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The Critical Eye!

Michael Leavitt’s professional inspection related blog.

Closed To Occupancy - What Does it Mean? Beware of HUD Homes!!!

Closed To Occupancy - What Does it Mean? Beware of HUD Homes!!!

b2ap3_thumbnail_1Michael_Leavitt_160.jpgAs a Utah Home Inspector, I found myself walking up to the front door of yet another bank-owned, foreclosed, and vacant property, I was confronted with a sign taped at eye level to the outside of the front door.

“CLOSED TO OCCUPANCY by order of the Salt Lake Valley Health Department.” The yellow and black police tape was also a nice touch. If you look close at the sign you will see that I removed the address, but this sign was posted back in September of 2012. What does it mean? Is it safe to enter and evaluate? Am I risking my health to inspect this home for my client? And what were the causes of the sign placement?


A little history of the sale process would help put you in my shoes. My client was deemed the “Eternal Optimist” by his Father and I was prepared for a typical REO inspection. The home was being sold by HUD, so I was expecting higher standards. This is the very same HUD that forbids peeling/flaking paint, missing handrails, and obvious mold/rot issues if you are buying a home with their financing, but apparently are willing to shaft unsuspecting buyers with those same issues present when HUD is selling the property. In fact, this home’s accepted offer was for full current market value minus needed interior paint and floor coverings.

In fact, I challenge anybody to get HUD financing and close on a home that occupancy is prohibited by the Health Department. It just isn’t going to happen. HUD knows that all of the above listed items would cause most new buyers to default on the loan after closing and then they would be stuck with a property containing huge issues. But flip the coin and HUD is more than willing to stick it to the buyer who purchases this unsuspected full rehab project with conventional financing. This seems very unfair and unethical. The sign on the door must have raised the “Red Flags” for somebody at HUD in the listing process, but this home is on the MLS with no disclosure of the obvious issues. If you are an eternal optimist, then watch out for bank owned homes being sold by HUD.

Yes, I was brought to this home thinking it was a paint and floor covering project house and left wondering how many thousands, or tens of thousands of dollars it would take to make it safe for occupancy.

I called the Salt Lake Valley Health Department to find out what was behind the placement of the sign. They looked up the file and then the confusion really began... “Mr. Leavitt, it appears that the sign was placed due to utility issues.” What does that mean? They went on, “Sometimes this is because of sewer backups into the home or other issues with the utilities.” This made no sense as there were no interior sewer back-up issues. I pointed out that there are hundreds of vacant homes in the valley that have the utilities shut off and there are no signs on the door. So what gives? “Well when the police were there, there were obvious utility issues but the notes are not clear as to what they at the home.” Police, was there a Police raid on the home? That would explain the bashed in rear door to the home and the large dent in the front metal clad door. “The notes are unclear as to whether there were drug related issues and I cannot tell if there is a meth contamination issue. I don’t see any results and there is no mention that testing was performed. You know we don’t do the testing. This is done by independent testers yada... yada... yada.” Yes I know, I am one of those testers I assured the gal. I went on to share that the sign on the door was not the red sign indicating confirmed contamination from meth, but it was the yellow sign that was placed for an undocumented reason.

By the end of the conversation there was no confirmation as to why the sign was placed and what it would take to get the sign removed. In other words, this home was deemed unfit for occupancy with no clear course of direction as to what was needed to deem it safe once again. And yet, HUD was willing to take advantage of unsuspecting buyers at nearly full market value with no discount applied for the needed repairs. Boy was my plate full with the ensuing 3.5 hours of inspecting time.

The repair list included 184 pictures and 31 pages of documentation identifying the need to replace at least 7 doors and door frames due to forced entries, major ongoing plumbing leaks (even though the water has been shut off for over 6 months... I now, I know, it is impossible), major ongoing mold and rot in about a 40 square foot area, major plumbing pipe ruptures in the polybutylene piping system (complete re-plumb recommended due to the ruptures and the high risk class action nature of this type of piping), as well as everything being 1984 in the bathrooms and kitchens with the exception of the added tile floors that were cracked and damaged from inadequate underlayment and complete removal and replacement needed. b2ap3_thumbnail_BuyerBeware200.jpgThis was a major rehab project for my unsuspecting buyer that would require large amounts of money to pay the men with the white suits and decontamination chambers to perform the flood restoration water damage mold rehab.

So when they say that Utah is a “Buyer Beware” state, they really mean it. This real-life inspection scenario should confirm any doubts as to whether you should get an inspection on each and every home you purchase. Should you get a warm fuzzy feeling when you are purchasing a HUD home? Apparently the answer to that question is “Absolutely NOT!!!” HUD is obviously willing to close on any home, including those “Closed To Occupancy”, and sell it to you for near full market value as though there was little or nothing wrong with the home. The above account is real and gives a huge black eye to homes being sold by HUD.

Michael Leavitt - Orem, Utah - - Michael Leavitt & Co Inspections, Inc.

What has been your experience with homes sold by HUD?

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