Buying A HUD Home In Arizona Part 3 of 3 ~ Escrow Process, Inspections and Closing
Excellent informational post on buying a HUD home in Arizona. A must read if you're thinking about purchasing a HUD owned property.
In Part 1 the HUD electronic bidding process was laid out for you.
In Part 2, the HUD contract execution process was reviewed.
Now, your Contract has been executed, and HUD has established the title company that will handle your escrow. Ordinarily, the buyer may choose services, but when purchasing a HUD home, HUD designates a title company that typically handles all their escrows in a particular county.
HUD will e-mail and fax your HUD Broker a copy of the executed Contract along with a letter that designates the title company and provides for a 72 hour (3 business days) receipt of the actual earnest money check.
The title company will call your HUD Broker and advise them of the actual deadline date for receipt of the deposit check.
Overnight mail is recommended, so you have a guarantee of delivery and tracking. Don't cut corners here--failure to deliver the earnest monies timely is cause for cancellation.
When the earnest money is received, the title company will immediately issue a copy of the check and earnest money receipt to your Broker.
When you receive the executed Contract, your Broker will fax in your Authorization To Turn On Utilities form with the 3 day period you wish to turn power on for inspections filled in. HUD will sign authorization and return to you. This usually takes a couple of days.
Once your Broker receives the signed Authorization, you may then have utilities turned on for inspections. Check with your inspectors first and make sure they will be available during that 3 day period. Then call the power companies and arrange a 3-day turn on. Don't forget termite inspection, mold, radon or any other inspections you deem material.
You MUST disconnect utilities at the end of that period--even if you know you will proceed with purchase--and reconnect them at Close Of Escrow.
If the Property is serviced by a septic system and you are financing your purchase, HUD will have the septic tank inspected--BUT they will not arrange a septic inspection until your loan docs are received by title. As soon as loan docs have been sent to title, make sure your lender notifies the Broker so they can request a septic inspection from HUD.
This may seem scary because it is waiting until the last minute. It is a good reason to ensure BEFORE purchase that your loan professional can get your loan processed timely.
You may wish to have the septic inspected at your cost by your own chosen septic contractor (they must be qualified and licensed) during the Inspection Period (cost apx 300-400). Then you can be certain that a local septic professional with knowledge of the types of septic systems AND soils in the area is confirming the condition of the system.
If your septic inspector needs water turned on, you will need to arrange the inspection during your 3 day utilities-on period. HUD's septic contractors typically haul water for their inspections.
Loan docs take extra time to process because HUD will sign off on them before you receive them to sign yourself. That will add an extra 2-3 days to your escrow. A HUD purchase is not one you should think of making in terms of a fast escrow and quick close if you are financing.
Home Warranty is not a cost HUD will cover for you, and they are not escrowed as they routinely are during other escrows. At Close, you'll want to contact your chosen home warranty company and order coverage on your home's systems and appliances.
At close, once the property has been recorded into your name, the first thing you will want to do is meet a locksmith and your Broker at the property, as it has been keyed for HUD key and you will need to have all locks re-keyed for your new keys.
DISCLAIMER: HUD is the final authority on procedure. Check with them before submitting any documentation.
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