When buying a HUD foreclosure house, there are several ways to get a great deal. These buy HUD foreclosure tips will save you time & money.
Check the HUD PCR – Always check out the Property Condition Report (PCR) because it tells you exactly what’s wrong/missing/broken/needed with the house. Click on the Addendums tab above the property listing photo and the select the PCR at the bottom of the list.
Check the HUD MPR – The Minimum Property Requirements (MPR) is also listed on the Addendums tab. It details what repair items are needed to meet MPR and provides a cost estimate for each of the repairs.
HUD investor waiting period – HUD reserves new listings to owner occupant purchasers for a priority period, usually 30 days. House flippers have to wait for the bidding to open up for investor bids, so don’t waste your time looking at the newest listings. The best way to check is at the top of the page. If it’s not open to investors yet, it will say “Eligible Bidders: Owner Occupants, Nonprofits, and Government Agencies only.” Look in the listing information for the date the exclusive listing period ends.
HUD bids below asking price – HUD home listings have a price listed, but you can submit bids below that price. The longer a HUD listing has been extended, the more likely a low bid will be accepted.
New HUD home discount – HUD will sell new listings to owner occupant bidders with discounts of 10 to 15% off asking price. The standard rule of thumb for owner occupant bidders is to offer 88% of asking price. Investors can bid after 30 days and should always start their bidding well below the 88% price point.
HUD price vs. discount – The lower the price a HUD property, the higher the discount. That may seem odd, but your won’t get a $150,000 HUD home for 33% off asking price. However, you can easily get a $30,000 HUD property for 33% below asking price.
Always submit low bids – Just like buying a regular property, always submit your lowest bid first. All bids have to go through a HUD-approved broker and they’ll try to tell you that its a waste of time. All bids are reviewed each day and are either accepted or rejected. If your bid is rejected resubmit at a slightly higher price. Don’t leave profits on the table by immediately bidding at the asking price. At this point, the HUD property has been listed for over a month, so they will be more receptive to below asking price offers.
203k rehab loan – Another one of our buy HUD foreclosure tips is to use an FHA 203k rehab loan to renovate a large, older house into a duplex, triplex, or even a 4-unit apartment building. Or, if the area is truly desirable, you can convert the housing units to condos instead.
Complete rebuild – You can also use a 203k rehab loan to finance a complete tear-down and rebuild, provided that the existing foundation system remains in place. That works well in renovating properties in city areas where vacant land is scarce.
Wholesaling HUD properties to investors – House flippers can make money by buying HUD properties at a discount and then quickly wholesaleing the properties to other investors to do the rehab work.
Research each bid property – Always do some quick market value research on the HUD properties you are bidding on. Get the tax appraisal value from the city/county website, do a quick google search of the address for links to past property sale information, and check out housing market information sites like Zillow, Trulia, Redfin, etc. All are great sources for approximating neighborhood property values. And don’t forget to checkout Google Streetview for a quick look at the house and the surrounding properties.
These buy HUD foreclosure tips aren’t the only way to save money and/or make money with HUD houses. Check out some of our related articles for more tips on buying foreclosures and flipping houses for a quick profit.