In March of 2012 I attempted to buy a HUD foreclosure house. The house was misrepresented as a 2 bath home and had extensive damage not shown on HUD's inspection or appraisal. After I had my inspection completed I canceled my contract and offered to buy the house at a reduced price. My counter offer was rejected and I was notified I lost my entire earnest money deposit, EMD.
This was the 1st HUD house I tried to buy. It was also the 1st HUD house my agent had tried to buy. The agent processed the offer online thru her realtor’s HUD credentials. When we placed the online bid there were multiple questions where my agent tried to contact the local listing agent but never had any calls returned. We proceeded with the process and made an unknown error. The house only required a $1,000 EMD but we placed a $5,000 EMD. None of the HUD documentation that I saw or signed stated that on HUD houses over $50,000 only a $1,000 EMD is required. We placed this larger size deposit because our experience with buying property has proven that a larger EMD is more likely to get an offer accepted. There was one document we received after our bid was accepted that stated that our EMD was above the needed amount. But nothing in this document stated what the required amount was or that the amount had no bearing on the acceptance of a bid.
After we were notified of the loss of my EMD I contacted the listing realtor for HUD. I explained my situation to her and her assistant in person at their office. She stated that HUD should not have accepted my EMD and that they should have notified me that only $1,000 was required. She offered to intervene and work with HUD on returning all or a portion of my EMD. I stated to her that I was even willing to lose $1,000 but that the remaining $4,000 should be returned. The listing realtor had a series of health issues after our meeting and her working with HUD on my issue was intermittent. Recently the final statement from HUD was given and all my EMD was lost. I asked the realtor to supply me the contact information of whom she had been corresponding with and copies of those emails. She refused and I asked her to please supply me with any basic contact information for HUD that would assist me. I’m on my fourth request for the basic contact information and have received nothing.

I feel as a business person who buys homes in bad shape, remodels them and sells them that I have been wronged:
1. I should be the "market" as an investor that HUD targets and should make conducting business an easy process. Their tactics make the process difficult and do not follow standard real estate guidelines.
2. I as an investor I have been discriminated against. If I was an Owner Occupant in this transaction I would have received some or all my EMD back.
3. With the EMD amounts only being either $1,000 or $500; HUD should not accept any other amount.
4. In standard residential purchases there is always the right to an inspection. HUD’s business model an investor is “supposed” to conduct an inspection prior to making a bid on any property. As an investor I could never afford to pay for an inspection before I had an approved contract. I once placed 110 bids before I had an accepted bid. If I followed HUD’s business model and had inspections before I had an accepted bid it would have cost me $33,000 before I bought. Even once my bid was accepted by HUD I had to pay one of their servicing companies to allow electricity and water to be turned on in the subject property.
5. HUD misrepresented the property as having 2 bathrooms. The 2nd bath was illegal and will cause substantial money to be made legal.
6. Hud had not listed in their inspections that there was a plumbing issue. They only connect water at the house directly and do not turn on the city water when they do their inspection. The plumbing issue was between the city water supply and the house. This is still the responsibility of the homeowner to repair.
7. HUD had not listed in their inspections the serious termite damage that was uncovered in the roof joists.
8. HUD had not listed the Mold issues.

I would like to recoup my entire $5,000 EMD, $300 inspection and costs to activate the utilities. I have spent many hours trying to correct this and would like to be paid. I have visited several websites mentioning HUD investors losing their EMD. If possible I would like to start a Class Action Suit against HUD's business practices.

What are your thoughts and what would be my next step?

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Signed Poor Dumb Investor