The Meaning of HUD/fha Escrows
When the Office of Housing and Urban Development guarantees a home loan and that loan defaults, the seller is evicted and HUD takes ownership of the home. These are the HUD listings that people salivate over… you can get them cheap! The government loves to sell their listings and they love to sell them for less than “street” value.
Often with HUD listings there’s usually a section that calls for the amount of estimated repairs for escrow. I previewed a HUD house with another agent earlier today and the HUD/FHA escrow amount was over $3,000. The house needed a lot of work - cleaning, painting, new flooring (the carpet had been removed and we could still see the animal stains on the sub-flooring), the fireplace was a hot mess (heh…), and the railing on the front porch needed to be torn down and replaced.
My colleague said he felt it was too much work for his buyer, but for anyone who was willing to make the effort it could be a real diamond in the rough. The buyer - after closing and if they got an FHA loan- would make the home repairs and save the receipts. HUD would have put the amount that was needed for repairs in an escrow account with the closing or title company. Once the repairs were made by the buyer, they could take the original receipts back to the title company which would then reimburse the buyer from the escrow account.
SOMETIMES, FHA may require an inspection to confirm the repairs were actually made before releasing the escrow funds, but that’s a standard practice.
And now you know … next time you see a HUD house and there’s an escrow amount for repairs, you know that’s the amount you could have refunded to you the buyer from the seller (HUD).








