By Lynn Minnick
Although I’ve been in real estate for 10 years now, I just closed on my first HUD foreclosure. We haven’t had that many in my market (yet!) and so far I’ve somehow managed to avoid them. I almost fell out of my chair at the closing when the HUD attorney handed me a survey to complete regarding my experience selling the property! Really? I had a lot to say about not getting answers from the transaction management company when I asked, but mostly my beef was with the additional expenses incurred by the buyer.
1. When the information lists a repair escrow, it’s not the same as you’d think. In this case, it meant the buyer has to mortgage the amount listed ($2,000 in our example) which is held in escrow by their lender, and paid out to the contractor upon completion after the closing. This was unclear to me, the buyer, the lender and the attorney involved. There really should be some type of disclosure/explanation attached regarding this on the offer documents or somewhere in the paperwork.
2. In the case of a condo, as mine was, HUD does not provide resale packages. At $100 a pop, this was another surprise expense to the buyer, and there is no clause for condo document review. There was no ability to add such a clause either.
3. Not only are there no keys to the property, which of course I expected, but there was no remote garage door opener, and no mailbox key. (Looking back, I suppose none of that should have come as a surprise – we imagined we’d be able to get an extra mailbox key from the association – that wasn’t the case – the buyer has to install a new lock there as well. That’s more of an annoyance than an expense.)
4. The transaction management company advised us we’d need to have the electricity turned on to conduct a home inspection, but the utility company refused until we had an electrician check it first ($150) and submit a written affidavit that it was safe to do so. What the transaction management company didn’t tell us was that we’d have no access to water (it was listed as having a shared well on MLS) to test the plumbing without first opening an account ($80 just to fill out the application + an additional fee to turn on the water) and having a representative come out to approve it beforehand. These things seriously cut into the 14-day inspection period – so be sure your foreclosure buyer makes the calls right away instead of waiting until a week has gone by and you’re trying to schedule inspections in a snowstorm! Also on the home inspection front, if the property has been winterized, the buyer has to pay an additional $150 deposit (in our case) to have re-winterization inspected. (We are now several days past the closing and the buyer has yet to receive her deposit monies back from the contracting company.)
So while the buyer still got a great deal on the property, there were plenty of extra expenses we don’t usually come across in a regular transaction in our market.