HUD Purchase - Changing from Conventional to Cash

[Harry Metzinger]

Hi BP, I have a HUD property under contract. I planned to buy this property w/ a conventional mortgage and stated as much in my contract. It is in better shape than most HUD homes I've seen, so pardon my belief that this property could be purchased w/ a conventional mortgage. HUD's field service manager informed me that they will not permit water to be turned on for an inspection and appraisal. Of course I told my lender about this two weeks ago, but now finally this week, my lender said they cannot lend on the property w/out the water turned on.

HUD requires cash transactions to close within 30 days and financed transactions to close within 45 days. My one question is, in your experience, if you have had to change your financing from conventional to cash, does HUD still allow you to close w/in 45 days? If not, do you have any suggestions for any other ways around the 30 day cash requirement?

[Greg H.]

No they do not change the closing period so you will get the 45 days. You used to have to get a contract change form to the asset manager along with proof of funds but in the last couple of years the have not been requiring that. Just schedule the closing within the deadline 

[Harry Metzinger]

Good to know, thanks @Greg H. I called HUD's asset manager and that's what they said...but that seemed like a customer-friendly approach, and HUD isn't the most customer-friendly, so I had to confirm what I was told.

[Harry Metzinger]

@Greg H. as a follow up question, have you had any experience or success w/ getting water turned on to a property where HUD's initial stance was water may not be turned on? Perhaps could I pay additional $ to HUD to agree to turn on the water...or is there another (legal) way to go about it?

[Greg H.]

Originally posted by @Harry Metzinger:

@Greg H. as a follow up question, have you had any experience or success w/ getting water turned on to a property where HUD's initial stance was water may not be turned on? Perhaps could I pay additional $ to HUD to agree to turn on the water...or is there another (legal) way to go about it?

You are not going to be able to turn on the water as it failed the initial pressure test by the Field Service Manager for HUD. There is no work around with this other than doing your own pressure test to isolate the issue. However that will not help you with your lender. This is a major obstacle in closing a HUD with financing but you might check around with other lenders or local banks

[Harry Metzinger]

Thanks @Greg H. I have a pressure test scheduled for next week, so hopefully we get to the root of the issue.

[Salley Smith]

I had the same problem and couldn't find any lenders that would do that. I had to do a rehab loan since cash was not a possibilty. The days go buy quickly with a HUD home, hopefully your agent has done sales like that before. I would think a week out for a pressure test is a long time. I was going to have the contractors come during the pressure test so they could give me estimates right then (since I was doing a rehab loan). I have no experience with cash sales, so you are probably fine, but I know my HUD with a water leak and a rehab loan took over two months to close. Fourtunatly, since I was an owner occupant, they waived the expensive fees.