How to Negotiate a HUD Home, Part 2 – Inspections

In my last entry, I talked about some tips and tricks from experience on how to negotiate a HUD home and land a great price.  Today, I will discuss the inspection process as it is a little different than a typical inspection.

Before bidding on any HUD home, you should have reviewed the  Property Condition Report (PCR) and the Seller Disclosure addendum.  The PCR is the result of HUD’s own inspection but it is not very thorough.  To determine the viability of the electrical systems and items they hook up a generator to the home and try to power the different systems.  To test the plumbing, they run compressed air through the main water line into the house and test whether it will hold pressure at 30 PSI and if it does not they will determine that the plumbing “has issues.” But so far in all of my transactions, the reason for not maintaining pressure has just been because a faucet wasn’t turned off all the way.

Sample PCR
Sample HUD Seller’s Disclosure Addendum 

HUD’s process to do your own inspections can be tedious and stressful if you need the utilities turned on.  While an inspection period is typically 10 days, HUD gives you only 3 days for you to have the utilities turned on.  To do so, you have to get written approval through the Asset Management Company responsible for the home, and that can take 2-3 days by itself.  This process could be a non-refundable $50-$150 JUST to turn the utilities on and subsequently turned off.

Because all HUD homes are sold “AS IS” the inspections are for your own information only and HUD will not do any repairs.  The lack of repairs and condition of the property is the trade-off for better deals that usually have equity built right into them. If you are willing to roll up your sleeves and are not afraid of unforeseen issues, HUD homes can be very good investments either as your primary home or as a rental or flip.

In my final installment next week, I will provide some anecdotes on particular deals and how I resolved issues as well as any “odds and ends” that can help you navigate the world of HUD homes.

Sincerely,

David R. Madaffari, Realtor
Keller Williams Realty – First Choice
Office: 225.744.0044
Cell: 225.772.3283 (DAVE)
37325 Market Place Dr. Ste D
Prairieville, LA 70769
www.DavidMadaffari.com
Each office independently owned and operated

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