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Purchasing a HUD house in Macomb County MI – What does “repair escrow” mean?

February 16th, 2013 · No Comments · tips for home buyers, tips for purchasing a foreclosure

Even though the supply of foreclosures is finally going down in Macomb County, my buyers and I are still seeing new HUD homes come on the market each week.   If my buyers are FHA buyers with limited funds to bring to closing, there is something I watch out for diligently with these HUD homes:  A repair escrow.

Prior to a home being put in the market HUD has the home appraised.  This appraisal determines the market value of the home for HUD as well as notes any repairs or deficiencies that the home may have that would be a “no go” for a FHA mortgage without the items being corrected.  This is where the repair escrow comes in to play.

The addendum that HUD attaches to the home (can be viewed at is quite detailed and will list the items that need to be repaired or replaced along with an estimated dollar amount that it would take to correct these items.

An example:   A home at 123 Main Street in Macomb may be offered for sale by HUD for $50,000.  There is flaking & peeling paint that the appraiser notes must be corrected / repaired, and the appraiser estimates that it will cost $1000 to do this. HUD will accept an offer by a purchaser with an FHA mortgage if the purchaser comes up with an extra $1000 at closing to be put in to an escrow account to insure that this work is done on the home.

Can the buyer add this $1000 in mandatory repair escrow to their mortage?  No.   You cannot finance the repair escrow with a standard FHA mortgage.

Many of my home buyers have the funds for their 3 1/2% down payment as well as extra for the closing costs and/or prepaid items they will need to bring to closing, but the repair escrows on certain homes puts the home out of reach.

All of the HUD homes that are currently for sale in Macomb County can be found at .  Each home listing will have addendums attached, and if the home has a repair escrow you can find that addendum and review it prior to writing an offer on a home.   Ask your buyers agent to do this for you before you even view a home.  You will save yourself wasted time and effort and frustration.

Kris Wales – a partner for your real estate needs in Macomb County MI
Contact Kris – (586) 536-5453
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Important copyright information: All photos were taken by Kris Wales. Do not copy and use photos for your own use, whether it be for personal or commercial purpose. All articles were written by Kris Wales. Once again, do not copy and use for your own purposes. Important disclaimer: Views expressed on the blog by the author and commenters do not express the views of Keller Williams Realty. All information contained is deemed to be reliable at the time of posting but not guaranteed.