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If it is ever necessary to cancel a HUD transaction (contract) it is important to know how to do it and what is the likelihood of having the earns money returned. The answer depends on whether you are an owner occupant or an investor. Owner occupants will receive their earnest money returned where they must cancel a contract due to a death in their immediate family, a serious illness in their immediate family that results in either significant medical expenses or loss of income. HUD will also return earnest money where the owner occupant discovers a serious defect when completing a house inspection or their financing is denied. Of course, the buyer must show due diligence and provide timely notice and must set forth a valid reason/explanation and include all documentation to support the termination prior to the contract expiration. Investors must close and will only receive a refund if there is a title defect and no other reason.