Have extra wiggle room when you buy from HUD
Monday, February 11
HUD deals seem to be the rage these days, especially with owner occupants. The pricing in many markets including ours for HUD homes has been beyond inexpensive in owner occupant markets where a bidding war is the norm. Investors homes are no different albeit there is less of those floating around these days.
In the midst of the bidding wars, how can you have extra wiggle room when you buy from HUD?
We recently came across a house where we were going to purchase from HUD. The week before the inspection we had rain, lots and lots of it. The atypical one week of water for our part of the country. The ground was beyond saturated. As most of us know, seeing houses when it is wet is truly the best time to inspect them. :-) it just so happened that on the final walk through to check the house out, we found a leak in the crawl space. It was to the tune of about 3" standing water filling up an area of approximately 20 sq ft. Not the smallest of puddles.
How did this get missed? We renovate properties regularly. Multiple contractors went to the project and no one caught it. There was no gutter issue. There was no grading issue that would normally get someone's attention. There was no downspout overflowing one particular spot. There wasn't even standing water on the outside of the crawl space anywhere near the spot of the issue on the inside. No leaks to be found anywhere inside. Upon further inspection, it was determined the water had to have come up from the bottom somehow. There was simply no other visible evidence. This was a crawl space where you could walk in so it was an easy spot to verify was good prior.
We brought the matter to HUD's attention in good faith and stated this was a costly fix and could we discuss further knowing full well they would probably say no. And they did which was fine. We don't like losing earnest money but 5k is no small chunk of change to absorb assuming no other issues were linked to this one. What was disappointing was the asset manager stated they would review our evidence to make their determination. What was disappointing was they put the house back on the market at the lower price before telling us their answer! While we won't get into our thoughts on that, suffice it to say that in spite of their actions, we made the right choice.
It is unfortunate that investors are not given the opportunity to state an issue when it was clearly abnormal. Thank goodness owner occupants perhaps have a little more wiggle room when they get this to closing. If I was buying a house and had this come up at the end, I would be displeased to say the least. Reality is it took a ton of rain for days to expose the issue.
So when buying from HUD, triple check what you are getting and don't succumb to the bidding war. It could bite you and it could be costly in the end. Exercise your due diligence indeed!