Well, winterized just mainly means they drained the pipes of course the cheap alternative, is to just dump some antifreeze down the drains… gotta love that one. But yes, you can’t turn on the water to test, or the gas, etc… because you play by HUD’s rules… You probably could do it, provided you paid for the rewinterization… but just one more ONE OFF to deal with and expense.
As I said, I gave up on HUD properties for now, not worth the risks or headaches. I know people do it, and make good money on it, but for me, personal experience to this point says stay clear of em. If you live somewhere where REO/Foreclosure’s aren’t such a good deal, and HUD’s are… might be worth the effort and energy. Here in my area, its not.
A real estate agent in my town has been passing on to me weekly the details about several homes taken back by VA and HUD. Some of these properties I know are a bargain. I’d like to make offers on most of them knowing that most won’t be accepted; however, HUD requires $1000 dollars earnest money and that properties are accepted AS IS. This doesn’t give me much flexibility and increases my exposure to risk since they don’t allow the standard exit clauses in the contract. I can come up with a few thousand dollars for contracts, but I would rather not. Can you suggest anything on dealing with HUD deals and limiting exposure to risk?
on huds, generally the acceptable “net” to hud is 87% of the listed price. if the property has had a “special price reduction” the acceptable net is generally 89% of the reduced price.
on va’s the acceptable net to va needs to be 90% of listed price.
Posted by Rob FL on December 29, 2002 at 21:06:43:
HUDs and VAs are very straightforward. Inspect them before you place your bid. If for some reason you find a major construction problem after the bid, you can walk and lose your deposit. Occasionally you will have a problem because the utilities weren’t on when you inspected, but you should just calculate what you can into your bid. Maybe you can find a brokerage that will hold the $1000 in escrow and allow you to do multiple bids.
Flipping HUD properties–limit exposure in Earnest - Posted by Dave T
Posted by Dave T on December 29, 2002 at 19:35:58:
If you are concerned about earnest money requirements on each property you bid on, ask your broker when earnest money is actually needed – when you make the bid, or, only when you are the successful bidder.
In the past, I have given my broker one certified check, bid on two or three properties. It sees that the broker is only required to receive an earnest money deposit for each property in which I am the winning bidder. If I happen to win the bid on more than one property, I have 48 hours to put another check in his hands.
For the most recent properties I have been interested in, I did not give the broker any earnest money up front. The broker just said “Let’s wait until you win the bid”.
Now if you happen to win more than one bid, but are only able to obtain financing for one property, you can withdraw your bid and forfeit your earnest money deposit for the property you will not purchase.
Since you only lose your earnest money if you can not complete the purchase, is this sufficiently limiting your exposure, or, did you have something else in mind when you asked the question?
Thanks guys, this is what I came up with as well. If HUD does not get the earnest money within 48 hours the deal is cancelled as well. The agent I’m dealing with is cool and willing to work with me. I just don’t like the idea of losing 1000 bucks should I find I didn’t make a good choice. Thanks for your input. I just wanted to find out if there were any more ‘loop holes’ because it seems that HUD makes the rules, not the investor, and for a newbie like myself it is a little intimidating. I have a little ‘fear’ because I don’t want to make too many mistakes in my calculations because at 1000 a pop, it could get expensive.
Posted by Eric - GA on December 29, 2002 at 23:21:40:
The trick to HUD properties is to figure out what they are willing to take for them. Remember, HUD is a huge government operation, so they can’t deal with things on a house by house formula. They get an AS-IS appraisal, and list for that price. In my area, during the first 2 weeks (Own-Oc), they are willing to accept any offer that nets them 90% of the list price. After that, anything that nets 87% of list price. After 45 days, they will accept anything that nets them 80% of the original list price. Formula may be different in your area. You would be well-served by contacting an agent that specifically targets HUD props, as they will have figured out the formulae.
Posted by Kristine-CA on December 30, 2002 at 02:30:59:
Man, do I wish it worked like that where I am. There is most often no rhyme or reason to accepted bids after the first few weeks on the market when offered by HUD here. I have seen so many properties stay for months because they were overpriced junkers, with HUD not accepting 80% bids of their bad appraisal/price. Then they reduce the price and accept 50% of that, when they would have done better with the original price/bids. And many of the worst ones keep coming back to auction because nobody closes on them. And now, with so much out-of-area newbie investors with cash coming in, most of it is all going for 100% or more. I keep wondering if I missed the hey-day that HUD properties supposedly were. I meet investors who used to use them as a deal source but say that it’s just not there anymore. The online auction thing combined with the governmnet thing is a total lose-lose, in my opinion.
I keep hoping, though. I look every week and know what’s going on with all of them. Guess I just want one of those legendary HUD deals.
I gave up on HUD long ago… not worth the trouble in my opinion. Golden Feather, who handles them around here are idiots, I feel.
List a property for X, get bits for Y reject the bids, property sits, then 6 months later take offers for far less than Y… just stupid. I don’t think they have any idea what the properties they list are worth… they just get the appraisal and think it has some meaning… when it doesn’t.
Not to mention you have to pay for the inspections etc all before you bid etc etc… just not worth it… I gave up on em long ago. Mainly doing REO’s now, pleantiful, easy, and while can be a pain in butt dealing with banks, far less trouble than Golden Feather Realty, and frankly get better deals.
There is a HUD right now across the street from an REO I picked up for 18k, that was worth nearly 40 before I touched it. The HUD property has been vacant for at least 5 years, needs to be condemend and they still are asking over 20 for it… its not worth 10.
Whoa! Now I’m really nervous. I think I’ve found a couple properties that could have good margins if my offers get accepted; however, I’m really scared because they have been ‘winterized’ and I have no way of knowing if the pipes are bad, etc. I’m frustrated that the investor has to play by the governments rules…they really pin you down without offering much in return.