HUD earnest money, am i screwed?

Question

Hey guys,

So recently I had the winning bid on a hud home, the home was a little out of my budget but I could afford to buy it, I would have just needed to make a loan for the rehab materials using the property as collateral. I was told by many including my estate agent that i'd have no problem doing this, so I went ahead and bid on the home thinking it would be no problem.

After I won the bid i've been trying everywhere to lend 15k against this 60k house I have under contract to buy, but nobody i've tried will lend on it. The one HML I tried said they won't lend less than 60k which would eat 50% of our profits.

Long story short if I cannot line some kind of financing up before I close I would like to know if there is some way I can pull out of the deal without losing my earnest money?

I still want to buy the home, but it just makes no sense to follow through with the purchase expecting things to change if i can't get financing lined up now.

Any help is greatly appreciated

Danny Day · Answer

I know HUD requires you to have no option periods. There is a form for refund of earnest money. I don't think you will lose it all.. maybe a percetnage. I believe 50% at most. Have your agent dig deeper. Post update once you find out.

Call Pemco (http://www.hudpemco.com/) and they will explain more.

Good luck

Danny

Jonathan Godden · Answer

I was under the impression that 203k loans were strictly not for investors?

I'm pretty sure it was uninsurable =(

Thanks for the replies guys

Gilbert Ryan · Answer

Please elaborate as the question asked is not completely clear. If i understand your situation correctly, a 203k loan might have been your best recourse. Yes, you're required to occupy the home after renovation, so one week occupancy will do.

If it is a HUD home, you can still switch it to a 203k loan, unless the property is located in a no loan zone.

Brian Levredge · Answer

The answer really depends on how your offer was written and whether it was an insured sale or not.  If it is not an insured sale, you lose all the deposit.  The other out is the inspection contingency, which has to be either structural or a code violation, and HUD has to concur.  If you are passed that point your EMD is gone.  If it's a good enough deal can you partner up with someone for the balance of what you need?

J Scott · Answer

If you bid on the property as an investor (as opposed to an owner occupant), unfortunately, you will lose your EM if you back out of the deal.  If you bid on the property as an OO, you may have some recourse.