HUD earnest money is set by HUD, not negotiated. Under HUD's rule (24 CFR 291.205) it is $500 on homes priced at $50,000 or less; above $50,000, HUD sets it between $500 and $2,000, and the amount is shown on the listing and addenda. It is delivered to the closing agent within about two business days of acceptance. Late money means a cancelled contract. The closing deadline is also set by the contract, typically 30 days for cash and 45 days for financed buyers, with paid extensions. Here's how I run the clock so my buyers don't lose a house on a technicality.
The short answer
When HUD accepts the bid, a clock starts. You have about 48 hours to get the signed HUD contract package and earnest money in. Then you have the contract's closing window. Need more time? Request an extension before the deadline and pay HUD's fee. Miss it with no extension, and the contract ends. Whether the buyer gets the earnest money back depends on why, and HUD decides.
Step by step
- Before the bid, have the money ready. Certified funds or whatever the listing's asset manager requires. Don't wait for acceptance to move money.
- Day 0: bid accepted. Text the buyer. Send the contract package for e-signature the same day.
- Day 1 to 2: package and deposit. HUD sales contract (HUD-9548) and every addendum on the listing, signed. Earnest money to the closing agent as instructed. Get a receipt.
- Day 1 to 4: lender moves. The lender orders the FHA appraisal. On an IE home, the repair escrow is set up. On a 203(k), the contractor bid and consultant start now.
- Write the deadline on your calendar. Add a reminder 5 business days before it. That's your extension decision date.
- Need more time? Request the extension on HUDHomeStore before the deadline, with documentation. Pay the fee up front.
- Closing week. Final walk-through against your pre-bid photos. Two sets of documents is normal: HUD's closing agent handles the deed, the lender's title company handles the loan.
- Keys. Hand them over after HUD confirms funding.
A worked example (illustration only)
A financed owner-occupant buyer on a $356,000 IE home:
| Day | Event |
|---|---|
| 0 | Bid accepted |
| 1 | Package signed, earnest money (the amount on the listing) delivered |
| 4 | Appraisal ordered |
| 12 | Appraisal in; repair list matches escrow |
| 31 | Clear to close |
| 38 | Closed, 7 days inside a 45-day deadline |
Extension fees are charged per extension on HUD's current schedule (check the HUD addendum or ask the asset manager). If HUD caused the delay, ask for the extension at no charge; that's how I handle it. If the buyer fails to close, the fee is not refunded, and unused extension days are not refunded either.
Illustration only. Deposit amounts, fees and deadlines come from HUD's current policy and the signed contract. Check current numbers at HUDHomeStore.gov and in the addenda on the listing.
When earnest money comes back
| Situation | Owner-occupant | Investor |
|---|---|---|
| HUD can't or won't close | Generally back | Generally back |
| Financing denied (documented, good faith) | Often back on insured sales | Generally forfeited |
| Documented hardship (death, serious illness, job loss or transfer) | Sometimes all or part back | Generally forfeited |
| Buyer changes mind or misses a deadline | Forfeited | Forfeited |
HUD's forfeiture addendum governs. HUD decides. Bid like it's final.
How to explain it to your client
"HUD runs on a strict clock. If we win, you'll sign the paperwork the same day, and your earnest money deposit has to be at the title company within two business days. If it's late, HUD gives the house to the next person. Then we have about 45 days to close. More time costs a fee, so we'll keep your loan moving every day. And please, don't change jobs, buy a car or open a credit card until we close."
Watch-outs
- Weekend acceptance. Business days, not calendar days, but don't count on that. Move the same day.
- Wire fraud. Confirm wiring instructions by phone with a number you found yourself. Never from an email.
- 203(k) timelines run long. Start the contractor bid before you bid on the house.
- Investors forfeit more. Make sure investor clients understand that.
- Paperwork is the deal. One missing signature or wrong name can cancel it.
- Don't promise refunds. Say "HUD decides," because HUD does.
Extra detail
- Clock starts when HUD signs. The 30/45-day deadline runs from the date HUD signs the sales contract, not the bid date or the acceptance notice.
- Extensions are 15-day blocks, requested before the deadline, fee paid up front. HUD isn't obligated to grant one; it wants proof the lender is actively working the file (a lender letter that the loan is approved subject to conditions). Requests after the deadline are at HUD's discretion and often refused.
- Most common wasted fee. Paying for an extension when the delay was HUD's (title issue on HUD's side, closing agent not ready, lead-paint work unfinished) because nobody asked for the no-charge extension.
- Why HUD loans run late, and the fixes. Late FHA case number transfer; 203(k) consultant and bids; slow utility activation; DPA programs with their own underwriting. Fixes: HUD-experienced lender, utilities and inspection in week one, DPA pre-approved before the bid, ask for the extension a week early.
- Cash buyers: proof of funds. Proof of funds goes in with the bid: a recent bank or brokerage statement in the bidder's name showing the full price plus closing costs (often dated within 30 days; check the listing). A hard-money letter only counts if it's a firm commitment.
- Cash buyers: 30-day close, same extension fees. No appraisal is required, but they should still inspect. Investors who fail to close generally lose the whole deposit.
- Cash doesn't beat a higher net. HUD scores net, not certainty; cash also doesn't let an investor bid during the owner-occupant window. Where cash wins: UI homes, the extended period, homes lenders won't finance, and as a backup.
- Keys come from HUD's field service manager, not a listing agent, and no occupancy or work is allowed before closing.
This is training for real estate agents. It isn't legal advice. HUD's current contract and addenda control. Check with your managing broker.
Questions
Is HUD earnest money negotiable?
No. HUD sets it. Check the current amount on the listing and addenda.
Who holds the earnest money?
HUD's designated closing agent, or as the asset manager instructs.
What if the buyer's loan is denied?
An owner-occupant with documented, good-faith denial often gets it back on insured sales. HUD decides.
How long is an extension?
HUD has granted extensions in 15-day increments for a fee. Check current policy.
Can we close early?
Yes, if the lender and HUD's closing agent are ready.
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.