Inspections for HUD Buyers

One of the advantages of buying a HUD house with FHA financing is that you don’t have to get an appraisal. HUD’s already taken care of that for you and very graciously agreed to sell the house at exactly that price. So you won’t need to worry so much about the difference between an appraisal and inspection (because you won’t have to pay for the appraisal – score!).

It isn’t ALL good news though. With a typical seller (even regular old bank owned foreclosures), they’ll take care of making sure that the utilities are turned on for you. All your inspector needs to do is walk in the door with his clipboard and commence to inspecting. Not so with HUD.

Here are your downsides:

• You’ll need written authorization from HUD before turning on the utilities. If you are doing your inspection between October & March you’ll have to include a check for $75 to cover the cost of re-winterizing* the house after you’ve de-winterized* it for your inspection
• Once you’ve got your authorization, you’ll need to have the utilities turned on in your name
• Once you’ve finished your inspection, you’ll have to have the utilities turned back off until after closing

In addition to the whole utilities hullabaloo, there are also some limitations regarding using your inspection contingency (while also getting your earnest money back). Most sellers will accept just about any inspection related reason as justification for terminating the contract. HUD requires that:

• Inspection issues must be diagnosed by a licensed home inspector (not your cousin Vick even if he’s a general contractor)
• Problems found must be significant and structural or mechanical in nature. Broken windows, one non-working outlet, & holes in the drywall don’t count. It’s got to be something like bad wiring throughout the house, cracked foundations or bad sewer lines
• Repairs needed can’t be something that was already disclosed on the property condition report that HUD provides (you can view these reports at www.BidSelect.com)

Thus concludes the Inspections chapter of ‘Required Reading for HUD Buyers.’

*Winterizing – turning off the water, draining the water heater and blowing the water out of the pipes.  **De-Winterizing – turning on the water, filling up the water heater and filling the pipes with water (as you might expect given the definition of winterizing).  ***Your inspector will not look like the guy in the picture up there.