If you are thinking about purchasing a HUD home, make sure you factor in additional expenses before going under contract on a home. On HUD homes, buyers are responsible for turning the utilities on for a home inspection. Buyers are also responsible, depending on the field service manager (FSM) and the time of year, for de-winterizing and re-wintering the home. If the property needs to be re-winterized, some field service managers charge a fee to have someone from their approved list handle the re-winterization process. This fee varies depending on the field service manager.
If you are purchasing a HUD home that is insurable with escrow, the amount allocated for that repair may not be sufficient to cover the cost of the repair. If you are concerned about whether the escrow amount will cover the repair cost, you may want to have a licensed contractor come out to the house to examine the item(s) in question. Many licensed contractors, however, charge a service fee to come out and inspect an issue. If the repair quote is higher than the escrow amount allotted by HUD, your agent should submit the repair quote to the listing agent or point of contact at HUD’s asset management company, to see if the repair escrow can be adjusted prior to closing. HUD will not make any changes to the escrow amount after closing.
More than likely, your lender will not be able to take these additional fees that you have paid into consideration, in determining your minimum cash investment at closing. On the plus side, HUD will cover the cost of your appraisal fee, if you are obtaining an FHA loan. Many lenders will generally accept HUD’s appraisal report as long as it is less than 4 months old. And, if you plan to use HUD’s closing agent, you may be able to save a few dollars going that route.