Now that you understand how HUD’s bidselect website works, I want to give you my strategy and approach to bidding HUD foreclosures. It’s relatively straight forward, and should be a cinch for you to duplicate. So here it is:
Bid Early, and Bid Often!
This may seem somewhat elementary, but it is exactly my mentality and approach to bidding HUD foreclosures. And when you take emotion out of the equation (emotion is the number one enemy to making money in real estate by the way), and understand the way HUD views offers, it will make sense to you.
Imagine you are HUD for just a moment. Now they have hundreds of properties listed on the website on a given day, and their inventory is flying off the shelf left and right, and they aren’t really looking to make a lot of money. They simply want to cover their losses. Now, if they are able to sell a property for market value or close to it, then great. But the point is, they don’t really care much about negotiation, or trying to make a deal work. They care about speed. Speed of moving their inventory. And this is what I have found out by testing them through multiple offers.
Philosophy of Bidding with HUD
This is the way it works with HUD. You send them an offer, and they accept or reject. There is no negotiation. Furthermore, they publish accepted and rejected offers on their website. This is why I told you about the feature to “watch” a property on HUD’s site by signing up for a free account. It pays to do this! You can easily go back into the website and find out exactly what your competitors are bidding on the property, and you can one up them if it makes sense to do so.
So don’t get discouraged if they reject your first offer. Incidentally, that is why I always start off very low with HUD. One time, I bid a house that they started off asking $70,000 to buy, and I only bid it at $40,000. And I included a seller concession of 3% towards my closing costs. I didn’t think there was anyway they would accept it, but you know what, they did! And now, I have a house that I can rent out for about $700 per month in the historic district of a small college town. Perfect for renting!
The Bid Strategy Summed Up
So here it is in a nutshell. Search out and find a property that you want to buy on HUD’s bidselect site, determine a high price that you are not willing to exceed, and start you offer off at well below that price. If HUD rejects it, just up your bid a little, and try again. If they reject again, just up it a little more, until they either accept your bid or your hit your top number. I remember one property we bought with HUD that took approximately three bids in order for them to accept it!