A HUD home inspection happens before the bid, not after. HUD sells every home as-is. There's no inspection objection, no repair request and no price cut for what you find. If your buyer wants to know what they're buying, they inspect first and bid on what they saw. Here's how I do it, and I spent 13 years as a construction superintendent before real estate, so I care about this one.
The short answer
Get the utilities turned on through HUD's field service manager. Bring an inspector. Check the sewer, roof, electrical panel and furnace first, because that's where the five-figure surprises hide. Photograph everything. Get contractor numbers. Then build those numbers into the bid ceiling. If the math doesn't work, don't bid. The buyer is out a few hundred dollars instead of a house full of problems.
Step by step
- Read the Property Condition Report (PCR). HUD's contractor noted what worked on the day they looked. It's a starting point. It isn't an inspection.
- First visit. Get the lockbox code through the listing's process. Bring a flashlight. Power is usually off. Decide if it's worth inspecting.
- Request utility activation. File the request through HUD's field service manager as the listing instructs. The buyer usually pays the utility company and any fees. Plan about a week.
- Inspect in this order: sewer, roof, panel, furnace. Then water heater, plumbing, foundation, grading, windows. Cosmetics last.
- Scope the sewer. In older homes, a sewer scope is cheap insurance against a big repair.
- Photograph everything. Appliances, fixtures, the water heater label, the panel. What's in the house when HUD accepts conveys, but HUD won't replace anything that goes missing. Photos are your record.
- Price the work. Contractor numbers, not guesses.
- Set the ceiling. Comparable sales in this condition, minus repairs, minus a 10% cushion.
A worked example (illustration only)
A 1978 ranch listed at $350,000. Updated homes nearby sold around $415,000.
| Item | Finding | Budget |
|---|---|---|
| Sewer scope | Clean | $0 |
| Roof | About 8 years left | $0 now |
| Panel | Fine | $0 |
| Furnace | 2009, works; plan replacement | $6,000 within 5 years |
| Carpet and paint | Needed | $9,000 |
| Repair escrow on listing (IE) | Handrail, windows, paint | $4,200 (in the loan) |
Ceiling: $415,000 minus $9,000 minus $4,200 minus a 10% cushion on repairs ≈ $400,000. Plenty of room at a $350,000 list.
Illustration only. Real repair costs vary. Get contractor bids.
How to explain it to your client
"HUD doesn't fix anything and won't lower the price after we win. So we inspect before we bid. You'll spend a few hundred dollars to look under the hood. If it's good, we bid with confidence. If it's bad, we walk, and you saved yourself thousands. I'd rather you lose a few hundred on an inspection than win a house that needs a furnace and a sewer line you didn't know about."
Watch-outs
- Power off means untested systems. No utilities, no real inspection of the furnace, water heater or plumbing.
- Winterized homes. De-winterizing and re-winterizing may need HUD's process. Follow the listing instructions. Damage from freezing is the buyer's problem.
- Lead-based paint. Homes built before 1978 have lead paint rules. On some FHA owner-occupant sales HUD stabilizes defective paint. Otherwise it's as-is.
- Mold and radon notices. HUD includes addenda. Read them with the buyer.
- Condos. Get HOA documents, dues, special assessments and confirm FHA project approval if using FHA.
- Don't diagnose. You're not the inspector. Say "the inspector found" and stick to their report.
This is training for real estate agents. It isn't legal advice. HUD's current listing terms control. Check with your managing broker.
Questions
Can a buyer inspect a HUD home after the bid is accepted?
They can look, but there's no contingency. HUD doesn't renegotiate. Inspect before.
Who pays to turn on the utilities?
Usually the buyer, through the utility companies, following HUD's activation process.
Is the PCR enough?
No. It's a quick snapshot, often with the power off.
Does HUD do any repairs?
Generally no. Small exception: lead paint stabilization on some FHA owner-occupant sales.
What if the furnace is missing?
That can make the home uninsured (UI). Standard FHA won't close. Look at a 203(k). See HUD financing codes.
Brian Lee Burke is the founder of PadLeaders, a Colorado real estate broker licensed since 2003, team leader of The Kenna Group at Keller Williams DTC (formerly Kenna Real Estate Group) and the author of Mastering Real Estate and The Real Estate Playbook. More about Brian.