HUD House Appraisal Less Than Bid Offered?

[Jonaye Barnum]

My bid was recently accepted for a HUD home. The starting bid was priced at $95,000, and I offered $127,500. The house is 4bd, 1.5 bath. It assesses on the city site at $123,200.

The reason I bid so high is because I have been outbid before, and the market in my area is very volatile. It's difficult to find a decent home in my price range, especially when I intend to rent the house out in the near future to begin building my investment portfolio. The house is in decent shape, no major issues noted (until inspection of course). I am comfortable with the decision because I am using an FHA repair escrow, so many of the issues recognized by the appraiser will be covered in the repair escrow.

The contract states that I must make up the difference in cash if the bid amount offered is higher than the appraised amount. I believe that the house will appraise for around my accepted offer of $127,500. However, in the off chance that it is much lower, I will not be able to afford that, along with closing costs and down payment all in cash.

Have you experienced anything of this nature and how did you resolve it? I believe I should be able to get out of the contract if it turns out to be too much out of my pocket due to finances.

Is there possibly even a way to finance the difference I would owe, or even roll it into my mortgage? Thank you for the help!