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Foreclosure in 73118 : Real Estate Advice

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Activity 1
Fri Feb 24, 2012
Bob Willett answered:
HUD REO contracts are absolutely not buyer friendly – but then no REO contract I’ve ever seen is. The way I read the contract, the only way you as the purchaser can absolutely receive your deposit back is if the property is damaged AFTER the contract is signed but BEFORE you close. Under Section E of the Conditions of Sale when referring to damages incurred after the date of the contract where FHA financing is NOT used it states: “Seller will not repair damages but may, at the sellers sole discretion, reduce the sale price. Purchaser has the option to cancel the contract and receive full refund of earnest money deposit.”

The interesting thing is if you read Section B, it says “Purchaser acknowledges responsibility for taking such action as it believes necessary to satisfy itself that the property is in a condition acceptable to it … and agrees to accept the property in the condition existing as of the date of this contract.” But then the very next line says that “It is important to have a home inspection performed on the property in order to identify any possible defects.” So… you sign a contract that says you are buying it in its current condition, but then it says to have a home inspection. However, if you find any problems in your inspection, your only choice is to walk away and let them keep your deposit? Did I mention that this is not a buyer friendly contract?

Of course the real question is how strictly does HUD adhere to this contract? I would be surprised if HUD keeps every deposit where a home inspection turned-up problems and the buyer didn’t want to buy. I know I’ve had buyers back out and I’m pretty sure HUD never retained any their deposits. I wouldn’t be surprised if they did for investors though. I would be really interested in finding out what the outcome is in this case, and if anyone else has come across similar situations please post it.
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