Potential Conflict of Interest

Although most foreclosure specialists will work to find you a good deal, potential conflict of interest does arise in the sale of HUD homes. First, if you do not submit a winning bid, your sales agent does not earn a commission. An unethical agent could pressure you to raise your bid even if the value of the property doesn't justify a higher price. Second, sales agents may submit bids from competing buyers who are bidding on the same property. If you bid $80,000, an agent could tell another more favored buyer to bid $80,100. You lose. Third, HUD typically pays brokers who submit a winning bid a 5 percent sales commission plus, on occasion, a $500 (or more) selling bonus for designated properties. Again, this reward may encourage the agent to push you to bid high.

Although you should not unjustly insinuate that your agent is likely to engage in underhanded sales tactics, it is smart to ask your agent how he handles these potential conflicts.

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