Inspection contingency on HUD property?

Question

Hello BP friends,

I was wondering if anyone has had success when offering all cash on HUD properties with inspection contingencies. I have a feeling if you do this, your offer will be put at the bottom of the stack. Any personal experiences (success or no success) with this?

Thanks!

Jon Holdman · Answer

I'm not sure this is the same everywhere, but around here it has no effect.  That is, if they accept your offer, you cannot get your earnest money back.  Period.  You can do an inspection, but you can't back out if you find something you don't like and get your EM back.

Justin S. · Answer

I have not seen anything on termites.  If you go to the addendum section of the property you are looking, the Property Condition Report (PCR) is the basic inspection.

Bienes Raices · Answer

I don't know about termites, but the house I bid on had aluminum wiring, which unfortunately I didn't find out about until too late, and ended up backing out. HUD didn't mention that at all in the report (now I always check behind the panel in a house before I make an offer, HUD or not). Technically it isn't a defect, perhaps, but it can be very impossible to get decent insurance with that type of wiring in my area. So I wouldn't rely on those inspection reports alone.

Jonathan Sher · Answer

Have you ever seen the report state anything about termites?

Justin S. · Answer

HUD does a very basic inspection for you which states which items needs fixing, etc.  It is disclosed for you on the hudhomestore.com  For example, if the AC does not work they will state that in their property inspection sheet.  If the property is too ugly, I think they just open it up to investors and state to purchase at your own risk.

HUD either has a $500 or $1000 EM depending on the purchase price.  NON-refundable always.

Jon Holdman · Answer

You never have to close on a property.  As long as the contract says "liquidated damages" as the remedy, the seller just keeps your earnest money.  The difference between a HUD and other properties is that there are effectively no contingencies.  If you can an accepted contract you can close or not, but you will never see your EM again.

Bienes Raices · Answer

Right--from what I've heard, technically there is no inspection period for investors, although you can back out and forfeit your $500 if you don't want to (or can't) close.

Jonathan Sher · Answer

Thanks for the response. So if you do get an inspection and you want out, you can get out, but your earnest money would still be gone correct?

Bienes Raices · Answer

I made one cash offer on a HUD property. I was told that HUD never offers an inspection period to investors and that the EMD in non-refundable to investors. Also they told me that even if I wanted to have the utilities turned on to have an inspection for my own peace of mind (even though my $500 deposit would still be non-refundable), I would have to pay for a liability policy in case a flood or something else occurred when the utilities were turned back on! For these reasons I don't particularly want to deal with them again. Caveat emptor.

Inspection contingency on HUD property?

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