The Unexpected Costs of Closing on a HUD Home: How We Spent Almost $2,000 on a Property We Don’t Even Own
I knew closing on a home in foreclosure could be a bit of a process. I’ve read the articles, heard the tales. But the process started out so smoothly, I thought we were going to be able to slide by without any real road bumps.
We’re still under contract on our first rental property and it’s been anything but an easy ride. Since the property is a HUD home, and the utilities have been turned off, it is the buyer’s responsibility to call the utility provider, have the utilities put into the buyer’s name temporarily, and have them turned on. Easy enough.
I learned that the second floor unit of this duplex has been unoccupied for over a year and so the utility provider requires a technician to inspect the property before they can turn everything on. This makes sense. We don’t want the home to blow up if there is a problem with the gas.
The customer service rep let me know that they could have a technician out to check the home in two to three days.
“But I have my inspection scheduled for tomorrow!” I thought.
But fine. So we scheduled for them to come out the following week and postponed the inspection.
Of course this customer service rep only handles the electric. So I was forwarded to the construction office who deals with the gas and I spoke to the nicest woman. She was so nice that I almost forgot to ask how long it would take for them to make their way to the house. With a casual tone, she responded,
“six to eight weeks.”
My jaw literally dropped. We only have 15 days to do an inspection and we wanted to close in 30 days. Six to eight weeks could ruin this deal!
After a day of panicking, we came up with a plan. Thanks to a family friend who works for said utility company, we found out that you can expedite the process by doing all of the leg work yourself. Which basically involved A LOT of back and forth with the utility company and the township. Below is a timeline of events to illustrate the crazy amount of back and forth.
4/25/17
- Initial call with utility company
- Made appointment to have an electric technician come out and inspect the property to give the approval to have the electric turned on.
- Was told we needed to have an air test done on the pipes as part of the process for turning on the gas.
- Pulled a permit from the town for the air test ($65)
5/1/17
- Utility technician came out and checked the property
- Declared the first floor unit good to go but did not clear the second floor unit because the electric has been off for over a year. Duh. You guys already knew that.
- Requested to have the township inspect the property, verify everything is okay with the second floor wiring and submit a cut-in card to the utility company.
5/3/17
- Had a plumber come to perform the air test. The plumber underestimated the job and said he didn’t have time and left.
- Short moment of freaking out.
- We called another plumber and scheduled for him to do the air test the following day.
- Appraiser came. ($595)
- Pulled permit to have the township inspect the second floor unit electrical and to confirm that the air test was completed successfully. ($67)
- Scheduled to come on 5/5
5/4/17
- The second plumber came out, completed the air test. ($1,150.41)
- Received a call from the most helpful man ever. A tech from the utility company who actually knew what he was talking about. Came out that day to inspect the gas. Did a full check of the house, gave us the go ahead to have the gas turned on. Submitted a work order to the utility company to send someone out to turn the gas on. He said they would be out in 2-3 days.
5/5/17
- Township representative came out and for some reason only checked the air test gauge and not the electric. Scheduled to come out on Monday 5/8.
5/8/17
- Called the town. No answer. The rep did not come and check the electric as planned.
5/9/17
- Finally got in touch with the town to see why they didn’t check the electric. They apologized and promised they’d be out tomorrow morning. (5/10)
- Followed up with the utility company to see when a technician would be out to turn on the gas.
- Scheduled for them to come out on Thursday, 5/11.
- Spoke with realtor to see if we could request an extension on our 15-day inspection review period.
- Extension approved.
5/10/17
- Township representative did go and inspect the second floor electric, but the report isn’t ready yet.
5/11/17
- PSE&G technician came and turned the gas on. First good news so far! (Took a total of 17 days)
- Called the township about the electric report. The second floor unit passed! More good news! Now the town will submit a cut-in card to the utility company and they will then turn on the second floor electric.
- Called the utility company to confirm they received the cut-in card and they were closed. These lucky utility workers only work 8AM-2:30PM. How totally inconvenient.
5/12/17
- Called the meter department at the utility company and confirmed that they did indeed receive the cut-in card and will have a tech come out to the property to inspect the service. He will then give the approval to the office and the electric will be turned on. Unfortunately, I was told this process will take five to seven days.
So we won’t have electric for the second floor unit during our inspection. At this point, I don’t even care. I’m just glad this process is almost over.
Not only was it very time consuming, but also expensive. $1,877.41 expensive! Purchasing a HUD home, I knew that all pre-purchase costs were at the expense of the buyer but I had no idea that it would be this costly. Every check we wrote, I just kept thinking how crazy we were to pay for things for a home we don’t even own. But we knew going into this that the property would require a pretty large rehab and we’d move forward with the purchase regardless of what showed in the inspection report.
While I somewhat feel like I’ve been taken for a ride, it took way less than six to eight weeks time and we’re still on schedule to close at the end of May.
Now onto the home inspection which is scheduled for early next week. Check back for a super detailed post about that.
Side notes:
I was very surprised by how busy and booked solid inspection companies are. I called over seven companies in the area and they all had a wait period of over two weeks. I think I might get into the home inspection business!
Shout out to our awesome realtor who played a heavy hand in meeting technicians and contractors at the property while we were at our W2 jobs and for his great vendor connections. Without his help, this process would have taken twice as long.
