New to HUD real estate deal

Buying & Selling Real Estate
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New to HUD real estate deal

Gracw W.
La Crosse, WI · Member since 2015 · 8 posts · 0 votes

Hello, my name is adette. I came from an asian country and moved here in america 5 years ago and now a naturalized US citizen.I am married,26 years old,female, no kids and have owned two houses,my home and the other one is a rental.I love being in a real estate business. Now i have a big question about HUD real estate, i am not really an experience person on buying a hud home. We found this house that we like and We have won the bid on purchasing this one property for rental and will be using a conventional loan. how do you proceed on getting a loan when the bank appraisal need to have all the utilities in the house on, and the HUD people refused to turn on the water utility?just crazy. Any ideas? I am new to this, I have not purchased any kind of hud homes before.Is it possible that we sneak in to have the water meter hook up ask the city to do it? im not really sure about it. I dont want to get fine either from doing something that would have bad consequences. We have a real estate agent working with us but she is not that helpful either.My husband and I are confuse we dont know what to do next. pls. help.thanks for your feedback

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Greg H.Pro Member
Moderator
Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
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@Gracw W.

I saw that you have posted this in a couple of different area but I will address it here

First off, attempting to get a conventional loan on a HUD home is very difficult for the reason that you are encountering. The appraiser is going to require that all the utilities be turn on for the appraisal which you have now discovered. HUD guidelines only provide that the utilities can be turned on at YOUR expense during the first 15 days after contract acceptance and only for a 72 hour period. I would suggest that your agent beg the Field Service Manager to allow an exception to get them turned on at this point. Your agent has received the "Accepted Offer" email from the Asset Manager detailing who to contact.

Here are a few tips for anyone trying to buy a HUD home especially with a loan :

-Get an experienced agent who has worked with HUD. HUD transactions are different than any other and frankly no matter how long he/she has been an agent....you don't know what you don't know

-Select a mortgage company that is familiar with the HUD process as the timing of the appraisal and how the loan must be funded is different from any other transactions

-Understand that you the buyer be all the costs of turning on utilities and any damage that could result from doing so. Many municipalities will require any past due bills from the property to be paid before turning on utilities. I have had clients pay upwards of $1500 plus the cost of inspection/appraisal to get things done. In some cases, HUD knows of a potential leak and therefore utilities cannot be turned on therefore no appraisal is possible. The information would be contained in the PCR(property condition report) or Property Condition Summary/Disclosure Add depending on the Asset Manager

- You only have 15 days from contract acceptance to get things done and the utilities can only be on for 72 hours

Feel free to contact me directly if I can help

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  • Matt Slakey
    Investor · Salem, OR · Member since 2015 · 76 posts · 28 votes
    11y

    If you are concerned about the plumbing or electrical systems having problems, I would ask HUD if they have had an inspection done. If they have not, I would ask if the plumbing and electrical have been tested and do they have a report from the test. If they say they haven't had any inspections done, ask how your inspector will be able to test the plumbing without water and electrical without any power going to the property. Your agent should be educating you more on this. If there is a language barrier, it may be beneficial to have someone who speaks both languages fluently. (Or use google translate)

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  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    11y

    @Gracw W.

    I saw that you have posted this in a couple of different area but I will address it here

    First off, attempting to get a conventional loan on a HUD home is very difficult for the reason that you are encountering. The appraiser is going to require that all the utilities be turn on for the appraisal which you have now discovered. HUD guidelines only provide that the utilities can be turned on at YOUR expense during the first 15 days after contract acceptance and only for a 72 hour period. I would suggest that your agent beg the Field Service Manager to allow an exception to get them turned on at this point. Your agent has received the "Accepted Offer" email from the Asset Manager detailing who to contact.

    Here are a few tips for anyone trying to buy a HUD home especially with a loan :

    -Get an experienced agent who has worked with HUD. HUD transactions are different than any other and frankly no matter how long he/she has been an agent....you don't know what you don't know

    -Select a mortgage company that is familiar with the HUD process as the timing of the appraisal and how the loan must be funded is different from any other transactions

    -Understand that you the buyer be all the costs of turning on utilities and any damage that could result from doing so. Many municipalities will require any past due bills from the property to be paid before turning on utilities. I have had clients pay upwards of $1500 plus the cost of inspection/appraisal to get things done. In some cases, HUD knows of a potential leak and therefore utilities cannot be turned on therefore no appraisal is possible. The information would be contained in the PCR(property condition report) or Property Condition Summary/Disclosure Add depending on the Asset Manager

    - You only have 15 days from contract acceptance to get things done and the utilities can only be on for 72 hours

    Feel free to contact me directly if I can help

    1Reply
  • Michael Olesky
    Investor · Indialantic, FL · Member since 2013 · 111 posts · 76 votes
    11y

    @Gracw W.  I'll second what @Greg H. had to say and add that utilities can be tested without them being turned on.  A plumber can pressurize the system and tell you if it is holding pressure or loosing pressure due to a leak.  Electrical would be more difficult but same concept, circuits can be tested without power being on. 

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  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
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    @Michael Olesky

    Yes you can do an inspection the property using these methods.  However, the OP is having an issue with an Appraiser who is not going to except these methods and needs to see them operational

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  • Michael Olesky
    Investor · Indialantic, FL · Member since 2013 · 111 posts · 76 votes
    11y

    My bad, coffee is still kicking in!

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  • Gracw W.
    OP
    La Crosse, WI · Member since 2015 · 8 posts · 0 votes
    11y

    Thank you for all the feedbacks guys.it is very helpful to have some of these insights. so really the hud told us that they can turn on all the electrical but not the water though. then what? how can an appraiser do a complete report when the water is not on and when the bank requires it?i dont know whats next?

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  • Gracw W.
    OP
    La Crosse, WI · Member since 2015 · 8 posts · 0 votes
    11y

    @Greg H.thanks for your feedback in regards to my hud question. we are in the process of purchasing this hud house now,but we are kinda of stuck on the water issue.is there other thing we can do?my husband would like to TALK to an experience hud buyer/broker/agent or something that could help us get through this appraisal that the bank needs in order for us to make the purchase.thank you

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  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    11y

    @Gracw W.

    Grace- How much time do you have to get it closed ?  Since I don't have all the details I can only generalize but ....

    If I had the ability to pay cash...I would close for cash and rehab the property and then pull out the cash

    If I couldn't pay cash I would....Ask my lender to find a portfolio lender that would accept the appraisal without utility check and then refi later if need be

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  • Michael Noto
    Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
    11y

    I was just about to respond to this thread but then read @Greg H.'s detailed response. He put everything perfectly in regards to buying a HUD home.

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  • Mark Nolan
    Professional · Carlsbad, CA · Member since 2012 · 12k+ posts · 1k+ votes
    11y

    Gracw Wachuta

    Welcome to Bigger Pockets. BP is full of resources. You will find resources here from blogs to pod casts and forums. You can also send messages to members. This is one of my favorite features of Bigger Pockets especially for asking specific questions.

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  • Gracw W.
    OP
    La Crosse, WI · Member since 2015 · 8 posts · 0 votes
    11y

    @Greg H. 

    Thanks for all your inputs! We just closed our deal a couple days ago! We actually made it and acquired the hud home without the water turn on. My husband search around and talked to several banks(even though we got approved with the first bank,but had an issue with utilities need to be turn on for appraisal) and we found a small local bank who did the financing through their in house loans portfolio. We are so grateful and thank you for all the/your help and ideas!!! 

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