HUD delays closing date. What can I do?

Question

I recently made an offer (asking price) on a HUD forclosure and the offer was accepted. Closing date was March 30 but HUD said they were not ready to close (something about a "Deed of Trust"). We haven't heard from them since. Our  realtor's closing attorney bothers them weekly but still no new closing date. This will soon start costing me money and headaches as I will have to move out of my current apartment. Do I have any recourse? Any advice is appreciated.

Steve Babiak · Answer

It could be that HUD is waiting for the granting of the deed to them to be recorded.  They can't give you a deed until they've first gotten theirs via the foreclosure process.  In my area in the state of PA, it can take anywhere from 6 weeks to 3 months for a sheriff's deed to be recorded after the date of a sheriff sale auction.  Look into the time frame in your state, since it is likely different.

Or, you have a situation as Don described, where the foreclosure was flawed.

Don Konipol · Answer

You haven't really provided enough information for us to make an educated guess, but the mention of a deed of trust would lead me to the possibility that HUD has reason to believe that there might be a defect in the foreclosure procedure that let to HUD  obtaining ownership of the property.  Many loan servicers apparently followed an expedient model of real estate transaction, and have been successfully challenged in court by borowers.  If HUD questions their right to title, then they will not sell the property until their legal consul advises them that any title issues have been resolved.

Jon Holdman · Answer

You seem to want to blame HUD for their inability to close the deal.  While they (and all the other sellers of properties like this) do move slowly, I don't think its because someone is on vacation in Vegas.  While its possible the person handling your file is on vacation and the file is stuck waiting for their return, the bigger problem is these agencies and banks are overwhelmed with files.  This house is personal and matters to you.  For the person on the other end, its just one of dozens or hundreds of houses they are dealing with.

Had you asked earlier, I would have told you to never commit to moving out of your current housing based on a closing date in an offer.  Until the deal closes, it can always be delayed.  That's true even on a normal closing, and is especially true for these bank-owned deals.

The seller is required to provide you a clear and marketable title.  You really, really want that.  They have discovered a $98K lien.  Maybe we're talking about a million dollar property here and this isn't too big a deal.  If this is a $100 or $200K property, this is a HUGE deal.  Are you willing to pay that $98K?  Someone is going to have to, or the holder of that $98K lien can foreclose and take the property.  You certainly don't want to move in and then have that happen.  And, yes, that would be their right if the lien wasn't resolved.  Messy title situations like this are all too common in these bank-owned properties.  Its very common that the mortgage wasn't the only bill that wasn't getting paid.

Not sure what you spend $1000 on, but realtor fees are usually only paid if the deal closes.  Appraisal and inspection fees are often paid out of pocket before the deal closes.  And, yes, I've spent money on those things only to have the deal fall apart.   It is just part of the house-buying process.

If you want a surer deal, make offers ONLY on houses that are being sold by their actual owners and not bank-owned (including HUD) or short sales.  Even then, there can be delays but at least there are people on the other side of the deal that are focused on that one property.

You should be grateful to get your EM back when this deal falls apart.  Around here, HUD keeps the EM no matter what happens.  I suppose you might get it back in a case like this, but it would be a fight.  With a $98K lien on the table, I don't see this getting resolved to your liking.  At the very least, you should make plans to find somewhere to live.

David Ford · Answer

My closing attorney has found that the issue involves an unresolved "Deed of Trust" for $98K involving the Charlotte Housing Authority. He said that HUD could cancel the sale at their discretion despite our signed contract, and that all I would be entitled to is reimbursement of my earnest money.

As a home buyer I am upset as it has already cost me close to $1K in fees for my realtor and mortgage loan application process. Because we have not been able to close I will have to move all my belongings into storage over the next 2 weeeks and find a new apartment to live in until HUD can close on the house.

As a taxpayer I am pissed that HUD would be willing to let this and other houses sit idle and deteriorate at taxpayer expense, despite having interested and capable buyers. The previous owner could not afford the mortgage and abandoned the house. Under the "you can't get blood out of a turnip" principle it is highly unlikely that the Deed of Trust issue will be resolved to anyone's satisfaction.

Question: In the worste case scenario that HUD chooses to renig on our contract, would i have any options such as right of first refusal should they choose to sell the house at a later date? Could I refuse to cancel the contract and just wait them out? Does anyne know of any way put pressure on HUD to get their stuff together?

After watching the GAO fiasco I have this mental image of my paperwork sitting on some beauerocrat's desk ready to go while he/she is sitting in a hot tub in Vegas!

Thanks for letting me vent.

Mike H. · Answer

You might want to check with the title company and/or the asset management company to see what exactly the issue is. Are they waiting on a payoff of a grass cutting lien? Water bill from the village.

I've seen it happen quite a few times. To be honest, sometimes I count on it as I'm waiting on yet another lengthy refi to go through to free up my purchase money. :-)

But when I have my purchase money ready to go, I typically have my realtor go track down the liens. Its amazing that HUD title company takes weeks and months to get a water or lawn cutting bill from a village when my realtor can get one in less than an hour.

But you need to track down what the issue is first and then, hopefully, its something as easy as an outstanding bill that needs to be retrieved and paid by the asset manager.

Unfortunately, they won't just let you pay it yourself or you could really speed things up.

Ann Bellamy · Answer

This has become standard operating proceedure these days, with so many title defects.  I joke that 6 of out 5 closings are delayed by title issues.

Jon Holdman and Andy  Chu are correct, you have to wait it out.  Although you don't have anything to lose by trying Lynn M.'s suggestion.

Andy Chu · Answer

HUD is an amazing entity. We have one property under contract since November 2011. They still refuse to close because of expiring hoa demands, renegotiation with the lien holder and in generally can't figure out what is going on.

You don't have any recourse against them. The only thing you can do is sign the amendment to extend and hopefully they can figure out what to do.

Jon Holdman · Answer

This is just par for the course of buying these properties. Sounds like there is some outstanding lien that need to get cleared before they can sell.  You might be able to get out of the contract if that's what you want. But if you want to complete the purchase you'll just need to be patient.

Lynn McGeein · Answer

David, we had a foreclosure closing delayed almost a month back in 2009 due to a deed of trust issue.   After speaking to my closing attorney, we found out it was held up in some recording paperwork  problem from a company in another city.  I got their number, called the person handling it directly, explained my loan was about to expire, and how important it was to me financially that this be done, and it turned out they were just swamped, she put it at the top of her pile, and we closed the next week.  Not sure if I was just lucky, but your title company or closing attorney may be able to find out exactly where the holdup is, and a few phone calls may help.  At least you may find out if it is just a recording delay or an actual contested foreclosure.

HUD delays closing date. What can I do?

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