HUD property I'm purchasing has been Vandalized!

HUD, VA, and Tax Sales 19 Replies

Hi all, Deano from Cincinnati here. I'm in the process of buying our first HUD home, signed the papers and paid a $500 deposit.

THEN the back door was kicked in and all the copper stolen. HUD did not secure the property for three days and who knows what else was damaged.

I've asked for my earnest money BACK and told them that I would like to place a new bid due to the well as some serious structural damage which my engineer uncovered.

They've refused; consider me in default of contract and are putting it back on the market next week. What should I do?

I'm new at this...and was only trying to save a great old house and our neighborhood. Deano

Your experience with this is the same as mine. I had one under contract that got storm damage. They would not fix it or refund my $500 EMD, so I closed as the damage wasn't substantial.

You should walk and lose the $500 or close. If you walk, you might buy it in the next round, perhaps for thousands less.

[email protected] | 214‑929‑6545

Thanks Jon....that's what I'm planning to do. Such bureaucracy...why can't I just call and offer $1000 less? Now, it will take a week to get it back on the market, another week for me to make my offer and several days after that for them to accept it...hopefully it will be accepted, there has not been very much interest.

Anyone else bid on it before? How close to your bid? Your agent should be able to get you this info. If no one else was close, I might bid 70-75% of asking. I've gotten a few in that range. Also they should price it cheaper with the new damages.

[email protected] | 214‑929‑6545

This is my understanding of HUD, too. If they accept your offer, the EM is theirs. You have to do inspections before the offer, not after. If you don't close, you will lose this earnest money.

If they put it back on the market, you'll have to make another offer with new earnest money.

Jon Holdman, Flying Phoenix LLC

Make sure the listing agent has all the information about the structural damage, in writting, from your engineer. Make sure he includes something about the copper, as well. If the Realtor has reliable third party information on the property and it's defects, he/she are required to disclose to other interested parties. It may keep some from bidding, or others from over-bidding on the property. Then make sure your next offer is discounted by $500! Like Jon said, your inspection needs to be before the offer, but, don't let someone else over-bid (like you did the first time) if you still want the property.

Yes, thanks guys. I originally offered 48,000; there was one other, significantly lower, offer. I'm planning on rebidding more in the 30,000 range. We are planning on turning the house into our primary residence, after renovations, in a year or so. Our neighborhood is one of Cincinnati's early suburbs...we are taking the risk that the area could severely "tank" but these houses are beautiful. My realtor is very responsive but this is her first HUD home also and I guess we're learning the hard way. I hope the government doesn't run healthcare like this!

If you are bidding as an owner occupant (and you should be), your bid will be given preference over investor bids. As an investor I've lost out to OOs who bid $4K less than me.

Also, don't be too upset if you don't get this one. Better deals always come along if you keep looking and learning.

[email protected] | 214‑929‑6545

Thanks guys, here's an update; HUD kept our earnest money despite the damage to the property and put the house back on the market for the same price ($55,000). We've rebid $35,000 and that's as high as I'm going. If I lose this bid, would it be worth taking HUD to Small Claims Court? Deano

I don't think so. No doubt you signed a stack of papers along with the offering and one of those will protect them from any judgment. Around here, the lowest they will accept is 87% of their current listing price.

Jon Holdman, Flying Phoenix LLC

[b]Well guys, after almost three months of haggling, I finally have a signed contract on the property that was vandalized...$35,000 down from $55,000...and hope to close the week after Christmas. It's a great house and after working on it all Winter and Spring, we hope to move into it ourselves, with new doors and a new kitchen and laundry room...and of course, new plumbing. I appreciate all of the advice...the big problem now is what to do with the old house which has been in my wife's family for 70 years (she wants to keep it...sigh).

Deano in Cincy[/img]

I realize this is an old thread (though thanks for the update Deano and congrats!), but wanted to make a suggestion...

While I've never bought a HUD property and haven't read the HUD addenda, in a typical contract and standard REO addenda, a buyer has the right to back out (getting their EM back) or renegotiate if the property can not be delivered at closing in substantially the same condition it was in when it was put under binding contract.

In this case, it's easy to make a case that the property is not in substantially the same condition, and unless the HUD addenda address it specifically, I would think that you should be able to fight and get your EM back.

I also can't speak to the contracts and precedents in your state, but my state tends to be VERY buyer-friendly, and if a buyer wants his EM back for any reason, he can usually figure out a way to get it, even if the contract doesn't specifically support him (in others words, the brokers will generally side for the buyer, and it would cost a lot of money to fight it in court).

As an example, I had a property under contract with Fannie Mae for 8 months earlier this year. They just couldn't get clear title on it, but since it was a great deal (there were 19 bids the first day it went on the market), I kept signing the contract extensions waiting for it to go through. About two days before we finally were to get to closing, the house was vandalized. I asked Fannie Mae for a $3K credit to cover the damage (with my agent letting them know that we felt it was within our rights to back out if we so chose), and they happily gave it to me.

Just a thought if it happens again...

Medium lishproplogoJ Scott, Lish Properties, LLC | [email protected] |

Thanks for the comments, J.

Well, the realtor never sent in the EM check the first, she has sent it this time. If HUD is either nice or stupid at this point, they will accept it for the sale and not require the old $500. Since I've gotten such a good deal on the house, I won't be too upset even if they do...but I won't rule out going to small claim's court either...especially if there is more damage before closing. Thanks much,


Thanks for posting, Deano.

Next HUD I win a bid on I'll try installing a couple of those motion-sensor alarms inside. Might not work but it's cheap insurance until I close and can properly secure the place.

I do a lot of HUD transactions (both as a Realtor and for my personal investing). The one thing I noticed missing is that after the bid has been accepted and you have a ratified contract you can complete the inspection (assuming you requested one). If the property has been damaged when you do inspection you have a right to rescind the contract and request the EMD refund. If you're agent is green, engage the help of his/her broker. It's very common procedure and 9 times out of 10, I see the EMD refunded if the reason for backing out of the contract is truly because the property did not pass inspection.

Thanks Guys; I am having the power turned on tomorrow and am doing the sensor lights thing...before closing. Well, HUD refused to let me back out of the contract, even after the property was damaged...but then it was relisted and they have not asked for a second deposit or EM. So we'll see. Deano

Mark Y, when you do a HUD transaction as a qualified HUD broker/realtor, how do the agent commissions work? Arent they typically 5%-wow that be great if it was paid to you at closing on your own HUD deals.

Johnny, yes the commission on HUD deals is 5%, minimum of $500. For the deals I've been buying, I've been waiving the commissions since the net to HUD is greater. HUD simply looks at what they're netting from the offer.

Hi, the original issue is clearly one where the contract can be voided, or modified. The question is- who has care, custody and control of the property at the time. If any seller, including the federal government, has the obligation to keep the property in good condition to closing, if they fail, you have recourse. They and you may put it off to the listing agent who may have that responsibility and this is an insured event. Look to the contract, it should have provisions for the buyer to accept loss proceeds or avoid the contract and be entitled to the EM. It has nothing to do with inspections or due diligence if you can show the damage occured after the fact. Since damage is so common with foreclosures the fact that you can show occured after your inspection and on their watch, you can point that out. Also, alot of comments about small claims court. In my state and probably many, small claims may be used for LL disputess, but default in a real estate purchase contract is a civil matter that is not addressed in small claims court, check in your state. Bill

Medium logoscopiccroppedblue2Bill Gulley, General Real Estate Academy |

If any of you guys would like to read my blog about the HUD home which we have purchased, here is the link: Thanks!!