I have read the HUD guide but I still don't see the answer I need and I've been in contact with an agent but he is unavailable. I want to bid 5K (cash) on a HUD home as an owner occupant and I'm just wondering if the bud was accepted, about how much would I need to come up with out of pocket in regards to closing cost. The taxes are paid and up to date but do I have to pay any taxes in advance or anything. Any input would be greatly appreciated.

Thanks, Lola

Hi Lola,

Typically taxes are prorated based on closing date so if they have prepaid for the year you might have to reimburse them a share. If they are not paid you may be responsible for them but should get a credit for the time prior to your ownership.

Mr. Foreclosure

Thanks Mr. Foreclosure,

I'm a bit slow so can you break it down for me. The winter taxes are 3K and the summer taxes are like one hundred dollars. They paid the winter taxes in September so right now nothing is owing. So say if I closed in two weeks, how do I calculate the prorated portion or what would be a ball park figure. I'm just trying to figure out apporximately how much I'll need all together and in the future know how to figure out.

LOLA make sure when bidding for a HUD property as an owner occupant that you are NOT an investor!

In the past investors would do this to bid during the owner occupant period and then lie on there mortgage docs saying they would live there to get a lower interest rate. Doing either one of these actions is a federal crime that is fraud punishable with fines and time in prison.

Yes they do randomly send out people to check and make sure you didn't lie and are actually living there.

Hud properties can only have offers submitted by qualified brokers/agents.Hud will have a bid period where your broker/agent will be informed if you were the winner by e-mail or they might counter in multiple offers with highest and best.

You really need to talk to your broker/agent as that is what they are getting paid for.We do not know the nuts and bolts of your deal so it wouldn't be right to speculate on specifics.

Follow this link and find out yourself...
http://hud2.towerauction.net/e7/stats/MI.htm

Super Realtor - Yes, I am going to live in the house. I'm a recent college graduate trying to pay back student loans so I"m going to live here to save money and pay back debt.

Real Agent - Actually I have read all the documents on the HUD site, the purchaser, agent and broker handbooks and everything (bascically everything on the HUD and mcbreo site) but I don't see the answer.

I know about the bidding process and owner occupant rules, so I guess my new question is just how to you calculate prorated taxes for any real estate transaction. I"m trying to equip myself with as much knowledge as possible.

I can't calculate a breakdown for you without knowing specific amounts and the, the date range each covers and the specific closing date.

You should be working with an attorney or title company that will actually create a closing statement of all expenses and who is responsible for them (often done on HUD-1), including the tax apportionment.

Thanks everyone I got the info.

Question to my fellow REO friends:

Does anyone know the magic formula for when HUD accepts an offer/bid? I see most acceptances in the 80-85% range but on occasion see offers accepted for as little as 10-15% of the asking price. I just submitted a fair offer for a property for a client that was in their inventory for a while and was rejected. It is driving me crazy not being able to figure out the reasoning behind their acceptances!

In Arkansas, while the property is in it's first six months of being marketed, HUD will typically accept an offer that nets them about 88% of the offering price (Purchase price - commission - BCC paid (if any) = net).

After the property has been on the market 180 days, then it goes into a GNP1 phase where it is offered to local municipalities for a $1. It is not available to the general public during this time. After a couple/three weeks, it comes back on the market as a GNP2 phase. Typically, it is then listed at 50% of the original offering price (which was the price it appraised at by their appraiser immediately prior to listing initially). The price never gets reduced from then, but their anticipated net continues to get lower every couple of weeks.

I had a 2 yr old 4BR doublewide on 40 acres initially get listed at about $180K last year. Once it went thru all the phases, it wound up selling for under $20K.

I list HUDs and get this question a lot. I've kept spreadsheets for every HUD in our area for the last 3 years, tracking BPO price, appraised value, list price, sales price, net, DOM, etc. So far, no magic. You're right - around 85% is common. But I've also seen them turn down anything less than full price, and seen them accept much, much less.

The only answer I have for clients is to bid what you are willing to pay, no more, no less. If you get it, great. If someone outbids you that's ok, you didn't want to pay that much anyway.

I have a question. I am actually not a Realtor. We put a bid on a HUD home full price cash offer. Surprisingly someone bid $1 over asking price and got it. We are the back up offer. $1 seems fishy to me. I've seen in all of the bid statistics $100 or more will win, but $1!! It almost seems like they knew the top offer was for exactly the full price offer. I'm not accusing my realtor of any wrongdoing, but would it be against the law for them to share my bid offer with another realtor or hint to that realtor what my bid was without actually stating it? She represented HUD and her husband was technically representing me. It was a different company that won the bid.

Have you seen this in the past...it being within a dollar??

I doubt your offer information is being shared, if it was I think the difference would be more than $1 just to keep it from looking suspect.

Some buyer's will expect a HUD property to go full price and just barely go over with their offer in hopes it makes the difference (which it apparently did in this case).

Thank you! I am probably just upset that they outsmarted me:)

I have seen an instance of two identical bids being submitted on a HUD property. The winning bid was submitted a few minutes before the second offer. Sometimes timing makes the difference; sometimes, as Mr. Foreclosure indicated above, it can be a small amount of money. I always recommend to a prospective HUD purchaser that they round up their offer by a few dollars. Let's say they wanted to offer $15,000. I would recommend they offer $15,025. Sometimes it's that close.

Thank you! It wouldn't have been so bad, but the house was in great condition and across from a park and CHEAP!! Next time I am bidding an additional $102!!

Yes HUD homes are submitted online in a sealed bid process. Hud will usually take the highest NET to them NOT the highest bid price.

If it's a great deal you always go above asking as appraisal shouldn't be a problem. Most buyers will offer full price or go 1 dollar over. I always go more than that to outbid them.

You just got outbid plain and simple.

My question to you is if you were represented by a knowledgable broker/agent they would have told you to overbid because the price was so low. Just bidding full price on a hot deal shows me they are inexperienced in guiding you.

I work with HUD homes. Lately there has been bidding wars on really good properties. I had one recently go $24,000 over list. I never tell any buyer what to bid, but do let them know they can bid over list, and that they should offer the highest they are willing to pay, especially if it's a good property. During that first bidding period, we have no way of knowing what the other bids are, unless we submit them. I NEVER tell anybody what my other bids are, but to offer their highest and best. Sometimes, the higher offer will not win because they may be asking for closing costs. Sometimes,buyer agents will bid without a commission and win a lower bid. It all depends on the net, as Super Realtor said.

I have a quick question. I put a bid on a home a few days ago on the premise that the other bidder put amount x on the home based on what the selling agent said. Now she came back saying our bid is to low for the seller to consider however it's more than what the other bidder placed. Does the selling agent have a legal responsibility to provide my agent with the actual bid amount. I have a feeling she is not being truthful with the original bid amount.