The short answer
HUD bid strategy comes down to one number: the net to HUD. HUD looks at what it keeps after the closing cost help you ask for and the broker compensation, not the price alone. So build the bid from the home's real value in as-is condition, decide how much closing cost help the buyer truly needs, and bid in the right window. No one can promise a win.
This page is about deciding the number. For the bid screens and the contract package, see how to write an offer on a HUD home.
Step by step: HUD bid strategy
Here's how I do it with every HUD buyer.
- Start with value, not list price. HUD's list price comes from its appraisal. Your number comes from sold comps in the same condition. Pull them yourself. See how to price a listing for the comp method.
- Subtract the repairs. Use the inspector's report and real contractor bids. See HUD as-is inspections.
- Set the ceiling. Value minus repairs minus a cushion for surprises. That's the most this buyer should pay. Write it down before emotions show up.
- Price the closing cost ask. Get the lender's estimate. Ask for what the buyer needs, not the max. Every dollar you ask for comes off HUD's net.
- Run the net two or three ways. No help, some help, full help. Compare each net against the ceiling and the buyer's cash.
- Read the clock. Bids in the owner-occupant window are held and opened together after the period deadline. There's no prize for bidding on day one. There's a big penalty for missing the deadline.
- Read the result. Results usually post the next business day. Accepted means move. Not accepted means decide: re-bid, wait for a cut, or sit in backup. See HUD bid rejected and backup offers.
- Watch for price reductions. When a home sits, HUD may cut the price. A cut is a new chance. Re-run the net at the new number and bid again if it fits.
- Keep the ceiling. If the home only works above the ceiling, let it go. Another HUD home will list.
Net to HUD, two bids side by side (illustration only)
Same $300,000 list price. Same broker compensation on both, so we leave it out of the comparison.
| Bid A | Bid B | |
|---|---|---|
| Bid price | $300,000 | $293,000 |
| Closing cost help requested | $9,000 | $0 |
| Net to HUD before broker compensation | $291,000 | $293,000 |
Bid B has the lower price and the higher net. On a fresh listing with other bidders, Bid B may be the stronger bid. Bid A's buyer needs less cash at closing. That's the trade every time.
Illustration only. These numbers are made up to show the math. HUD's net also accounts for broker compensation and other terms in the listing and sales documents. A lender sets the real loan terms and cash to close. The annual percentage rate (APR) would differ from any note rate. This is not an offer of credit. Program rules change. Check the current listing at HUDHomeStore.gov and FHA rules in HUD Handbook 4000.1.
When to ask for closing cost help, and when not to
| Situation | What I usually lean toward |
|---|---|
| Brand-new listing, owner-occupant window, lots of showings | Ask for little or none, if the buyer has the cash |
| Home has sat, price already cut | Asking for help may still clear HUD's line |
| Buyer can't close without help | Ask for the lender's estimate, and accept a lower win rate |
| Cash buyer | Lowering the price by the same amount is simpler paperwork |
It's a lean, not a rule. The buyer decides after seeing the numbers.
Owner-occupant vs investor strategy
Owner-occupants have the strongest position. During the exclusive window, they compete only with other owner-occupants and approved nonprofit and government buyers. Bid a clean, real number inside the window. Waiting to see if it sits can hand the home to someone else.
Investors wait for the extended period. Their edge is patience and cash. They watch for homes that sat, got cut, or are uninsured. Some HUD homes draw few owner-occupant bids. Those are where investors find room. See HUD bid periods.
Backup position
If your bid isn't accepted, it may still matter. If the winning buyer fails to close, HUD may go to the next bid. A backup only gets called if it's a real number with a live pre-approval. Tell the buyer up front: if they buy another house, withdraw the backup.
How to explain it to your client
"HUD doesn't pick the biggest price. It picks the bid that leaves HUD with the most money. So every dollar we ask HUD to pay toward your closing costs counts against us. Let's look at your cash first, then decide how much help to ask for. I'll show you two or three versions, and you pick. I can't promise a win. Nobody can. I can make sure your bid is complete and makes sense."
Watch-outs
- No magic percent. HUD doesn't publish a fixed percent of list it accepts. Anyone who says they know it is guessing.
- Lowball bids aren't placeholders. A bid under HUD's line is just rejected.
- Over list with FHA. The loan is capped at appraised value. Bidding over list can mean more cash at closing. See HUD home appraisals.
- Same bid, same answer. Re-bidding the same net on the same terms rarely changes anything.
- Don't miss the deadline chasing an extra dollar. A perfect bid that's late is worth zero.
- Owner-occupant means it. Never shade the bidder type to get a better window.
Sources
Further reading
Keep going
- How do HUD homes work?
- How to write an offer on a HUD home
- HUD bid rejected and backup offers
- HUD owner-occupant vs investor bid periods
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How much under list price does HUD accept?
HUD doesn't publish a fixed number. It looks at the net to HUD, and what it accepts can change as a home sits. Build your bid from value and the buyer's ceiling.
Does asking for closing costs hurt a HUD bid?
It lowers the net to HUD, so it can. On a fresh listing with competition, it may cost you the house. On a home that has sat, it may still work.
Should I bid on day one of the HUD bid period?
In the owner-occupant window, bids are held and opened together after the period deadline. Bid when the buyer is ready and inspected, but before the deadline.
Can I re-bid after HUD rejects my bid?
Often yes, while the home is still listed. Change something that improves the net, or wait for a price cut.
Can I bid over list price on a HUD home?
Yes, but an FHA loan is capped at appraised value. The buyer may need extra cash at closing. Check with the lender first.
Brian Lee Burke is the founder of PadLeaders, a Colorado real estate broker licensed since 2003, team leader of The Kenna Group at Keller Williams DTC (formerly Kenna Real Estate Group) and the author of Mastering Real Estate and The Real Estate Playbook. More about Brian.
- Agent training by Brian Lee Burke, The Kenna Group at Keller Williams DTC
- HUD Homes for Sale (https://www.hud.gov/topics/homes_for_sale)
- HUD Handbook 4000.1 (https://www.hud.gov/program_offices/housing/sfh/handbook_references)
- HUDHomeStore.gov
- HUD Handbook 4000.1
- HUD.gov: Homes for Sale
- How to buy a HUD home, step by step (denver-hudhomes.com)
- What is a HUD home? (denver-hudhomes.com)