xepherys

I looked for some other threads regarding this, but didn't come up with anything. Soo... anyone with experience in the industry, please lend a hand.

I'm looking to buy a HUD home. List is $85,000. I'm planning to offer a massively low bid as there have not been other bids on the property (which is typical around Detroit - the house is in Royal Oak). I'd like advice on how low to offer. The Realtor recommended $75,000 (but she gets paid on how much it sells for). I was thinking $65,000. Some people have suggested as low as $45,000, but that seems too low. I don't want to waste my time, but I also don't want to pay too much.

Also, I've read a variety of information on POC (paid outside of closing) fees being unnecessary. I've added a link to the good faith settlement estimate below... can anyone decipher where I should ask for a better deal? This is assuming I take $85k which is list. This WILL NOT happen.

Lastly, I'm going FHA (despite VA possibly having a slightly better rate) because I can take 203k loan riders for some repairs. The house is in good shape. Foundation is great. Only major known issue is plumbing... water connection is broken. There is POSSIBLY a mold problem. I'm currently using a home testing kit to get a rough idea. Will have the inspector do a thorough mold test after I get an accepted bid. Thanks!

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NoSoup

Well, take this with a grain of salt, as I lend in Wisconsin, but...

As far as the asking price is concerned, the beauty of dealing with a HUD house is that it isn't being sold by people - noone is going to be offended by the initial asking price. Although I'm basing this solely off the limited knowledge I have of the Detroit area market, they are likely doing what they can to dump the property and get it off their books - low balling them should be standard procedure. However, know that there is risk involved - if someone happens to put an offer in at the same (or similar) time, you might lose the house. That said, absolute worst case scenario, even if you offer them a ridiculously low amount (like that $45,000 or whatever) the worst they can do is refuse the offer. At that point, providing noone else has bid on it, all you'd have to do is resubmit. However, I would imagine that they would end up countering, if they are trying to get rid of the property.

As far as what your realtor recommends, they might be familiar with the amount the HUD agency is generally willing to discount in the area, and that's what they are basing their advice on. However, regardless of what they say, offer only what you think is fair - don't go over, you don't want to end up regretting it.

As far as POC, you might be able to avoid it, but you may not as well. Often times, when dealing with traditional sellers, you would be able to offer a higher price and have them pay your costs - effectively rolling them into your loan. For instance, you make an offer for$50k, they come back with $55k, you offer $60k with the condition that they put $5,000 towards closing costs.

Dealing with HUD, though, it may be different - check with your local HUD office to see if they are willing to credit you costs. I believe it varies state to state. As far as the disclosure is concerned, everything appears to be reasonable, though many of the fees vary greatly in different markets - you may want to check with a local banker/broker to see if any of them are outrageous.

Either way, Good Luck! Let me know if you have any more questions

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xepherys

Thanks NoSoup.

with the "rolling in" of costs, is that what the 6% concessions are?

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xepherys

Also,

I'm doing a lot of the footwork regarding the 203k stuff via email. I'm now including the lending agent and my Realtor on all of those emails. I'm trying to squash any miscommunications and whatnot. Is this at all kosher? Not that I care, but I'd like to know in advance if I'm going to stir up anxiety on either of their parts.

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NoSoup

Yep.

As far as including them in your email, you are certainly welcome to do so, though I suspect that neither one of them spend much time on them. But if it makes you feel more comfortable, I don't see any harm.

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yournamehere

I would walk away as soon as I heard "possible" mold problem. Especially if you know there's a plumbing problem.
You don't want to end up completely re-building the house - no matter how good a deal you get on the purchase price.

At least get a mold inspection professional in there who will guarantee their results for a few years.

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xepherys

I've already considered the mold and the plumbing when I was toying around with an offer. The 203k lets me roll that into the mortgage as well. The house is, otherwise, AMAZING. I don't need to move in right away, so it should work out...

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yournamehere

Wouldn't you be better off buying some land for the $50K, and spending the $200K on having a new home built? With everyone scrambling for work these days, and the state of Michigan's economy, I would imagine you could easily get a new home constructed for well under $100/sf. Everything new, energy-efficient, and under warranty.

Have you considered that option, or are you really in love with this house?

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xepherys

Uhm, not $203K, 203(k) FHA loan... it's about $15k in repairs and refurbishment. The whole loan, for the property, house and repairs would be under $80k, which is pretty decent for 1700+ sq. ft. in Royal Oak on a double lot.

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amonkie

Do make your offer contingent on the house passing a detailed inspection - and that there be concessions and time lines for things that do not pass inspection to be fixed in order for your offer to stay on the table.

I've always been told go for good bones - that includes foundation, venting/ductwork, and plumbing. If the market is really that great, spend a little more time looking. Don't get sucked into the "its GREAT except for ____". Every house will have something. But its a whole lot easier to repaint a wall than it is to tear one down to get at the plumbing and put a new one back in place.

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xepherys

There is a plumbing issue. HUD estimates a $600 repair, so I guess it'll be closer to $900. Otherwise, the foundation is good.

Also, bidding on a HUD home, once they accept my bid, I get to have it inspected before I close. I think there's a 60-day period between bid acceptance and close. Past that, they start taking other bids. So, it's not something I have to hurry on anyhow.

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raeanna74

In our previous market I purchased a home listed at $65k bought it from the bank for only $47k. In this economy I found one last purchased for $63k and bought it from the bank for $18k. There's practically no limit as to how low you can go. Have you asked your lending agency for advice? It sounds like you don't have a Buyers realtor, the way you were talking. I would suggest getting a Buyers realtor and that will help you get the best deal.

Just my little two cents here... Make sure you research the title yourself and make sure that there are no taxes, leins or assessments and check with the utility companies too. You can go to the courthouse yourself and ask for those records - that is all that the Title insurance companies do and on both purchases the Title insurance company missed things. I confronted the selling bank with the taxes and assessments that were on this current home and they paid them in full before closing. If I hadn't dealt with that it would have cost me a couple thousand more.

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xepherys

There are no leins or taxes. As far as I understand it, HUD properties are always cleared before they are sold. What do you mean by "Buyers Realtor"? HUD bids all go through a Realtor (required) and the Realtor can only bid what the buyer specifies. Both the Realtor and the Mortgage Lender have given roughly the same advice... but both said to offer whatever I think is worth offering.

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amonkie

What she means is that Realtors often specialize - for example some specializing in selling, first time Home Buyer, Commercial/rental properties, 2nd homes, and just buying in general. Their in depth knowledge will come from which of these areas they have built the most experience and research and familiarity. If you call a realty office and tell them you are seeking a Buyer's realtor to assist you as a first time Home Buyer, they should match you up with someone whose clients fall primarily in this category.

Also, have you actually gotten the loan preapproval in your hand? When I was looking, most realtors would not take me seriously until I did, and then the amount of house you can afford based on total loan amount, taxes and fees, broken out by month.

Also, bring someone you trust to speak out their opinion with you to see the home(s). They will see things you will not, and some things I didn't even know to ask. Like the size of the water heater (20 gallons in one place I looked, that was turned on by a switch!). Look at the age of the electrical wiring and see if it can easily meet the current electronic workload. A lot of these will depend on the age of the home. Also take a really close look at the roof - when was the last one put on? Was it a 10 year, 15 year, 30 year? Does the ground slope/saturate in certain areas that may lead to flooding in heavy rains?

Drive by the house at different times of day and gauge street traffic.. ask the neighbors whether they're happy with the area. A mortgage is a big commitment, you can change the house but you can't change the neighborhood.

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xepherys

amonkie, thanks for the info on the Realtor... never knew that.

I do already have the mortgage pre-approval. Have say <5yrs old easily... probably newer. All codes up to date, as required by HUD for a house to sell... even updated to circuit breakers instead of fuses (always a good thing). It's 2-3 miles from where I grew up, so I know the neighborhood pretty well. It's on a side street with virtually no traffic... also awesome!

Thanks for all of the pointers

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The prospect of achieving a peace agreement with the extremist group of MILF is almost impossible...
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amonkie

Glad to help... I absolutely loved house shopping, though all the choices and hoops stressed some people out.

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Cynthetiq

thats why they get paid 6% split between the buyer and seller realtor. It's not like they just open the door and do the Vanna White points... My realtor specialized in rentals as he's also my rental manager, so he knew things like how many years left on the carpet, how many years to expect for the water heater, roof, and other potentially expensive repairs. It's not so expensive if you're going to live in it...

anyways, good to see you're doing your homework. Mold is a pain in the ass. Some sellers will have you sign some documents about not knowing about the state of mold blah blah blah. It's like a stupid liability thing like lead paint.

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yournamehere

Sorry!
Wasn't familiar with the term!

If you get mold, though, it'll cost you a lot more than $15K to fix it. When I lived in Houston, I had a co-worker whose neighbors up in The Woodlands had to spend $70K to get rid of their mold problem - and it took 6 months. They had to find somewhere else to stay during that time, too.

Having lived in Houston, I'd run the other way if someone even whispered "mold." Especially if I knew there was a plumbing problem.

I'll admit, though - 1700 SF on a large lot for $80K sounds like a deal, although I'm not familiar with Royal Oak. I'll assume it's a great neighborhood, since you've mentioned it in your post.

Just please - spend $300 and get it checked for mold! Most homeowners insurance policies no longer cover mold damage.

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If you want to avoid 95% of internet spelling errors:
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It won't hurt your fashion sense, either.

thingstodo

What is the downside to offering a very low bid? If no one is bidding, why not go low?

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