9b. Important factors to consider
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Once buyers understand how important it is to consider the acceptable bid amount, they also need to consider certain factors when getting ready to make a bid. Common questions from buyers include the following:
- What are usual bids on HUD homes?
- How low may I bid on a home?
- What is the property actually worth?
Making a big on a HUD home
When trying to decide what to bid on HUD homes, several different factors need to be kept in mind:
- The Amount That Buyers Can Finance
- The Home’s Appraised Value
- The Comparable Value of the Home
- The Minimum Bid Amount HUD Will Accept
Amount the Buyer Can Afford to Finance
First, the Amount that Buyers Can Finance must be considered when making a bid on HUD government foreclosures. A lender provides buyers with a loan amount they qualify for; however, buyers need to consider how much they can realistically afford as well. The comfortable and affordable amount buyers can afford should be the cap for the bid made on a home.
Of course, the Home’s Appraised Value is another factor to be considered when deciding what to bid on a home. HUD does an appraisal when they first take ownership of the home, which shows up on the property description. This amount usually helps to determine the initial listing price on the home.
Next, homebuyers must also consider the Comparable Value of the Home when working to come up with a reasonable bid amount. Real estate agents can help provide this information by doing a Comparative Market Analysis on the property, which will compare several previously sold properties in the area that are very similar to the home the buyer is considering. Using this helpful information allows buyers to see what other similar homes have sold for in the area, which is a factor that should influence the final bid amount decided upon.
Last, the Minimum Bid Amount HUD Will Accept should also be kept in mind while deciding on a bid amount. Again, working with an experienced HUD approved real estate agent can be beneficial to buyers. Real estate agents experienced in making bids on HUD homes will be able to help buyers come up with the minimum net amount that HUD will accept. When agents work with HUD homes on a regular basis, they can track bids over time, allowing them to offer excellent advice on a good bidding strategy in the area.
Remembering the importance of the minimum net amount HUD accepts is important. Buyers need to look beyond the gross sale price to consider the net proceeds that will go to HUD when the sale is complete. Sometimes a higher gross sale price may not offer HUD as much in net proceeds as a lower gross sale price will. HUD wants to make as much money as possible, so the net proceeds that go to HUD is an essential factor to consider when making bids on HUD homes.