How much do I have to put down on a HUD home in AZ?

Before any offer is submitted to HUD, the buyer is required to deposit with the HUD registered real estate broker an earnest money deposit.  An earnest money deposit is money presented with an offer on a home that shows that the buyer is serious about purchasing a home.  

HUD only allows the earnest money to be either 1) a cashiers check or 2) a money order. If the purchase price is $50,000 or less, the buyer is required to deposit $500.  If the purchase price is greater than $50,000, the required deposit is $1,000.  If a buyer's offer is rejected, the earnest money is returned in full to the buyer. 

Should a buyer have an accepted bid and not be able to buy the home, HUD will return the buyer’s earnest money deposit on the following conditions:

For an owner-occupied buyer:  The entire deposit will be returned if it is requested in writing and adequate documentation is included when 1) there has been a death in the immediate family, 2) there has been a recent serious illness in the immediate family that has resulted in substantial medical expenses, income loss or adversely affecting the buyers ability to purchase the home, 3) there has been a loss of work by the primary wage earner or substantial loss of income at no fault of the buyer or 4) there is good cause as determined by HUD.  On an uninsured sale, the buyer forfeits 50% of the deposit if the purchaser is unable to obtain a mortgage, despite good faith efforts from the buyer.

However, the buyer forfeits 100% of the deposit in those instances when no documentation is submitted, documentation fails to provide acceptable cause for the buyer’s failure to close or where documentation is not provided within a reasonable time following contract cancellation.

For an investor:  The entire deposit is forfeited, regardless of reason unless the home is an insurable property and the purchaser is determined by HUD to be an unacceptable buyer (in which case the investor loses 50% of the earnest deposit).

Before deciding on which home to bid on, it is important for a buyer to sit down with his or her qualified real estate broker and discuss a strategy to buy a HUD home.  For example, HUD may pay up to 3% of the bid price towards the buyer’s closing costs (in Arizona).  However, this may affect your net bid amount (as discussed above). 

All sales must close within 45 days.  Closings later than 45 days require an approved extension and may (most likely) will incur a fee.  Extensions may be granted at the sole discretion of HUD or its authorized agent.

A buyer may not make any repairs to the property prior to the close of escrow.  Furthermore, the purchaser is not authorized to move any of his or her personal effects into the home prior to the close of escrow.   

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