HUD Homes are sold as-is and buyers need to be diligent when preparing their offers.

When submitting a contract package, there is a Forfeiture Addendum document that the buyer will execute. This document spells out the terms of return of earnest money. These terms do vary from an owner-occupant purchaser to an investor. There is also condition that states earnest money could be returned "for other good cause, as determined by HUD".
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Most of the questions on earnest money returns relate to an inspection and will fall under this condition. Buyers should be prepared that there is not an inspection contingency as would be the case with many other types of purchases. The buyer will be executing HUD'S Forfeiture and Return Policy stating they understand and accept its terms for addressing requests for earnest money returns.