Can a buyer cancel the sales contract for a HUD Real Estate Owned (REO) Property based on the results of a home inspection?

After HUD ratifies the sales contract, the buyer has 15 Days to:
  • access the Property to conduct any inspections, tests, or risk assessments at their expense; and
  • for Properties constructed before 1978, review all available records and reports relating to lead-based paint or lead-based paint hazards in the Property.
 Before the expiration of the inspection contingency period, the buyer may terminate their obligation to purchase the house and request a refund of the earnest money deposit by providing to the AM:
  • written notice of its withdrawal from the sales contract; and
  • a copy of a home inspection report identifying serious problems or conditions with the Property that were not previously disclosed or corrected, or documentation of the presence and/or condition of lead-based paint or lead-based paint hazards.
For additional information please contact the Asset Manager with jurisdiction over the property.  To locate contact information for the Asset Manager please visit the HUD Homestore website at and click “Help” in the gray tool bar.

For policy information see Handbook 4000.1 IV.B.2.j. at

All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.

Topic Number: KA-03203