This is where you will find important documents pertaining to the property, including:

We’ll cover some of these addenda below:

Lead-based Paint

There are a few conditions when it comes to purchasing a HUD home, and lead-based paint is a big one. We break it down for you:

If your loan type is FHA 203b and the property was built prior to 1978 – Real estate purchases are required to have disclosures regarding the presence of lead-based paint. HUD homes are no exception. Here’s how it works with HUD transactions:

Once a contract is executed, HUD will arrange a lead-based paint inspection. If deteriorated lead-based paint is found in the home, HUD will perform stabilization – removing loose paint, repairing physical defects that cause paint deterioration, applying a protective coating, etc, if the cost estimate is $4000.00 or less. Here’s how HUD explains it:

If the cost estimate is more than $4000.00, HUD at its sole discretion may:

  1. cancel the sales contract, or
  2. allow the purchaser to amend the contract financing to FHA 203k or conventional. In the event that HUD cancels the sale, the purchaser will be entitled to a 100% refund of earnest money.

The Purchaser shall have the right to review the inspection report, paint stabilization plan and cost estimate.

If the cost estimate is $4000.00 or less and the Purchaser is dissatisfied with the information provided, the Purchaser may withdraw from the contract and receive a full refund of earnest money by providing written notification to HUD of the intention to withdraw.

If deteriorated lead-based paint was identified in the Report and the Purchaser does not exercise their option to withdraw from the sale contract, HUD will stabilize the deteriorated lead-based paint in accordance with the stabilization plan.

In addition, HUD will obtain a 3rd party lead clearance by the close of the escrow period or any extensions thereof.

What this means is that HUD will take care of the lead-paint repairs if the cost of doing so is less than $4,000. If the cost is more than $4,000, HUD can either cancel the sale or allow you to change your financing type to a FHA 203k, which is a rehabilitation-type of loan, or switch to a conventional mortgage loan, which doesn’t carry the same conditions as FHA financing.

Also, if you aren’t satisfied with the information given to you regarding the lead-based paint, you can pull out of the contract (in writing) and get your earnest money back.

What if I have a FHA 203k loan?

Taking care of lead-based paint when you have a FHA 203k loan works a little differently. In HUD language, this is how it works:

If your loan type is FHA 203k and the property was built prior to 1978 At closing the Purchaser shall receive a credit in an amount not to exceed $4000.00, representing the Seller’s contribution toward the cost of stabilization and clearance testing. The Credit shall appear on the FORM HUD-1 SETTLEMENT STATEMENT and shall be deposited in the 203k repair escrow account. If the actual cost of stabilization exceeds the credit provided or if the property fails a clearance examination, the Purchaser will be responsible for any additional costs.

The Purchaser shall have the right to review the inspection report, paint stabilization plan and cost estimate. If the Purchaser is dissatisfied with the information provided, the Purchaser may withdraw from the contract and receive a full refund of earnest money by providing written notification to the Seller of the intention to withdraw.

If deteriorated lead-based paint was identified in the Report and the Purchaser does not exercise its option to withdraw from the sale contract, the Purchaser shall stabilize the deteriorated lead-based paint as part of its work plan for the property rehabilitation and shall obtain lead clearance before occupancy. Purchaser shall complete the 203(k) Rehabilitation Financing Lead Agreement form.

Broken down in plain language – At closing you will get a credit (that won’t be higher than $4000.00) from the seller toward the cost of stabilization and clearance testing for the lead-based paint. If the amount is higher than $4000, you are responsible for the cost of remediation.

If can review the inspection report, and if you’re not satisfied, you can withdraw from the contract and get your earnest money back, you simply need to inform the seller in writing. If you decide to go ahead with the purchase, you are responsible for taking care of any lead-based paint removal and/or stabilization before you move in.

No FHA Financing of Property Constructed Prior to 1978:

The purchase of this property is not being financed with an FHA insured loan. The Purchaser has an inspection contingency that expires 15 days from the date of the Purchaser’s signature. The property is being sold as-is with respect to all conditions including, subject to the above contingency, the potential presence of lead or lead­-based paint hazards.

If can review the inspection report, and if you’re not satisfied, you can withdraw from the contract and get your earnest money back, you simply need to inform the seller in writing. If you decide to go ahead with the purchase, you are responsible for taking care of any lead-based paint removal and/or stabilization before you move in.

Some other nitty-gritty details about HUD home purchases:

Property Condition Report (PCR)

You, as the buyer, will likely receive a Property Condition Report. The Property Condition Report will provide some important information regarding the condition of the mechanical systems and plumbing within the home. This report will help you assess what is in good working condition and what needs to be fixed or replaced.

If the property has damaged plumbing, the water will not be activated for an inspection or appraisal

If the plumbing isn’t damaged, the water can be activated for inspections only. If the buyer’s appraisal requires active utilities, the appraiser must go to the property while utilities are active, during the approved inspection period.

Repair Escrow Disclosure Addendum

In cases where there are repairs necessary, the Repair Escrow/Disclosure Addendum is provided. This report is an outline of repairs as determined by HUD’s appraisal, and is for informational purposes only. HUD’s FHA appraisal may include required repairs, but these repairs can’t be made to a HUD home before closing on the property. If this is the case, the Buyer will escrow for the repairs. Your Buyer’s lender will order an FHA appraisal and any repairs noted on that appraisal (up to $10,000) must be escrowed by the Buyer. The appraisal makes no guarantees as to the cost of the appraisal, and you may find there are other repairs that are required but were not included on the Repair Escrow Disclosure form.

The Buyer will make the repairs after closing, the appraiser will confirm the repairs are complete and the Buyer’s escrow funds will then be returned.

If the appraisal-required repairs are greater than $10,000, the property is considered FHA uninsurable. However, an FHA 203k loan can be obtained. This is another scenario where, if the costs exceed a certain amount, a different type of FHA loan product is necessary.

Buyer’s Select Addendum

The purchase contract is eligible for participation in the HUD “Buyer Select” pilot closing agent program. This HUD program allows you to choose your own closing agent, instead of HUD’s assignment. This makes it the responsibility of the purchaser (you!) to choose their own escrow/closing company.

Remember: HUD won’t pay for the escrow/closing service with this program. It’s the responsibility of the purchaser.

Buyer’s Selection Closing Date Extension Policy

If the closing date stipulated in the contract cannot be met, the purchaser(s) may request an extension of the closing date. Extensions of time to close are at the Seller’s discretion and, if granted, will be under the following guidelines:

  • The request for extension must be received by the Asset Manager no later than five calendar days prior to the expiration date of the contract.
  • The extension will be granted for a 15-day calendar period.
  • The extension fee for a 15-day calendar period will be $375.00 ($25 per day)

Ready to bid? Follow these steps:

Audubon Realty, LLC
2901 Ridgelake Dr., Suite 203
Metarie, LA 70002
P: (504) 831-3111
info@audubonrealty.com

  • In Property Details from the linked results, scroll to the bottom of the page
  • We are just asking, did you go through ALL of the tabs in this details view, especially the ADDENDUMS tab?
  • OK, you’ve reviewed and you want to bid… You’ll see the questions, “First time buyer?” “HUD Registered Bidder?” If you are working with Audubon, we will help you through this process.
  • You are a FIRST TIME BUYER since you do NOT have a NAID number, are not a government agency and are not a non-profit, correct? Just making sure this is clear.
    CALL US
    at this point, we can help you navigate this bid process efficiently.
  • Submit an Offer is next to the “HUD Registered Bidder” – this is where that NAID number comes into play. Only Government Agencies, Selling Broker and Non profit can fill this in. 
  • The more that is filled out the better. DOUBLE CHECK FOR ACCURACY, typos, etc. It’s a pain to have to go back and request corrections.

Bid Acceptance

  • When your bid has been accepted, it is conditional on receipt and review of HUD’s Sales Contract Package.
  • The Sales Contract Package must be received by Chronos Solutions within two business days of acceptance. (If bid acceptance is received on a Monday, the contract package must be received by Chronos Solutions on Wednesday. If bid acceptance is received on a Friday, the contract package must be received by Chronos Solutions by the following Tuesday.)
  • There is zero tolerance for contract package error. This means if you have any mistakes, you won’t be awarded the sale. Don’t lose out on your new home because of a simple error!