Hubzu: Too Good To Be True?
Hubzu has been around for a long time. Many homes that are listed through an online auction house, generally the result of a foreclosure, seem to be sold through this company. So, is Hubzu legitimate? Is it safe to use? I’ll get to that.
Like many people interested in real estate auctions, I first heard about Hubzu in September of 2019. I was walking down a street in my neighborhood and saw their sign in front of a small apartment. As a real estate agent, I went online, and saw that the condo had no asking price, rather the listing price simply said “Auction”. The minimum bid? About $360,000, was far below what I assessed was the fair market value of this apartment.
What is Hubzu?
Hubzu is a platform that showcases homes for sale. While they claim anyone can market a home on their site, I would guess that 90%+ of their business comes from banks in the United States looking to unload properties that have been foreclosed upon. Hubzu has a small team in Georgia, but most of their staff seems to be working in the Far East.
Finding out more information about Hubzu is tricky. There is scant data on this company online. Therefore, in this article I noted what little I could find about this company, and filled in the rest with my own experience.
One more thing to note: Hubzu’s Georgia staff seem to handle the MLS and showings, while the outsourced team handles the rest. To give Hubzu some credit, their website is pretty straightforward. They also market aggressively, as I often received emails from them for homes listed on their platform, long after the property I was interested in sold.
How Does Hubzu Work?
Back to the apartment. As any savvy real estate investor would do, I researched the property. The first call I made was to our municipality’s tax collector. After all, I wanted to make sure that Hubzu was not up to any monkey business. In other words, I had to make sure there were no outstanding tax bills owed, which may have negated the low asking price. The person on the other end of the phone confirmed there were only a minimal amount of taxes due. On the local registry of deed’s website, I couldn’t find any liens on the property either. Great!
Most of the homes on Hubzu are available by auction, although a few have a “buy it now” price. With the apartment I was looking at, the auction lasted a few days. At the end of the bidding, the reserve price was not met, so the property was re-listed a few weeks later at a slightly lower starting price. Between the end of the auction and the date the property was re-listed, it was offered at a buy it now price of $475,000.
My target price was <$400,000. My plan was to buy the property, invest about $50,000 in renovations, then re-list it for $549,000. However, someone eventually jumped at the $475,000 buy it now price, which included about $25,000 in additional fees (More on that later). The investor then made minor renovations and sold the property for around $570,000, a modest gain.
Is Hubzu Legitimate?
Yes, I have heard of many investors buying homes on Hubzu.
Like some, I tried to bypass Hubzu by contacting the owner of record of the apartment. Although the deed made it pretty clear that The Bank of New York Mellon owned the property, they denied that. I believe Ocwen mortgages owned it, but it was hard to tell. See the email below:
Consequently, there was no easy way to sneak around Hubzu and buy the property off market.
What Are Hubzu’s Fees? What Is the Sale Process Like?
Hubzu has their own Purchase and Sale Agreement. There’s no putting in extra language that will benefit you, or if you are an agent, your buyer. Most homes (not all) have a 5% buyer’s premium too. That means the person who bought the apartment I mentioned earlier had to pay an additional 5%. Therefore, their purchase price was probably a bit over $500,000 including attorney’s fees.
As with any auction site, be careful of automatic bidders. While I have not heard about this being an issue on Hubzu, you should always be very careful about bidding on a property listed online. If your offer is accepted, I’ve heard the sales process is often marred with delays.
Does Hubzu Have Any Customer Service?
Hubzu’s customer service is laughable. The good news is that as a savvy investor, you can use that to your advantage. Many people will simply give up on Hubzu because their platform is tricky to use. As the old saying goes, good things never come easy.
On MLS, I was given a lockbox code to access the property. Unfortunately, the code provided was wrong, so I was left waiting in the rain. Eventually, I was able to get in touch with the right person, and scheduled a showing.
Interestingly enough, they did not send a real estate agent to do it. Rather the maintenance man who winterized the apartment drove down from New Hampshire to show it to us, a long distance. That sounds pretty inefficient and a big violation of Massachusetts State Law (Having an unlicensed person show a property), but it was fine by me. After all, since the maintenance man told us he rarely came down to show it, that meant most parties were bidding sight unseen.
The bottom line is clear: Don’t rely on Hubzu to do you any favors. However, since they make it so hard to even see the property, many interested parties will bail long before making a bid.
My Take on Home Foreclosures, Auctions, etc.
Hubzu, Auction.com, Xome.com and others all claim to be the place to find foreclosed properties. Of course, many of the homes on these websites are in rough shape, and a lot are in tough areas. I would presume that quite a few of the homes would not sell with a conventional real estate agent.
It’s hard to figure out what the true owners of these homes, likely banks and mortgage companies, are thinking by using Hubzu. My presumption is that it is easier to outsource all of their listings to Hubzu, than to field calls and review various contracts with people in every state that they are located. Hence, this is probably why Hubzu charges a rather large buyer’s premium, something not normally part of a transaction in my real estate market. I would wager that some of this premium is given in a kickback to the bank or mortgage company.
Where do I stand? I don’t check Hubzu regularly, and I have unsubscribed from their constant emails. In my opinion, Hubzu simply keeps the homes on the market too long for anyone to sneak in and get a good deal, which is probably the entire point of the platform. That all being said, if a new property comes onto Hubzu near me, I will certainly consider making a bid if the price is right. Crazier things have happened!