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Determining the Minimum Acceptable Bid for a HUD Home

In order to buy a HUD home, your offer has to meet two criteria. First, your offered price has to beat your competition. Second, your offer must meet the super-secret HUD minimum acceptable bid. In this article, I’ll be writing about determining the super-secret HUD minimum acceptable bid. (Let’s just call it the SSHMAB minimum bid). If you haven’t done so, you might want to check out our first two articles on buying HUD homes here and here for some background.

The first criteria is easy enough to understand. The highest bid wins. I mean, HUD’s the government and all, but it isn’t stupid. So, HUD takes the highest bid net of costs, such as realtor commissions and buyer-requested closing costs, provided it’s above the minimum bid.

Why Do I Care What Bid’s Acceptable to HUD?

First, knowing the minimum bid may help you get your best deal. If you’re looking to buy a HUD home, whether you’re an investor or home buyer, you’re obviously looking for a deal. I mean there are plenty of homes out there for sale that have some advantages over HUD homes. Advantages such as heat, smoke alarms that don’t incessantly chirp for lack of working batteries, and the notable absence of big ugly Warning–This property is monitored by electronic surveillance signs. So, assuming that you’re in the price-conscious buyer category, knowing the minimum bid can help you buy a HUD property at the lowest price. While you still may have competition that may drive the price higher, HUD properties often can be purchased at the minimum bid price.

Second, knowing the minimum bid can help you quickly rule out properties that are of no interest. Depending on your area, you may have more than a few HUD homes as potential options–in some areas, quit a bit more. HUD homes, just like other listed homes, have a list price. Armed with the knowledge of the minimum bid, you’ll be able to rule out some of the properties that are overpriced even at the minimum bid.

Third, if you’re looking at HUD homes, and then offering less than the acceptable bid, you’ll be wasting your time. You can do this all day long if you like making offers, but HUD won’t accept them. This is the corollary to “HUD is government, but it isn’t stupid”. Because HUD is government, it isn’t flexible. HUD will not evaluate your offer, take a look at the property, maybe reappraise it, counter, and then negotiate. It (or at least the private companies that manage HUD properties) has a nice impersonal set of rules rigidly followed with predictable results. Well, predictable within a range.

Determining the Minimum Acceptable Bid

I would love to be able to give you the formula that, once applied to the list price for the HUD home you want to buy, will spit out the minimum bid. Unfortunately, I can’t. The reason I can’t is because (1) the minimum bid calculation is different in different states or regions and (2) it changes, albeit slowly, over time. I might be able to determine all formulas for minimum bids for all HUD regions as of today, but that would take me many, many, many hours and after I got done one or more of the areas would change.

What I can do is give you the exact formula that HUD applied to the sales of HUD homes over the time that I have been buying right up to Rob and my purchases of HUD homes as recently as the Spring of this year. I can also show you how we determined the minimum bid formula and a likely method to determine it for your area.

First, the minimum bid formula was, and is, a percentage of the list price. When I first started buying HUD homes (about 10 years ago), the rule was pretty simple–the minimum bid was 80% of list price. The formula had changed by the time that Rob and I started buying HUD homes (about 2 years ago). It also got a little more complicated. At that time, when a property first hit the HUD list, the minimum bid was 87% of list price. However, the minimum bid dropped to 80% after 60 days.

Which brings us to the second point–the minimum bid is a function of time on the market. When the housing market hit the skids, the HUD minimum bid calculation changed. By the time that Rob and I bought The Loft (click here for the name explanation), the minimum bid for HUD homes was 80% of list price when bids opened. It dropped to 70% after 30 days. There were further drops when a home went unsold for several months, but the number of these homes were so few that it was difficult to calculate exactly. I saw one home that sold at 50% of list price at around 150 days on the market.

So, will this most recent formula work to determine the minimum bid for your area? Maybe, but if not you should be able to determine the formula using this information and the published “bid statistics” for home sales. In a prior HUD article, we took a look at navigating the HUD website to find property information for your area. By navigating to the site for your home state, you’ll see an option for bid statistics. (Click on this link to see the screen shot for Colorado, for example: HUD Bid Statistics). On the HUD homes sites, the private firms managing the HUD sales provide a bid statistics category. The bid statistics page shows all bids, accepted or rejected, on each property for a two-month period. With some effort, you can use the bid statistics page to determine the minimum bid formula for the area over time. The difficulty lies in working with a sufficient number of accepted and rejected bids over months to get a good idea of the minimum bid. However, the information above, along with some patience, should get you there.

A Couple of Final Notes

While I noted that the minimum bid formula changes over time, determining the minimum bid is still likely to be a worthwhile exercise. In the 10 years that I have purchased HUD properties, the minimum bid formula for my area has changed only three times.

Also, you should be aware that when I’ve referred to a formula as a percentage of list price, I am referring to the original list price. After a period of time on the market, HUD will lower the list price, but the lowered price does not seem to correlate with the lowering of the minimum bid. So, in one instance, the list price may not be lowered when the minimum bid has been and vice versa.

In addition, I discovered fairly recently that the management company seems to have some discretion in determining the minimum bid. I came to this conclusion because the minimum bid changed once again after Rob and I bought The Loft, which corresponded with a change in the management company. The minimum bid percentage increased. The increase certainly did not seem to be justified by market conditions. The only thing that had changed was the management company. Given that, I also suspect that the minimum bid calculations when we bought the Loft are likely to be duplicated in other regions where the same management company continues to handle HUD sales. If you want to know to which company I’m referring, drop me an e-mail, and I’ll be happy to pass along the information.

Finally, just because the bid’s acceptable to HUD, doesn’t mean it should be acceptable to you. You’ll need to still make your own determination of value. I’ve found several HUD homes that met my criteria. With the knowledge of HUD’s minimum bid, sometimes I’ve been able to buy homes that meet my criteria and then some.

Happy hunting!

{ 65 comments… add one }

  • FourPillars November 2, 2007, 4:23 pm

    I think you are missing the links for the first two HUD posts.

    Since I don’t even know what HUDs are (although I can guess)…I need those links!

    I supposed I could use the search function…nahhh..

    Mike

  • Mike-TWA November 3, 2007, 1:49 am

    Oh no, missing links! You know what they say–link twice, publish once. Thanks for the heads up, Mike

  • Randall January 12, 2008, 9:43 am

    Fascinating, I’ve been idly perusing the HUD and FHA repos in my area and this is a handy rule-of-thumb valuation for them. I might seriously look into making a bid on something using this formula/article.

  • Mike-TWA January 12, 2008, 11:46 am

    Randall,

    Thanks for the comment. One of the added benefits to looking at HUD homes for potential investments is that you really can start to gauge what’s available in the foreclosure market. If you take it to the next step, drop us an e-mail to let us know what you’re finding.

  • onthuhlist January 18, 2008, 9:53 am

    Quick question – how does one determine the ORIGINAL listing price when looking at the bid statistics? For Michigan, all I can find is the latest listing date.

    For example see sales.clfres.com

  • Mike-TWA January 18, 2008, 1:08 pm

    onthuhlist, If I understand your question, you’re trying to determine the original list price for a sold property when the list price has been reduced. Unfortunately, I believe that most of the bid statistics show only the list price current as of the day of sale. However, there are two options here. One is to keep the listing information over a period of time to retain the original list price. I did this as a matter of course when Rob and I were buying properties just because we were regularly scanning updated listings for deals. But I would track the sales against the listing information to calculate the minimum bid numbers. Another options, albeit imperfect, is to understand that original list prices are generally to the nearest 1000 and are generally reduced by 10% increments. So, an original list price might be 92,000. The first reduced price would 82,800. If you see a bid statistic that is not rounded to the nearest thousand, you are likely looking at a reduced price.

    Hope this helps.

  • Robs January 20, 2008, 7:28 pm

    One of the better explanations I’ve ever seen on this difficult topic – thank you for putting this out there.

  • Akeya W. April 16, 2008, 2:11 am

    I have been bidding on a property for 2 weeks now, but to no avail. I would love to know how I can find out a better price to bid.

    Help, please!

  • Mike-TWA April 25, 2008, 6:53 pm

    Akeya,

    Always happy to help, but I’m going to need more than that. Consider an e-mail. My contact info. can be found in the (cleverly named) “contact us” tab at the top of the page.

    • Sonia June 12, 2012, 6:43 pm

      Hello Mike
      I bid one house that was showing on Hud the bid is pending but you can still bid
      so I bid over their asking price 10.000 more
      next day day find out they accepted some one else the house was in market 5 moths and then they re listed
      what should i do I want that house??

  • Mike February 18, 2009, 4:49 pm

    Has the acceptable bid changed at all in todays market, since housing prices are all dropping. Thanks for the great info- Mike

  • Mike-TWA February 21, 2009, 4:48 pm

    Mike, Indeed it has. While the principles of this article for determining minimum acceptable HUD bids are still applicable, the formula appears dependent on the management company handling the foreclosures. In other words, they seem to have discretion rather than following specific HUD rules for all regions. Since this article was posted, we have had gone through two management companies and the minimum acceptable bid has changed even during the time of the same management company. Rob and I were able to purchase a HUD home several months ago for about 60% of the list price. So, in any market, determining the minimum bid takes a little homework. Watch prices for a period of time and look for these patterns: a percentage of list price, the lapse of 30 day periods, and relists. From the bid statistics, you should see a pattern develop. Also, test it yourself with low end bids on properties that have sat for awhile. Good luck!

  • Mike February 21, 2009, 7:30 pm

    Thanks for the information. I did end up placing a bid for a house in IL where I live, but nothing happened. No email. Do they only contact you to let you know if they have accepted an offer? The house has been listed since Feb 1st and said all bidders, bid deadline daily. Does that mean that they check the bids daily? I place a bid on this tuesday, but we heard nothing back. So I put in a higher bid at 12:30pm this friday. It was still listed for sale all Friday night, but when I woke up this morning it was no longer listed. It’s not in the bid results or statistics. Does that mean they accepted someones bid or do they take it off after 20 days to relist it? I’m confused because there is no way to check on my bid. When are you able to see the results if it is sold? Thanks for all of your help with this confusing transaction. – Mike

  • Mike-TWA February 22, 2009, 2:55 pm

    Mike,

    Many questions. I’ll take a stab at ‘em.

    Yes, they will not notify you of a rejected bid.
    When the bid goes to daily, that means that they will review bids everyday and either accept the highest from the prior day or reject all bids.
    If the property sold, it should be in the bid results. However, keep in mind that the daily bid means that the bidding closes each day at 11:59pm. Then the next day, the bids have to be reviewed–which won’t be instantly in the a.m. Therefore, if a property has been sold, it will not show up as such until whatever time the review period ends on that day (around noon). There also may be (although I haven’t seen this) a short lag between the time that a sold property is pulled off the available list and moved to bid results.
    My best guess is that your property has been sold. Check the bid results again to see if it shows up there.
    The bid statistics (as opposed to results) do have a lag time. I’ve seen 7+ days. Generally, they’ll update statistics on Friday for all properties sold through the prior Friday.
    One other note: keep an eye for your property even if it has sold. An accepted bid doesn’t equate to a closing, particularly these days. Rob and I have bought quite a few properties after they have sold, fallen through, and then been relisted.

    Good luck!

  • anna g March 8, 2009, 7:22 pm

    Simple question: from the bid statistics –

    you have your list price…and then “net”? price…and then your “purchase” price
    Is the “net” what was accepted, and then all your closing costs added, is now the “purchase” price?

  • Beth September 5, 2009, 3:15 pm

    Insightful article. My questions are do I deduct from my offer such things as renovation costs(missing fixtures, appliances, possible plumbing leakage, kitchen/bathroom rehab)? I’ve read much on HUD properties but I’m still unclear what the escrow amount is for. Is that money set aside for the buyer to use for repairs? Thanks and can you send me the mgmt company name and contact you used. I want to buy 1 or 2 HUD properties.
    Beth

    • Jonathan July 13, 2012, 3:01 pm

      The escrow is an amount that HUD makes you borrow from your lender on top of your bid price. The lender holds onto the money until the required repairs are done, and then pays the contractor (or you if you did it yourself). It is just HUD’s way of making sure the repairs get done. This page explains it in detail http://portal.hud.gov/hudportal/documents/huddoc?id=DOC_36187.txt

  • Amy January 31, 2010, 12:45 pm

    We want to a buy a house for ourselves, I am so scared that are min bid will not beat someone elses. I have fallen in love with a particular house and it closes tonight, can you bid over the list price or bid the list price to get the house, how can I know if that is biding to much??

    • DeVonna May 8, 2012, 2:53 pm

      i wanna know the same thing we just bid yesterday and bid the asking price and never got an answer, what do we do

  • TJ April 26, 2010, 4:33 pm

    TN Management – Pyramid Realty does not show the bid statistics on their website. Where else can I get that information?

    • Monica March 6, 2011, 10:43 am

      They don’t have the information posted anymore. Since there are so many HUD properties available in every state there is a simple way to determine the minimum in your area. Let me know if you want to know more.

  • MISSY April 29, 2010, 10:15 am

    I think it is safe to say this blog is DEAD…. No one responds to any inquiry. Placing your info on here will only lead to getting spammed. Don’t even bother and the blog owners need to get with it. Update this damn site or delete it!

  • Kristine June 13, 2010, 10:57 pm

    i’m bidding on a house that is listed for 68,000 and is has been listed since march. What would be a good bid?? thanks Kristine

    • Monica March 6, 2011, 10:39 am

      HUD has changed all of the rules as of 2011. They have a new website to track all of their HUD homes. This site is http://www.hudhomestore.com. It’s still quite easy to buy a HUD home at a really good price. My husband and I flip 2-3 homes per year and have made anywhere from $10,000-$40,000 profit on each. We are Realtors as well and can help teach you the ropes if you are interested.

      • Kyle October 21, 2011, 2:56 am

        Hey Monica,

        I would love to learn the ropes! Whats your email?

  • Monica March 6, 2011, 10:32 am

    Great article. Do you have anything published based on the new 2011 HUD website, http://www.hudhomestore.com?

  • Whit March 6, 2011, 10:46 am

    HUD homes still continue to be one of the best deals for property purchases. My wife and I have found homes that once rented get an annual return of 30% before calculating the initial depreciation we can take on our taxes and also not considering the inevitable appreciation once the market recovers.

  • Mercedes March 18, 2011, 11:45 pm

    Hi i have been bidding on a home for over a week and have just found out about this net pricing thing. The home is 4000 but in paying the listing agent and my agent wat woud the net price be that hud would be looking for to accept my offers? i’m already over the listing 4000 as we speak but wondering how much higher i should go?

  • Cheryl April 7, 2011, 3:12 pm

    Is there anyway to see if your bid is the highest? I just made a full price bid, but I heard a rumor that somebody offerred 28,000 over the listing price!! Yikes! My clients really want this and I believe the house is worth it, but I don’t want to advise them to go higher if they don’t have to.

  • Buy1home April 29, 2011, 8:03 pm

    I cannot find the bid history for hud homes in north carolina. Can anyone help me???

  • Buy1home April 29, 2011, 8:20 pm

    Also, does anyone know if HUD actually turns down your bid if it is not high enough and they do not have another offer or do they just hold onto it until enough time has passed that it is now an acceptable bid?

    • B.Stranger November 1, 2011, 5:44 pm

      If your bid is not accepted it goes away. It is not held. Backup offers are held only until an accepted offer is signed around and then they are reeleased.

  • Christy September 7, 2011, 3:14 pm

    Hello! Great article! I am currently trying to aquire a HUD home. I have never bought a HUD home before but found an amazing house that just so happens to be thru HUD, so I have been trying to educate myself. I would love to discuss a few questions I have with you. Please email me. Thanks!

    Christy North

    • B. Stranger November 1, 2011, 5:42 pm

      HUD made drastic changes in November of 2010. Thinks are not as they used to be. If you have specific questions I can try and answer them for you.

  • roxane schmidt September 13, 2011, 12:27 am

    hud sent back my bid as cancelled.why would they do that? propety is still for sale
    on hud list

    • B.Stranger November 1, 2011, 5:47 pm

      HUD will cancel a contract if they do not receive the required paperwork from your agent exactly as they request. You almost always need to rebid if your contract is canceled.

  • Belinda February 1, 2012, 7:36 am

    new to HUD unable to locate bid statistic page on HUD site any suggestions?

  • Tracey Maher March 27, 2012, 4:22 pm

    Would love some on advice on bidding on a HUD home. Is it 80% of net price before or after cost of renovations? And is the net price the current price even if that has been recently dropped 30K?

    • Brian Haigler April 6, 2012, 2:07 am

      Let me know if you still need questions answered about HUD homes. I have been focusing on them for a while now and the “rules” have changed.

  • Brian Haigler April 6, 2012, 2:05 am

    If you are still looking for some answers, let me know. I have been focusing on HUD homes for quite some time and the above info in the article has changed over time.

    • TRW April 11, 2012, 1:27 pm

      I have no idea as to what to bid on a HUD propert. The home is priced at 157,000 and I only want to put $115,000 in it. Will HUD even consider this low bid. I have heard that the bid has to be at least 89% of purchase price but then I see 80% listed here. Any help or advice would be appreciated.

  • Sue Ferrell April 9, 2012, 11:06 am

    Brian, we have been watching HUD homes in Michigan and have bid on one only to be disappointed that we didn’t get the house. I needed to know if there are ways to ensure a better result and found this blog. Would you agree that you can seldom bid under the price asked on a HUD home? Things here seem to go in a flash. A house might be listed for only 5 or 6 days and it’s gone. Any pointers for me?

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  • james May 11, 2012, 12:41 pm

    hi guys, I have been interested in a home it needs some repairs after last inspection. The highest bidder turned down property, we were second on house we bid full price 108k we estimated 20k to fix .we turned it down. House is back on. We asked realtor to bid lower she said no, they wont accept lower than asking price 108 she says if or when house drops she will let us know.What do you think? also does lender go by inspections from previous inspections or appraisels
    Thanks for any feed back

  • AngelaT0763 July 19, 2012, 2:11 am

    Brian, you keep answering questions with “The rules have changed – if you’re still interested let me know.” I am definitely still interested – how do I let you know?

  • Big D July 26, 2012, 10:37 am

    The rule of thumb for HUD homes is all about NET amount to HUD. NET amount is defined as your offer amount minus any closing costs concessions you asked for and the realtor fees. So lets say you offer 100k for a house and asked for 3k in closing cost concessions. What HUD sees as a NET to them is 100k-3k(concessions)-6k(realtor fees, both listing and selling agent get 3%) So NET to HUD is 91k. This formula is important so you know if you have a chance at the property. If HUD just listed a property and it has not been reduced yet they will only go down 85-90% of listed price. So you apply the NET formula to see what you have to bid. After it has dropped in price you can get great deals but it would take too much of my time to get into all of that. Hope this helps.

  • HC July 31, 2012, 7:20 pm

    There are a lot of empty houses in our area. HUD got this house for 50000.00 and it has been empty for 3 YEARS. It has roof damage and needs new carpet and paint and I have only looked in the windows. I have no idea what else is missing or in bad shape. How low of an offer can I go?

  • Brenda cockrell September 24, 2012, 9:22 am

    How can I check to see if anyone had bid over my price?

    • Michael Maratta October 2, 2012, 11:45 pm

      You can not see what someone else has bid. They are sealed bids and only HUD can review and accpet them.

  • LW October 16, 2012, 9:36 pm

    My realtor spoke with listing agent, who told her there were no other bids on property. We submitted a bid on day 14 of first look. Then listing agent comes back stating no owner occupant offers are being accepted, must enter bid as investor. We did this. Someones bid was accepted,but not mine. Does this sound suspicious?

  • Marta December 3, 2012, 10:48 am

    Hi,

    After a bankruptcy from last December (discharged in March of 2012) I had a hard time paying the mortgage, so my house is on short sale right now. Due to the short time after bk I have no credit, therefore can’t buy a much cheaper property and have no place to move to. Any good advice how could I get finances and bid on a HUD home in my area? Thank you,
    Marta

  • TTT December 6, 2012, 5:28 pm

    Can anyone here please please help and tell me if I must find a NEW agent who is HUD-registered in order to make a bid on a HUD house? My current agent is not registered and the registration process takes too long by the time she is reg’d the house could be gone!

    On the other hand, can we trust the Property Condition report posted on the official website for the HUD property in question? If we are to trust this report the house needs only minimal repairs but the list price is only HALF the price of the houses next door and in the whole neighborhood! How could the HUD appraiser be so… clueless as to list such a low listed price on this HUD house? Or is there a rule for HUD, like “list price should only be 60% of market price” ?

    Please help asap, anyone, I’m so desperate to bid on this house in this sought-after neighborhood but so worried to see why the list price is only about half the value.

  • Joespeh December 30, 2012, 3:36 pm

    There is a website that offers some key HUD Bid statistics, see http://www.housespin.com

    They have data on all the previous accepted bids along with list prices and can tell you what the ratio of bid amount to list price!

  • Bryan April 17, 2013, 2:14 pm
  • Anne June 3, 2013, 5:46 am

    Hi There,
    Hoping you can help determine minimum bid on a Maryland HUD home that has been on the market for 30 days or so.
    http://www.mlsfinder.com/md_mris/point229977be98cf843b192a801712952f7f0/index.cfm?action=listing_detail&property_id=CH8023797&searchkey=0969b9c5-d118-2009-ed31-ed459ab28e0c

    Thanks
    Anne

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