If you are looking to purchase a home, you may have come across one of the largest on-line home sale marketplaces: hubzu.com. You click around and starting seeing properties in your target neighborhoods with prices that are too good to be true. Sure, some of them clearly need rehab, but still….hmmmm. You Google “Hubzu” to see what comes up and you find real estate investors talking about purchasing properties through the website – it sounds promising. But then you also find a few reviews that say “Hubzu auction FAIL!!” or “Hubzu Deception in Online Real Estate Auction” along with allegations of fraudulent bidding processes or shady business tactics. You hit pause and wonder…. is Hubzu for real???
I can’t tell you whether Hubzu is a paragon of good business practices, but I can tell you that
I’M TYPING THIS POST, WHILE SITTING IN MY HOME OFFICE, IN MY HOME, THAT I BOUGHT ON…..HUBZU!
- I purchased the home in 30 days, after placing the successful bid online
- For a huge discount
- Using financing (not always accepted)
- In the perfect neighborhood with the highest rated High School in the County….SCORE!
What is Hubzu and How Does It Work?
Hubzu is an on-line auction site for homes. Think Ebay, but houses. The company boasts that it’s a leader in the on-line marketplace, responsible for selling 30,000+ homes per year. They claim to have over 1.4 million registered users and 400,000 registered real estate agents. You do not have to be represented by an agent to use Hubzu, you can bid and purchase all on your own. Or, if you choose to work with an agent, that agent can bid for you or assist you during the rest of the process. Hubzu acknowledges that about 84% of their buyers have agent representation (and, as with traditional sales, the agent will not be compensated by the buyer, but will receive a commission from the seller at closing). You can also register yourself as a company’s name (instead of your individual name), if the property will be purchased by the company (like an LLC or corporate entity).
There are all types of listings on Hubzu, including plenty of foreclosures and REOs (real-estate owned by banks), but they do offer traditional sales in addition to auctions. The home I purchased through Hubzu was an auction REO owned by Deutsche Bank. The auction format appealed to my competitive nature and my desire to get the best deal I could find. I feel the same way on Ebay…I never “Buy it Now,” nope, I want to bid!
Because there are different types of listings owned by different sellers, there are different rules for each auction – you have to pay attention to the details. Most of the homes require that the purchaser close in 30 days or less. That can be a challenging time-frame when you are getting conventional mortgage financing but it’s definitely do-able. However, you will notice that many of the properties are offered as cash-only deals, particularly when they are in terrible disrepair or when they are still occupied. Yep, you read that right, you can purchase a home complete with an uninvited guest still living in it. In that case, the price is even lower, because: 1. You will not be able to access the home to see it or do any inspection prior to purchase, and 2. You will have to evict the current resident post-purchase.
My purchase was happily less complicated, as the home was empty (vacant for years) and I was able to tour the home. If you have a licensed agent (or you are one yourself) you can get an access code from Hubzu to tour the property. However, if you are going it alone and you want to get into the property, you will need a referral to a local agent or click the “Schedule a Visit” button on the listing so that Hubzu can help arrange a showing through one of the their affiliated agents.
If you decide you are interested in bidding, keep in mind that the price listed on the screen is just the Starting Bid. There is a reserve (again, just like on Ebay) and you will not know the reserve price until the bidding reaches or surpasses it. As you bid, and you see other bidders jump in and the price continually rising, you may wonder if Hubzu can pull any funny-business to drive the bid price higher? Well, according to Hubzu, the company NEVER bids on behalf of a seller on ANY listings. In addition, they claim that you will always be bidding against other registered individuals (or companies), not against a “system.” In order to protect the integrity of the bidding process, Hubzu’s registration collects the last four digits of participants’ SSNs and uses 3rd party provider questions to determine unique identities.
The Dreaded 15 Minute Rule
As the auction is ending, Hubzu implements the dreaded 15 Minute Rule. If any registered user places a bid within the final 15 minutes of the auction, the auction is automatically extended for an additional 15 minutes. And it can happen indefinitely. The auction for my home ending up running an additional two hours. That’s TWO HOURS I spent on the brink of ecstasy, thinking I won the home, and then some other bidder would jump in with 30 seconds to go. So that was a bit excruciating, but then…
I WON! Now, in my case, the reserve was met, so my bid went under review by the seller. For the review, I had to submit paperwork showing proof of funds and financing before the seller declared a final acceptance of my bid. At that point, I was able to begin the full purchase process with Altisource (Hubzu’s parent company). Working with Altisource may require a whole separate blog post, but let’s just say that the deal got done and I am the happy owner of a great house at a great price. Yes, I did do a bit of work on the place, but the work wasn’t necessary to make the home habitable (maroon carpeting and wood paneling don’t qualify as “uninhabitable,” at least not technically). So, if I had used all of my money for the purchase, I could have taken my time to remodel the home to my taste.
Final Focus Points for Hubzu:
- You can purchase a home on Hubzu as a traditional sale or through an auction platform.
- You don’t need an agent at all (but one may help you gain access to the property and complete the purchase process – at no cost to yourself).
- Some properties do not allow financing – the home must be purchased with cash.
- There is typically a fee called a Buyer’s Premium, that is currently around 4.5% of the final bid price.
- Be careful to look closely at all fees and fine print in the listing.
- If no bids meet the seller’s reserve price, the seller may relist the property in a new auction (possibly reducing the reserve); however, this is not a given. Also, the seller may choose to negotiate with the highest bidder at the end of the auction if the reserve is not met.
- Hubzu is not paying me for this post. [But I think they know how to find me if, well, you know, they think I deserve a little something-something for boldly declaring their “realness” to the world]
- Don’t be scared to try Hubzu. It could add some fun to a boring weekend!