HUD Properties, Process and Earnest Money Check Joys

As many of you know, I’m something of an accidental real estate agent. I find myself managing the office of a team of agents, and my focus is on REO (aka: Bank Owned) and Government Owned property sales. One of my main functions is navigating the perilous maze of intrinsic weird contract “stuff” inherent in these transactions.

One my key sellers is HUD, and we’ve been seeing a few repeated issues with these contracts. HUD is pretty particular about earnest money checks. The biggest issue we’ve seen: the payee line. HUD wants to see “Escrow Company OR Buyer’s Name”, eg: “Chicago Title or John Doe”.

With the above, there’s another common issue: check type. They want either a cashier’s check or a US Postal money  order. Sorry, no personal checks; they’re looking for certified funds. Below is a slide created by BLB (the company charged with selling all HUD owned homes in Washington, as well as a few other states) to make it more clear.

HUD EMD Guidelines

With all this, we send tons of information as part of these transactions. As tempting as it may be to blast through these transactions minimizing the amount of reading you need to do, I counsel you against that. These hiccups do cause problems for transaction, thus delays and sometimes cancellations. A relatively small investment in time can, really, save you a lot of aggravation and grief.

Critical Communication

A sad moment this morning when one of our cooperating agents notified us about problems. Basic ones, really: some of the required signatories on the contract were hard to reach. The challenge, though, was this  offer was for a HUD owned home, with pretty rigid deadlines. However, they’re not ironclad. But waiting until a day or two past the due date to notify that there are problems isn’t effective. Sadly for the buyers on this one, HUD cancelled the contract. They can rebid, and have a decent chance of getting it with the same bid, but the bidding process will be opened to everyone again. Thus, they do have a real chance of losing out to someone else.

It’s important to note that, given lead-time, a time extension could have been granted. So, the lesson to take-away: communicate early, especially if there are problems. Please…