Big problem with HUD house

[Bienes Raices]

My offer was accepted on a HUD house, and (as an investor), I made my $500 non-refundable deposit.

I've now been notified that if I want utilities on I have to pay a $130 dewinterization fee and buy a general liability policy for the period the utilities are turned back on (in case someone got shocked by electricity, house flooded, etc.). It sounds like there is no way around this.

So my choices are 1) back out and forfeit the $500 2) Go ahead and take the risk of doing inspections without elec. and water turned on (and house has been vacant for at lease a year!) 3) pay a huge amount of money to have utils turned on, etc. to do inspection, etc. and as I understand it HUD will not negotiate price on repairs, so if there is a major problem and I back out I loose over $1000.

So I'm in a bad situation. Should I cut my losses and accept that the $500 is gone, or would you take the risk of an inspection without utilities turned on?

[Andy J.]

I think the best answer to your question is going to depend on a few variables. Is this a good deal if everything checks out, still a good deal if you have to repair some burst pipes? What style of home is this, ranch on a crawl space where there's less plumbing in the walls, or 2 story where an upstairs plumbing leak can do a lot of damage? Does it look like someone has done DIY repairs that appear less than professional? Did you open the breaker panel and look for modifications?

There's another option as well. You can pay a contractor to pressure test the plumbing and you can pay a contractor to bring a portable generator to power up the house to test everything. If it was winterized you have a better chance that the plumbing is okay, but I wouldn't rely on that alone.