John Rebchook is a former Rocky Mountain News reporter with more than 30 years of experience in writing and communications... 
HUD asked $100,000 for this Aurora home, but the winning bid was $130,501.
The 1,428-square-foot single-family home in Aurora was sold at an Arapahoe County public trustee auction on Sept. 24. It had an FHA-insured mortgage, so its new owner was the U.S. Department of Housing and Urban Development.
The four-bedroom, 1.75-bathroom home had sold for $180,000 in 2002, according to public records. On Nov. 27, HUD put it on the market with an asking price of $100,000. It received 31 offers. HUD received the winning bid on Dec. 2 for $130,501.
Despite the overall lackluster market, almost any broker in the Denver area will tell you it is common for bidding wars to erupt for lower-priced homes, such as this one on 1467 S. Andes Way.
“I have been out-bid on HUD homes by as much as $40,000,” said Nickolas Terry, a Certified Distressed Property Expert at RE/MAX Leaders.
“For any home under $200,000, it has been like a feeding frenzy,” said Steve Cramer, owner of Exit One Realty. He estimates his office has sold about 3,000 HUD-foreclosures in the past several years.
Despite buyers bidding the price of lower-priced homes to far above the asking price, data obtained by InsideRealEstateNews.com , shows the average price of a home that HUD acquired and re-sold in Colorado and the Denver area actually has dropped in 2009 from 2008.
Statewide, the average price of a home sold by HUD stood at $100,053 in the first nine months of this year, compared with $104,757 last year. And in the Denver-area, the average price of a home fell to $102,404, from $105,308.
“I can’t explain it,” said George Antoine, an economist for HUD’s Region VIII, which includes Colorado and is headquartered in Denver. “These are averages and the sample is fairly small. The numbers are very close.”
Still, brokers, when told about the data, at first blush are baffled that the amounts would not be higher.
“It’s possible that they’ve just put a lot of low-priced homes on the market during this period,” and that skewed the overall market statistics, Cramer said. He said that likely will change as more HUD homes become available to purchase by owner-occupants – many of them first-time buyers who will take advantage of the $8,000 tax credit – as well as investors.
Bobby Burnett, the broker owner of Keller Williams Realty – DTC, agreed.
“I think it could just be a little quirk in the market,” Burnett said. “I don’t think it is a trend or anything.”
And Terry, of RE/MAX Leader, said HUD homes are still the best deal out there for first-time buyers and bargain hunters.
“They’re the only game in town,” Terry said. “Nobody wants to buy a short-sale, because you can put an offer in, wait six months, and there is no guarantee the bank will accept it. And if you try to buy a bank-owned property, they are so over-worked at the bank, that they may never get back to you.” Bank-owned properties, or REOs, also typically sell for more than the asking price, he said.
Still, it’s not easy to win a bid for a HUD property, Terry said.
He said he recently lost out on one HUD home in North Central Aurora, after bidding $10,000 above the asking price. “There were 43 bidders and 17 of them were all cash offers,” he said.
For related stories, please visit these blogs:
HUD inventory could contribute to shadow market.
HUD loans soar in Colorado, Denver
9 Months of HUD Sales
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Year Colorado Average Contract Price Colorado Denver Average Contract Price Denver
2008 2,598 $104,757 1,985 $105,308
2009 2,542 $100,053 1,841 $102,404
Source: HUD Single Family Data Warehouse
[...] Contributors « HUD foreclosure sale prices drop, but Realtors don’t buy it [...]
We are seeing the same interesting pattern in our market. It almost seems strange to think that buyers would rather jump through all of the hoops that a short sale presents rather than the clean transaction of a HUD home. The only explanation I have is that most of the HUD homes in our area are in very bad condition comparatively.
My experience with HUD properties in the Denver market has left me very jaded to say the least. I have yet to have one offer accepted, out of the 30 or so I have submitted for clients over the past couple of years. It seems to me that investors are being allowed to jump the gun and bid during the initial 10 day owner occupant period, with little or no consequence. The prices get driven up by these generally "all cash buyers" and an owner occupant simply can't compete. If my buyer has an FHA loan, any amount bid over the asking price has to be brought to the table in cash, since the HUD asking price is the FHA appraisal number. It just stinks that the people who really need and deserve these types of properties get left out so investors can snatch them up and make a buck. While I realize that an investor caught misrepresenting their status can be fined, it's not very likely to happen. Why would HUD complain when the homes are selling for more than they list them for? Like I said, I'm jaded to say the least.
Chris, you are correct that any FHA buyer in Colorado that bids over HUD's as-is appraised value (usually same as initial asking price) has to bring the difference to closing in cash. But these over-bidders are not investors, they are VA buyers and CONV buyers that do not have to use the FHA appraisal. I have sold dozens of HUD homes this year to VA and CONV Owner Occupant buyers in the initial O/O period, even my buyers were bidding 10k-20k over the asking prices and getting outbid by another 15k on top of that, it truly was a frenzy before the $8,000 tax credit got extended. One VA buyer put in 16 bids this summer, every bid way over the asking price before he finally won one.
The problem isnt investors buying in the O/O period, that really isnt happening here. The local HUD office used to have 5 enforcement agents in 2005, now they have over 20 here in the Denver area.
Jay, It's good to know there is some enforcement out there. Thanks for the info. Chris
I have FHA buyers too, and as sad as it is, the real problem is that HUD doesnt treat FHA buyers fairly in Colorado.
Other states allow FHA buyers to get their HUD properties new appraisals, but not in Colorado. As a Federal organization, shouldnt an FHA HUD home buyer in Michigan, Ohio, Arizona, (etc) be treated exactly the same as an FHA HUD home buyer in Colorado? Why do buyers get special privledges in other states from this federally run organization that they dont get here. Why are residents of other states given special treatment? Those are the real questions that need to be raised!
Since HUD and MCBREO insist on appraising and pricing HUD properties in Colorado WAY WAY below market, as evidenced by 30+ overbids on almost every property, the fair way to let FHA buyers compete against VA buyers and CONV buyers (and cash buyers) in Colorado is to allow Colorado FHA HUD buyers to get re-appraisals after the bidding is completed.
What is the purpose of the FHA, what is the purpose of the HUD home program? In Colorado, they are far away from their mission, as they arent allowing FHA HUD buyers to even have a chance at home ownership. But in other states they allow it. Can anyone tell me why?
I have to agree with Chris in Denver….Although I have had two HUD offers accepted, this is far from a 'normal' transaction. With water liens, HOA liens and attorney's fees still in force, the purchaser gets hit with more and more fee's that every agency, group, or firm tries to levy. I guess it depends on which side of the transaction you're on. On my last offer, appliances were stolen from the home between contract and closing and MCB offered $200 for a $1,500 S/S oven…..then left the adjustment off the HUD-1! The more I look at the way HUD prices its homes, the more I question their appraisers (I am an appraiser as well). Add to the low initial offered prices with the artificial demand generated by the governments stimulus plan and this tells me we are in for a hard fall after the final offers are closed around 30 June 2010. I noticed there was another 996 homes with NEDs filed in six counties just last week. Any market recovery is still very far away……………