Foreclosure in 73118>Question Details

CW, Home Buyer in 73131

Is there a route of appeal for an investor when HUD denies you the return of earnest $$? I feel I was mislead.

Asked by CW, 73131 Fri Feb 24, 2012

Made offer on HUD home partially due to the fact that the house was FHA-ready and described in glowing terms. ( I was not going to go FHA - would pay cash) Upon inspection found that the roof was far from up to FHA lending requirements, among other things. Got cold feet and cancelled. Now I find that, in addition to the roof, there is $36 - $46K of lead paint remediation needed. HUD had a full report on this condition before I bid but never mentioned it . I feel that I was mislead - the offer would NEVER have been made had I known the facts. Any advice on this? I am not a big investor, FYI, so $1000 bucks is $1000 bucks.

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Why are they keeping the money, did they tell you? If you had an inspection period and canceled in time it seems they should refund the money. A letter from an attorney might be next.
1 vote Thank Flag Link Fri Feb 24, 2012
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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1 vote Thank Flag Link Fri Feb 24, 2012
One other tip: If you can't get that easily resolved, call your Congressman. Get pressure applied that way; it'll help wake up the HUD bureaucrats.

Good luck.
1 vote Thank Flag Link Fri Feb 24, 2012
Don Tepper, Real Estate Pro in Burke, VA
Not clear on a couple of points, you are an investor and couldn’t tell the house needed work? Did you make an offer without seeing the home?
1 vote Thank Flag Link Fri Feb 24, 2012
I would talk to a real estate attorney about this.
1 vote Thank Flag Link Fri Feb 24, 2012
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