Dear Real Estate Adviser,
I made a cash offer to buy a HUD home as my residence. It was accepted in November but still hasn't closed due to "an expired notary seal," which is all they'd tell me. It makes me wonder if fraud is involved, though no one will confirm that. I put down a $1,000 deposit and still really want that home. I have to request an extension every two weeks or the deal will die and I'll forfeit my deposit. How do I find out if it's ever likely to close?
-- Bea E.
I'd like to believe there's nothing fishy about this deal and it can just be explained away by bureaucracy, but that "expired notary seal" excuse just doesn't pass the smell test, especially over a five-month period. Generally speaking, closing on HUD homes typically happens within 60 days, and all-cash deals such as yours typically close in around 30 days, agents say. Paperwork flaws such as an expired notary seal are easily remedied.
But I should point out that HUD, which is short for the U.S. Department of Housing and Urban Development, is transitioning to a new system and has hired dozens of new management and marketing, or M&M, contractors to help the program's overtaxed asset and service managers push out foreclosure inventory. This has apparently slowed down the HUD pipeline somewhat, but certainly can't account for a mind-numbing delay such as yours. In fact, brokers who weigh in on this topic on real estate boards say closings for HUD-sanctioned foreclosure deals are generally less complicated and faster than those with two other government mortgage-guarantor programs, Fannie Mae and Freddie Mac.
Since you are required to use a real estate agent to submit your bid in any HUD purchase, I'd be curious to know if that agent has run across this sort of roadblock before and what he or she has done to try to remedy the problem. I am also curious if you are paying extra money every couple of weeks when you sign those extensions.
As for your earnest money, information on HUD policies and other information is available through the HUD website, as is a list of M&M contractors for your particular jurisdiction. Go to HUD's REO management page, hover over the "State Info" tab near the top of the page and click on your state, where you'll find phone numbers on the "Contact my local office" link. You may at least get some answers going this route.
But you have every right to be concerned and a little hacked off as well. Of course, any expressed suspicion on your part of mortgage fraud may not have made you too many friends in this deal. But that shouldn't delay a closing -- at least hypothetically.
If you're convinced there really is fraud, you can visit the page for HUD's inspector general to file a complaint. The site says it also processes reports of "waste, abuse and serious mismanagement in HUD-funded programs and operations." You can bypass that step and email the Office of Inspector General-Hotline directly at HOTLINE@hudoig.gov.
While fraud is always possible, I suspect someone is merely asleep at the switch or you aren't being given up-to-date information for some reason. Good luck on pushing this forward.
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