Excel spreadsheet. I believe  I could do it.

[HPM]

The issue with HUD homes is that (at least in my area/experiance), they are set up to favor owner occupants.
Some HUD homes are bad buys, some I would gladly pay more than asking.

The issue for me has always been that as a non-owner occ I need to wait 15 days to bid, and once I do, my bid takes a backseat to any reasonable owner-occ bid.
The amazing deals are gone within 15days to owner occs or less honest investors.
After 15 days I've had full price cash. No contingencies bids rejected, and later found out the accepted offer was less than mine, just because they vowed to occupy it.

Sorry, that doesn't directly answer your question.  Why does the fact they are HUD homes change the formula? Wouldn't it be the same as any other MLS home offer?

[tbodley74]

I got this concept from another investor who makes money doing this but uses a slightly different formula than the traditional wholesale formula. There are a few changes in the investors HUD offer formula and the regular wholesale formula.

The issue with HUD homes is that (at least in my area/experiance), they are set up to favor owner occupants.
Some HUD homes are bad buys, some I would gladly pay more than asking.

The issue for me has always been that as a non-owner occ I need to wait 15 days to bid, and once I do, my bid takes a backseat to any reasonable owner-occ bid.
The amazing deals are gone within 15days to owner occs or less honest investors.
After 15 days I've had full price cash. No contingencies bids rejected, and later found out the accepted offer was less than mine, just because they vowed to occupy it.

Sorry, that doesn't directly answer your question.  Why does the fact they are HUD homes change the formula? Wouldn't it be the same as any other MLS home offer?

[Rich_in_CT]

I recently looked at dozens of HUDs in my area and found that every single one was more than I was willing to pay.   You really have to be careful when you are looking at them.  They are not all good deals just because they are HUDs.  Likewise not all HUDs are bad deals.  I was looking for a house to live in and they were above what I wanted to pay so suffice to say you have to be even a little lower than my target because you need to wholesale and leave meat on the bone for yourself.  I ended up buying a foreclosure, just wasn't a HUD.  House was originally Skank of America.

[tbodley74]

I'm just using HUDs to flip without using my own money.

I recently looked at dozens of HUDs in my area and found that every single one was more than I was willing to pay.   You really have to be careful when you are looking at them.  They are not all good deals just because they are HUDs.  Likewise not all HUDs are bad deals.  I was looking for a house to live in and they were above what I wanted to pay so suffice to say you have to be even a little lower than my target because you need to wholesale and leave meat on the bone for yourself.  I ended up buying a foreclosure, just wasn't a HUD.  House was originally Skank of America.

[andydallas]

transitional funding is only good if you have a buyer lined up before you buy, it like owning the house for a day,,,that's not really flipping, that's wholesaling, and the transitional funding company wants to make sure you have the buyer ready to close the day or day after you close

What you offer for a house is not changed if your buying it from HUD, auction, REO or from an individual, unless there is a difference in closing cost,,the house at xxx main street, is the same house, same condition, same value to you as an investor no matter who is selling it

I think you have stated on here before you would have a hard time qualifying for a loan, or having the cash to  put into the deal,,,you need to go find deals to wholesale or lease option type deals (I have no experience in lease options)

[tbodley74]

I had another buyer already lined up that had me thinking she was all set to go all the way to get a deal closed. Once again I am back to sqaure one looking for another buyer. I have access to transactional funding to fund all my deals. Now I am facing a problem with earnest money. HUD wants earnest money to be sent of along with the required contracts.  They prefer cashiers checks to be sent, which is $500 for all properties $50,000 and under and $1,000 for deals over $50,000. Isn't earnest money the cheapest when you are just wholesaling properties from For Sale By Owners?

transitional funding is only good if you have a buyer lined up before you buy, it like owning the house for a day,,,that's not really flipping, that's wholesaling, and the transitional funding company wants to make sure you have the buyer ready to close the day or day after you close

What you offer for a house is not changed if your buying it from HUD, auction, REO or from an individual, unless there is a difference in closing cost,,the house at xxx main street, is the same house, same condition, same value to you as an investor no matter who is selling it

I think you have stated on here before you would have a hard time qualifying for a loan, or having the cash to  put into the deal,,,you need to go find deals to wholesale or lease option type deals (I have no experience in lease options)

[andydallas]

the earnest money requirements are the same, HUD is very strict about earnest money for investors, I put up $1k in earnest money on a HUD home, according to the HUD condition report very little was wrong with the house, but we found that someone had gone into the attic and cut the wiring out, and  cut some pipes,,,even though the property was not in the condition they had presented, I still lost my earnest money.

I basically raised enough trouble that they finally agreed to give me back $500,,,but I still lost $500,,,

the 'normal' in Texas is you put in a 10 day inspection period, during that time you can back out of the deal for any reason and get all of your earnest money back,,but not HUD

[tbodley74]

Yes they are strict when it comes to earnest money.  That is the only thing standing in the way between me and making money on HUD homes. All HUD homes are not that great, but I have seen some decent looking homes that could bring in some profit. Now I find myself looking for a better paying job which would help cover the high cost of earnest money. You say earnest money requirements are the same. Does that mean earnest money is somewhat as high as earnest money required by HUD no matter what? I could see if it was like $100 or $10 compared to $500 to $1000. That is a bit steep in my opinion.

the earnest money requirements are the same, HUD is very strict about earnest money for investors, I put up $1k in earnest money on a HUD home, according to the HUD condition report very little was wrong with the house, but we found that someone had gone into the attic and cut the wiring out, and  cut some pipes,,,even though the property was not in the condition they had presented, I still lost my earnest money.

I basically raised enough trouble that they finally agreed to give me back $500,,,but I still lost $500,,,

the 'normal' in Texas is you put in a 10 day inspection period, during that time you can back out of the deal for any reason and get all of your earnest money back,,but not HUD

[justin0419]

You can get away with small earnest money for homes sold by regular owners.  Many of the banks are requiring 1k earnest money.  HUD seems to be the same as the banks. 

[tbodley74]

When you say small, how small are we talking about? HUD earnest money is way too high  for me.

You can get away with small earnest money for homes sold by regular owners.  Many of the banks are requiring 1k earnest money.  HUD seems to be the same as the banks. 

[justin0419]

I've done $100-250 on regular owner occupied homes.  Some people on here talk about locking up a contract for $10. 

[tbodley74]

That's what I been hearing. Some people say they can put down as much as $10 earnest money. I even had one say he used $1 earnest fee.  How do you decide how much earnest fee to put down?

I've done $100-250 on regular owner occupied homes.  Some people on here talk about locking up a contract for $10. 

[justin0419]

If a home is listed, the number will already be determined for you and be in the listing.  If you're dealing with the owner directly, you'd have to negotiate it.  You're solving a problem for the owner, so they might be willing to let you put it under contract for very little money if they think you'll be able to deliver.

[HPM]

I always put decent sized earnest money down.
Usually $1,500-$2,000. That check gets held with a realtor so I'm not out any money.  My realtor tells me before he cashes it, just in case.
To me it's an easy way to show them I'm a serious buyer that won't jerk the seller around.
Probably not ideal for a wholesaler, but for a buyer putting that much or more down anyway, seems to work.