Welcome back to the series... "How to Buy a HUD Home in New Mexico". Here is part 3 in the series discussing the inspection process. If you missed the last two in the series here you go.
Part 1. How to Buy a Hud Home in New Mexico
Part 2. How to Buy a HUD Home in New Mexico
- HUD highly suggests having a home inspected prior to the offer process, however if done at this time would be a very basic and very limited visual inspection of the structure. Utilities are almost always off and HUD will not allow them turned on without authorization and a valid accepted contract. A big part of any home inspection involves working electrical systems, plumbing, appliances etc.
- HUD does provide a PCR or Property Condition Report and a PCS or Property Condition Summary. This is an inspection of sorts that tests the inoperative systems using generators for the electrical service and air pressure for the water system and share their findings a visual analysis is also provided. The Summary report may provide an estimated dollar amount of potential repairs. This is also necessary for the rehab type loan scenarios, however another independent estimate is required should buyer elect to utilize a rehab type loan.
- Once HUD notifies the buyer via his/her agent of acceptance the clock starts ticking very quickly towards completing a home inspection, loan processing and closing HUD typically mandates the close date at this point. You will have the opportunity to conduct full home inspections at the buyers sole expense.
- Turning on Utilities is also at the buyers expense and arrangement. Setting up utility turn on, inspections and utility turn offs (also mandated by HUD within 72 hrs of turn on) can be a strategic timing dilemma at best.
- For example: If the home has been vacant for an extended period and most of them have been, the utility companies have likely removed the Gas and Electric Meter. The water has been turned off and the home winterized (hot water heater drained, toilets drained etc) In order for a Gas Meter to be installed a licensed plumber must be hired to conduct a preliminary inspection and pull a city permit, package cost ($250.00) If that plumber or City inspector finds issues those items must be addressed (repaired) or no green tag is issued for the installation of the gas meter. The same hold true with the electricity, in order for the Power Company to turn on service an Electrician must first be hired to inspect, pull another city permit and have service then inspected by a City Inspector ($280.00) . If all clear a green tag is issued and the Electric company sets a meter and or turns on service. Keep in mind this is the buyers expense whether the home closes escrow or not. The water utility must be turned on as well, any deposits are at buyer expense, buyer is liable for any damages caused by any utility turn on. Agents must provide access for each of these events.
- BUYER BEWARE! Inspections are for the buyers information only! HUD does not and will not make any repairs period. When you purchase a HUD home you are buying the home AS IS WHERE IS WITH ALL FAULTS AND DEFECT. So what you see or don’t see is what you get. This is where the rubber often meets the road. For example if the inspector discovers a defect in the roof it could easily jeopardize your ability to acquire an FHA or VA (government backed) loan. Certain defects can deem a property as substandard according to FHA/VA guidelines, repair of the defect is paramount to successfully underwrite the loan. So a catch 22 scenario exists where the seller (HUD) will not make the repairs and the buyer is not allowed to make repairs prior to close of escrow. The catch is that buyers lender will not underwrite the loan until such defects are cured. HUD works to overcome this issue with very targeted loan programs called Rehab Loans or 203(k) loans. These are complex and few lenders will tackle the challenges of a 203(k). That is another article for another day. With that said a buyer is wise to understand what the inspection reveals and if they have the necessary means and or funds to fix those issues and other issues that may arise after closing.
As was discussed in part 1 having a knowlegeable Realtor® and NAID certified HUD home specialist is a key component to your success of purchasing a HUD home. I have the credentials and experience to assist you with your New Mexico HUD home purchase.
Part 4. Home to Buy a HUD Home in New Mexico
Call me John McCormack Broker/Owner/Realtor at Albuquerque Homes Realty with any questions and lets gets started on a HUD home purchase.
Check back for a look at the 4th and final part of the series on How to Buy a HUD home in New Mexico. I will outline the final closing process and occupancy.
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