Home inspection before putting in a bid on HUD home?

5 Replies

Hi All, 

I have a property in mind that I feel is a good candidate for a flip. The house is a foreclosure in my area and needs quite a bit of work, which is exactly what I am looking for, but I am not sure how extensive the damage is to the plumbing and electrical systems. I will be buying the property in my LLC name and as such do not qualify for the owner/occupant status. As such it looks like once an offer is accepted there is no refund of any earnest money deposits if it turns out there is something structural I didn't account for in my estimate rehab costs. Would it be a good idea to pay $300 for a home inspection prior to submitting the offer as opposed to submitting the offer only to later find something seriously wrong and risk losing the $700 EMD.

I just can't seem to justify in my own mind paying a home inspector to inspect a house I do not have under contract, but as this is hopefully going to be my first flip I don't want to take a punch on the chin either. 

Any help or insights would be really appreciated. 

you will not be able to turn on the utilities before placing a bid..  Have you agent check the PCR to verify if it will even be possible once a bid is accepted 

The EM deposit will be $500 is the bid is less than $50000 or $1000 if it is over

If the property report from HUD verifies any broken pipes they will not allow you to turn the water on for the inspection.

The property report said the pipes passed a pressure test, but it also said there was damage to the electric system, but the meter is red tagged by the utility company. So i dont know if there is actual damage to the wiring or if it is just that the electric is turned off , but the service needs to be upgraded from the current 60 amps anyway. I just would rather not have to rewire the whole house, but i have a feeling i wont be so lucky. 

Im just really trying to not get crushed on my first attempt.

@John Byrne , how long has it been on the market? If there is no interest, you may be able to get it for a steal.

Run your numbers based on everything being bad, and go from there. 

@John Byrne

Hey John: What you are saying about the inspection is very true. You don't want to spend the money unless you know you got the deal. On the other hand a good home inspection can be valuable specially for new and seasoned investors. For seasoned investors it not that they don't know what to look for but do they take the time. I know in a hurry and euphoria of finding a home run deal I have missed silly stuff that I should have never missed if I have paying just a bit of attention.

An easy way to fix this is use a simple checklist as a reminder. It help to follow a checklist even if you are experienced investor. 

As far as HUD is concerned. At the risk of coming across as a bit devious you have to be street smart. Here is what I mean. If you work with a good agent that really knows their way around HUD deals there are a few loop holes of getting out of the deal even after you tender earnest money.

Talk to a few people it not that difficult to figure them out. You earnest money will be 100% safe if you learn some of trick of the trade. 


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