HUD Homestore Accepted Our Bid - Now What?

Question

Hi Everyone - I was notified today that HUD accepted our bid. When we looked at the property, it was clearly winterized and documented as such. I noticed the pipes were intentionally disconnected at the meter and other low point to allow the water to be properly drained when winterized.

The property disclosure states 'Water failed pressure test' as I've seen on most of them. Does this mean that it legitimately has leaks or is that a boiler plate they put on for winterized properties since they can't actually turn the water on? Our lender says we need the utilities on for the appraisal, so this could pose problems... anyone know the best way to approach this?

Greg H. · Answer

Account ClosedThe HUD Field Service Manager perform their inspection without turning on the utilities by using a generator and a air pressure test for the water lines. So HUD never activates the utilities. If the pressure test fails they will not let the water be activated. In cases where you are able to activate the utilities the buyer can still run into issues with the utility providers as some will require an inspection and/or code upgrades if the utilities have been off for an extended periodIn general , the appraiser will on all utilites activated so they can run water, turn on lights and a/c system . You need to ascertain from your lender asap if they have a workaround .

John Rogers · Answer

Depending on the lender, consider this... Every HUD property comes with a PCR (Property Condition Report), in addition, the ones that qualify for FHA or a 203K loan will also have a PCS (Property Condition Summary) which details the repairs needed and assigns a dollar amount that can be used an an escrow holdback to do the loan, then get the repairs done after purchase.See if you lender will take those into account as a reason that there may be a failure on the appraisal. If they will, then you are home free...If you are considering doing it before you own it, CWIS will see the repair on their inspection visit and issue a "cease and desist" to keep you off the property.If your bid was already accepted, AND you have already submitted the contract and EMD within the two day window, the clock is ticking... Get answers from the lender NOW... If they are hung up on the water... find another lender to do the deal, then refinance after you own it.

Scott Schultz · Answer

Work with your broker, there is a utility turn on form, you will bear the expense, and the expense of a plumber to fire everything up, as well as re winterize, probably cost you $300-$500 PM me if you need to know more, I am a hid NAID broker and have doe about 70 Hud sales

Percy N. · Answer

Account Closed, you may have to find a portfolio lender willing to waive this, or find private money or a HML until repairs are made. PM me if you go down the private money road.

Account Closed · Answer

So, my lender offers an escrow for the repairs - not ideal, but certainly a last resort. Now I have a bigger hang-up. There is a one-liner in the SAGE Acquisitions / HUD contract that is requiring a letter of commitment from my lender, in addition to the prequalification letter. My lender is saying they cannot provide a letter of commitment until post-underwriting. How do I navigate throughTHIS one?!?

Account Closed · Answer

@Percy N. thanks and will keep you posted.@Greg H. : when utilities are turned off by FSM, is that typically done at the street or at the houses main valve? I'm wondering if on at the street and off at the main would be sufficient to qualify as 'utilities on' until closing

Account Closed · Answer

5/2016 is the date of the property report. I don't know right now when it was winterized. I'm using conventional financing since I'm not eligible for an FHA as we closed on another property earlier this year. My lender says the utilities must be on for the appraisal.... I could potentially get my plumber buddy in their to do the work but that rubs we wrong without owning the place first, obviously... Do you know if that is even an option in most cases?

Account Closed · Answer

Thanks for the feedback Scott.

Matt Turbitt · Answer

your Realtor should be playing middle man at this point but also I'd call sage and talk to them about it. It's normally hard to get the letter of commitment without the property and doing actual underwriting. I'd assume they either will take that form later or they are looking for you to actually be fully pre-approved.(credit pull and all)

Matt Turbitt · Answer

The lender will need to be able to turn the water on at facets and flush toilets. Every hud house will tell you if you can turn on the water in 2 ways, one call the listing broker and they will confirm ye or ne if you can fill out the form, and turn the utilizes on for a few days. 2. Is the condition report that will list if the pressure test held or failed. Most of the time they fail. This forces an o/o (or even an investor) to use cash, private lender, fha 203k, fha w/ repair escrow, or a portfolio product.You have a few days still the back out if you can't make it work without losing money. But you need to decide if you really want this house...If so, do 2 thing's, 1 ask your lender if you can escrow for the plumbing repairs. 2. Go start looking for a small local lender that has a portfolio product that doesn't care if the water is on or not. Keep in mind most Huds were vacant 6 months to 4 years before they were winterized. So the antifreeze normally means almost nothing. If bought Huds where the plumbing was perfect and only disconnected, and I've bought houses where the <20 year old plumbing crumbles in your hand.