There is no inspection contingency in a HUD contract. There is no appraisal contingency either. What there is instead is a written earnest money forfeiture policy, and the asset manager applies it the same way to everyone. Know it before you bid.
The deposit
HUD earnest money is fixed: $500 on homes priced $50,000 or less, $1,000 on homes priced above $50,000. It is delivered within 48 hours of acceptance as a cashier’s check or money order payable to HUD or its closing agent. Personal checks are not accepted. More on the deposit itself.
Owner-occupant buyers
| Why you cancelled | What you get back |
|---|---|
| Your lender denied the loan and you sent the written denial to the asset manager before the deadline | 100% |
| You died, or you (or your spouse) was deployed or lost a job and it is documented | 100%, at HUD’s discretion |
| You could not get financing because HUD’s appraisal came in low and you could not cover the gap | Usually 100% with the lender’s letter |
| You changed your mind, found another house, or did not like the inspection | 50% forfeited; the other half refunded |
| You missed the closing deadline and did not buy an extension | Typically 100% forfeited |
Investors
Investors forfeit the entire deposit if they do not close, for almost any reason. HUD assumes an investor bid with cash or knew the risks. The one exception is a HUD-caused failure, such as HUD being unable to deliver clean title.
How to cancel cleanly
- Tell your agent first. The cancellation goes through the asset manager on HUD’s form, with the reason.
- Attach the evidence: the lender’s denial letter, the deployment orders, the termination notice.
- Do it before the closing deadline. A cancellation after the deadline is a default, and defaults forfeit.
- Expect the refund by check from the closing agent in 2 to 4 weeks.
The inspection trap
You are allowed to inspect a HUD home within 15 days of acceptance, at your cost. What you are not allowed to do is cancel for what you found and keep all of your money. If the roof is worse than the property condition report said, an owner-occupant walks away with $500 of the $1,000. That is why we tell buyers to inspect from the sidewalk before they bid, and to bid only on houses they have already walked through. What to look for before you bid.
A plain-English example
A buyer in Pueblo got an FHA denial on day 28 because a collection account appeared during underwriting. His lender wrote a one-paragraph denial letter, his agent uploaded it the same afternoon, and the full $1,000 came back three weeks later. A different buyer in Greeley cancelled on day 12 because she “got a bad feeling” from the inspection. She got $500.
Not sure which rule applies to the house you are looking at? Call or text 303-955-4220. A live person answers, and the answer is free.
Written and reviewed by
Brian Lee Burke, Colorado HUD home specialist and team leader
Licensed Colorado real estate professional since 2002 · REALTOR® · Team leader and licensed broker of the Kenna Real Estate Group at Keller Williams DTC, a HUD-registered group that regularly bids on HUD homes · Author of The Real Estate Playbook and Mastering Real Estate. Brian’s full HUD biography.
Last reviewed: September 9, 2026 · Sources: HUD Home Store (hudhomestore.gov) and HUD program guidance, HUD Handbook 4000.1, REcolorado MLS data via kennarealestate.com, and the Kenna Real Estate Group’s own HUD transaction files.
Contact: call or text 303-955-4220 or homes@kennarealestate.com. During office hours you reach a live local Kenna real estate professional, not a robot or a national call center. Brokerage: Kenna Real Estate Group at Keller Williams Realty DTC, LLC, 6300 S Syracuse Way, Suite 150, Centennial, CO 80111. Each Keller Williams office is independently owned and operated. The Kenna Real Estate Group is an independent real estate team and is not affiliated with or endorsed by HUD or any government agency; official property information comes from HUD Home Store. Equal Housing Opportunity.
Free guide, PDF
The Colorado HUD Home Buyer's Playbook
How HUD bidding really works, the nine ways buyers lose, and the bid worksheet. 18 pages, free.
Why you want it before you bid:
- The 15-day owner-occupant window, day by day, so you never miss a deadline
- The net-to-HUD math HUD actually scores, with a one-page bid worksheet
- The nine ways buyers lose a HUD home, and how each one is avoided
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