Irving, TX · Member since 2013 · 17 posts · 0 votes
Internet searching lead to horror stories on this, but everyone's talking about older HUD homes. I've got one under contract half off appraised value of $165k. PCR is clean. Home is built in 2006, new neighborhood, no trees, unoccupied less than 8 months. Why go through the trouble, cost, and risk of dewinterizing, installing meters, turning on utilities, and rewinterizing prior to closing?
SFR Investor · Phoenix, AZ · Member since 2009 · 484 posts · 181 votes
13y
If the deal is that good, would a defect (even a $3k one) make you walk? If the answer is no, an inspection is a waste of time & money that could be better spent on repairs.. and you *will* have repairs, even if your inspector claims the house is perfect. Inspectors cant look inside walls, foretell the future, or hypnotize pretty girls. They walk through and report what they see.. you probably have a father-in-law or a grumpy uncle who would be glad to do the same thing for a pizza, assuming you cant do it yourself.
Investor · Southeast, MI · Member since 2012 · 2k+ posts · 1k+ votes
13y
If you're buying a HUD home as an investor, there is no inspection period once the offer is accepted. They want you to do your inspection prior to making an offer. It's a ridiculous system, but it's the government.
If you're an owner occupant, there is a ten day inspection period, but I've heard of people having a hard time getting their deposit back.
With HUD, you need to proceed with extremem caution.
They also don't provide title insurance. They claim that their titles are "clean". With all of the robo siging, mortgage fraud, and mortgages changing hands multiple times, I would HIGHLY recommend purchasing title insurance.
Investor · SE, MI · Member since 2013 · 1k+ posts · 461 votes
13y
Hi-
I'd be tempted, if I was comfortable with my own ability to inspect the property.
For the most part, I think it's worth the small price for the inspection for my piece of mind. I've been paying $350-$550 depending on square footage and # of units here. We're in the process of purchasing a house and expected to fly right through inspection (house is prime, currently rented, occupant certificate just issued in October) and our inspector found SIX gas leaks around the water heaters and boilers. These items were installed in 2008-2010, so relatively recently. What i'm getting at is even with a newer house like yours there may still be problems like that. Then again, you can buy a gas sniffer for $40-$500 depending on the quality :)
Investor · Dallas, TX · Member since 2009 · 718 posts · 913 votes
13y
I've never bought a HUD home so I'm not sure about inspect periods, but I agree with Rob K about proceeding with caution.
I'm in your area so I guess I have a couple of questions/observations. First, I would definitely run your foundation guy through unless there's absolutely no evidence of foundation movement. Can't hurt and you don't need utilities. Second, I'd probably turn power on and at least check the HVAC. I bought an 05 build and the previous residents had destroyed the internal unit. Never underestimate people's ability to destroy their houses.
How much are you budgeting on repairs and how confident are you in ARV?
Irving, TX · Member since 2013 · 17 posts · 0 votes
13y
This is OO. Need a place for my growing family. I'm budgeting $7k in cosmetics, home value is on low end for the neighborhood. I really believe this was a rare steal. Will consider the advice, thanks!
Rental Property Investor · Huntsville, UT · Member since 2012 · 127 posts · 35 votes
13y
Never rely on the PCR (property condition report) on a HUD home. Unless the utilities are on, the inspection is 100% visual. At a minimum get the utilities on and check the major systems.
SFR Investor · Phoenix, AZ · Member since 2009 · 484 posts · 181 votes
13y
If the deal is that good, would a defect (even a $3k one) make you walk? If the answer is no, an inspection is a waste of time & money that could be better spent on repairs.. and you *will* have repairs, even if your inspector claims the house is perfect. Inspectors cant look inside walls, foretell the future, or hypnotize pretty girls. They walk through and report what they see.. you probably have a father-in-law or a grumpy uncle who would be glad to do the same thing for a pizza, assuming you cant do it yourself.
Real Estate Investor · Philadelphia, PA · Member since 2010 · 283 posts · 81 votes
13y
Even though a house looks good on the outside it can have hidden problems behind the walls. If you are not that expierenced at inpsecting houses it may be worth wild to spend $400 to get things check out.
There could be bad wiring, plumbing that is not vented correctly, mold, water damage, foundation issues or other things that you may have not noticed.
Rental Property Investor · Manteno, IL · Member since 2009 · 2k+ posts · 2k+ votes
13y
It depends on what your risk tolerance is. I'd definitely have a foundation guy in there. But as for hvac, electrical and plumbing, just assume that you're going to have some costs there and call it a day. The fact that the house is so new, I wouldn't be as worried about the electrical and plumbing - provided you can still see it.
If the hvac is all there - a big if - then given how new it is, I would assume no more than 1,500 for repairs there. For electrical, again, given that its so new, $500. And plumbing, I always give myself a grand even if it looks good.
That typically covers about 90% of the HUD deals I've done. And very few of mine have been as new as that deal.
As long as you have that contingency factored in, you should be fine. But the foundation stuff is where I like to have someone look at if something looks a little off - cracks in foundation, or even walls.
Rental Property Investor · Palm Bay, FL · Member since 2009 · 511 posts · 290 votes
13y
I've bought and sold two HUD homes, don't believe the reports, or the appraisals for that matter. Do you own comparables, and if it's OO and you and your family will be living there, get the inspection. If you were an investor going to rehab it, that's a different story, but OO, inspect it.
Involved In Real Estate · Rochester Hills, MI · Member since 2010 · 812 posts · 178 votes
13y
Originally posted by Mark H.:
If the deal is that good, would a defect (even a $3k one) make you walk? If the answer is no, an inspection is a waste of time & money that could be better spent on repairs.. and you *will* have repairs, even if your inspector claims the house is perfect. Inspectors cant look inside walls, foretell the future, or hypnotize pretty girls. They walk through and report what they see.. you probably have a father-in-law or a grumpy uncle who would be glad to do the same thing for a pizza, assuming you cant do it yourself.
Unless you're a seasoned vet, this is terrible advice.
Irving, TX · Member since 2013 · 17 posts · 0 votes
13y
Originally posted by Joe Delia:
Originally posted by Mark H.:
If the deal is that good, would a defect (even a $3k one) make you walk? If the answer is no, an inspection is a waste of time & money that could be better spent on repairs.. and you *will* have repairs, even if your inspector claims the house is perfect. Inspectors cant look inside walls, foretell the future, or hypnotize pretty girls. They walk through and report what they see.. you probably have a father-in-law or a grumpy uncle who would be glad to do the same thing for a pizza, assuming you cant do it yourself.
Unless you're a seasoned vet, this is terrible advice.
Real Estate Investor · Dallas, TX · Member since 2009 · 183 posts · 153 votes
13y
Christian what is your background in real estate? If you are very experienced I wouldn't get an inspection. I never get inspections on houses I buy, however I would consider myself well versed in knowing what is needed to a house. I have purchased a ton of HUD houses over the years, usually they are pretty jacked up.
PM me the address of the house if you want me to do a rough estimate of the comps in the area. Half value seems like a deal of a century if it only needs 7k in work. That is what I am more concerned with from reading your post.
Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
13y
Remember that HUD houses are the "fallout" from (failed) FHA loans; and you know that the FHA loan qualifications are as close to zero down as we have - so those occupants almost always have no extra savings to fall back on as reserves for repairs.