Who is right?

Asked by Am I A Victim Or Just An Idiot?, 77079 Fri Feb 26, 2010

I am three days into a fifteen day option period on a HUD home. It has been the worst nightmare of my life and I just finished being the sole care giver to both my dying parents and had my home flood. I will just happily lose my earnest money despite it's being a huge loss to me and was told by HUD that is all I have to do to. Now my realtor is saying if I don't proceed as though as I am buying the house they will sue me. Is this right. What the hell does option period mean then? It would appear I have no options at all. Seriously should I just give up on owning a home? Is it all just one big scam?

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Robert Regan, , Dallas County, TX
Fri Feb 26, 2010
Am I A Victim,
Unfortunately, the answer to your question cannot reliably be provided with the information you have mentioned It is necessary to first establish some extremely important details about the transaction before anyone can knowledgeably talk about them.
Let me first start by stating that I mention to any buyer interested in a HUD home to expect a 100% loss of their Earnest Money in the event they decide not to close on the home. I do this for 2 reasons:
1. If the buyer shies away after hearing something like that, than in the unlikely event their Earnest Money is deemed non-refundable, I do not want to be the agent that never told them it could happen.
2. Seeing as I have yet to have any buyer back away from purchasing a HUD after giving my brief, "Take it or Leave It – Say goodbye to the Earnest Money if you don’t close” moment of truth type of disclaimer, I can only speak for myself when saying out of the 20 or so HUD homes I sold in 2009, I had 1 investor cancel a contract (they lost 100% of their earnest money - as it clearly stated in the FORFEITURE OF EARNEST MONEY ADDENDUM. I had 3 buyers who bid as Owner Occupants (2 of which cancelled long after the "Contingency Period" and 1 during their Contingency Period; all of which received a 100% refund of their Earnest Money Deposit. The likelihood of an Owner Occupant, financed buyer losing 100% of their Earnest Money because of cancellation of contract is rarely the case let alone HUD deciding to get “sue happy” and wasting time litigating the hundreds of purchasers that decide to cancel a HUD contract each week.
So this brings us to our first detail to iron out . . .
1. Did you purchase as an Investor or Owner Occupant? 2. Are you paying cash or financing? 3. Was the property considered by HUD as Insured/Insured with Escrow or Uninsured?
If you answered Investor, cash, Uninsured, you can practically guarantee that your Earnest money will be forfeited in the event you don’t close (as was the case with my investor scenario above).

Our next set of details however is really detrimental to the facts at hand.
I’m not sure it is clear, at least not to me, the exact reason you want to cancel. Was it due to the unfortunate passing of your parents? If yes, than you do have certain rights. Did you just decide this was not the right time for you? First of all, just as a little insider information, even if this were the case, why would you document it as such? I’m not telling you to fib of course, but I rarely run into a buyer or a REALTOR for that matter that would settle on the reason for not buying a new home being, “Just Because.” However, if it’s all you have to work with, this is another way you practically guarantee that you will be waiving farewell to your Earnest Money.

Another unclear point that makes a WORLD of difference:
Which home flooded? Was it The HUD home that you hadn’t purchased yet that was previously un-flooded or another home altogether?
In the event such an event does happen and is recorded to take place after an bid was accepted, even the supposed “practically guaranteed” group that lose their Earnest Money” now have some recourse if in fact the property sustained such substantial damage. HOWEVER, if you are trying to claim damage or a material defect that is clearly visible (that you can rest assured HUD already listed as existing), then we get into a bit more sticky situation and bring to light the differences of an OPTION PERIOD & a CONTINGENCY PERIOD and nicely flows to our conclusion.
A HUD 15-DAY CONTINGENCY PERIOD IS NOT THE EQUIVALENT TO A TERMINATION OPTION AND IN NO WAY CORRELATED TO THE OPTION PERIOD which usually only apply on TREC promulgated forms an apply to NON-FORECLOSED homes. As stated previously in this post and in the Procedures Manual that explains the specific requirements, disclosures and order of events provided by HUD and required for all agent to read in order to allow them the opportunity to explain, represent and bid on HUD homes for their client’s, even before your bid was placed by your agent, you would have had to complete, agree to & sign all appropriate HUD required Addendums; including FORFEITURE OF EARNEST MONEY ADDENDUM as it was something your Realtor should have in fact provided.
The actual addendum that applies to all HUD sales & Earnest Money can be found at http://www.firstpreston.com/documents/FEMP.pdf
Finally, anyone who might suggest you contact an attorney is unfortunately unaware of how HUD contracts read & work. Any agent not fully versed and in complete understanding of the contracts they have others agree to have absolutely no right or reason to be writing contracts at all.
I hope this help explains your options a bit better.
2 votes
ian cockburn, Agent, New Orleans, LA
Sun Jun 2, 2013
nonsense..tell that Realtor the only person who will get sued will be their broker and themselves....in the meantime they will have to have a serious discussion with your States real estate commission.

HUD is not in the business of suing buyers. Your Realtor is on the border line of being unethical and not representing you. If this person is willing to sell their soul for a dollar, they can't be trusted. Never deal with anyone who starts the "suing" line of guano.
Web Reference:  http://iansellsnola.com
0 votes
Tamika Goree, Agent, Arlingon, TX
Mon Mar 1, 2010
So HUD is stating that's it's OK for you to walk away but your Realtor is stating if you do than HUD will sue you?? In my opinion, based on your posting, your Realtor is using a scare tactic. It seems as if she is trying to "force" you to proceed even though of your circumstances w/ your parents & the flood of the home. She should be looking out for your best interests and I'm not sensing that she is based on what you wrote. I agree with the other Realtors who suggested that you should consult a Real Estate Attorney ASAP!

I apologize that you are going through this and I do wish you the best of luck!

~ Tamika
0 votes
Ronda Allen, Agent, Plano, TX
Sun Feb 28, 2010
You are in a contract, you want out, and you need to know your rights. Get with an attorney, preferably one who specializes in real estate in the state of Texas.
Good luck.
0 votes
James Deskins, Agent, Worthington, OH
Sat Feb 27, 2010
Let's be honest here: HUD is a massive government collective. They don't have the time or the effort to sue you. That is highly unlikey. HUD actually tries to help the public, not harm it. Very few sellers, HUD or otherwise, will go through the effort to sue a buyer especially if they get your earnest money.

Disclaimer: I am NOT an attorney. I suggest you consult one.
0 votes
Dp2, , Virginia
Sat Feb 27, 2010
You probablly should consult with an attorney.

Is it possible that you might be able to go through with the purchase if you were given some extra time to regroup? If so, then you might be able to negotiate with HUD to extend your closing date to give you more time.
0 votes
Mack McCoy, Agent, Seattle, WA
Fri Feb 26, 2010
Maybe, this wasn't the best time to pursue this project.

I do not think they will sue you, and as mentioned below, a visit to a legal-aid office will likely put your mind to rest.

You should give up on owning a home while you are recovering from the serious stresses in your life.

And, no, it is not all just one big scam.
0 votes
Anna M Brocco, Agent, Williston Park, NY
Fri Feb 26, 2010
Why not protect yourself and consult with an attorney specializing in real estate--most professionals do offer a free consultation.
0 votes
Bruce Ericks…, Agent, Dallas, TX
Fri Feb 26, 2010
HUD homes are As-Is sales without Option Periods as I understand it. Now depending on if you are paying cash or using conventional financing .. or you are using FHA financing there are different rules on the earnest money.

And for your agent to tell you to just act like you are going through the process of buying the home does not feel right. Ask to talk to the agents Broker to review the file and your options available to you. If you still get the same advice to pretend then go talk to an attorney.

Like the agent Cristina Alzugaray said .. don't delay and get a resolution quickly. Time is not on your side.

Good Luck .. Bruce
0 votes
Dan Chase, Home Buyer, Texas City, TX
Fri Feb 26, 2010
Did I correctly understand that the house you want to buy was just flooded? If so is it in the same exact condition it was when you made your offer? If not, the condition of the house is different and the buyer is expected to maintain the home in the same condition throughout the buying process.

Did they disclose that it was in a flood zone? If not, that could be a material misrepresentation.

I would talk to a real estate lawyer who understands this kind of issue. You may (or may not) have certain rights.
0 votes
Cristina Alz…, , Florida
Fri Feb 26, 2010
HUD homes are sold through bidselect.com in the state of Texas. You should have signed contract, addendas, disclosures, etc. when you won the bid for the home. You should also have procured copies of such for your records. My suggestion to you is to see an a real estate attorney in Texas ASAP that can advise you as to the ramifications of walking from a HUD contract. Good luck.....and don't wait!!!!! Definitely check out http://www.hud.gov which might help you in answering some of your questions.
0 votes
Am I A Victim…, Home Buyer, 77079
Fri Feb 26, 2010
Just to be clear HUD will sue me not my realtor.
0 votes
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