FORECLOSURE HOUSES

Most foreclosure properties are referred to as "distressed" properties and are usually sold "as is," that means that the 15 percent discount you just saved on the purchase price can easily be eaten up by unforeseen expenses. These expenses include repairs not immediately apparent in an exterior inspection.

Many owners of homes that go into foreclosure have been struggling financially, which usually means that the house has not received needed repairs or general maintenance for a while. Some homeowners who lose their property to a lender frequently damage the property. So be prepared to do renovations and repairs.

Your offer should include an inspection contingency period that allows you to terminate the sale if the inspection reveals unanticipated damages that the bank will not correct. Banks always want to sell a property in "as is" condition. Most will allow you to get all the inspections you want (at your expense), but they may not agree to do any repairs. But they might agree to correct safety hazards or items to make the house liveable.

Even though you agreed to “as is," always give the bank another opportunity to make repairs or give you a credit after you’ve completed your inspections. Sometimes they’ll re-negotiate to save the transaction instead of putting the property back on the market, but don’t take it for granted.

You need to know about the physical condition of the property and make sure that the defects, deficiencies, or system inadequacies are within your acceptable limits

Be Sure to Get a Bank-Owned House Inspected

Always, and we're not just saying that because we're inspectors. You are going to live there and need to know the safety, structural, electrical, plumbing and HVAC issues before you feel comfortable moving into the house.

Reason #1 - They've Been Vacant

Bank-owned homes typically have been vacant for long periods of time. Homes are like machines: they are designed to be used, and when they are not used, problems begin to arise. You probably wouldn't buy a car that you know has sat unused, outside for a year, without careful evaluation. A home is very much the same. Issues such as broken windows, storm damage, pest infestation, broken pipes, and vandalism can go unnoticed for weeks. The home’s ventilation system is typically not running which may lead to moisture issues in the home. A home needs someone in it every day to notice small problems, which generally lead to large problems.

Reason #2 – Foreclosure Rage

This is not so common, but it can result in a little more work on your part in making the home look nice. There has been a trend by some owners to start damaging the home that they are leaving during the foreclosure proceedings. Holes in walls and doors where fists and feet went through are the most common example. Another is damaged wall sockets that people yanked plugs out of them. Sometimes you will find missing light fixtures, appliances or parts to the appliances. Sometimes it's just a case of the owner having no money to make repairs, so little things went undone. You may find that you will have to cleanup after the previous owner, who may have left their personal effects behind.

Reason #3 - The Utilities Have Been Off

The utilities to most bank-owned homes have been turned off for extended periods. With the heat or air not running, the home is dependent on mother nature, which could mean broken pipes from freeze damage, or mildew or mold from humidity or a leak. With the water turned off, some valves, washers and toilet parts can go dry and become brittle. Water heaters are susceptible to damage without power and/or water. Turning the utilities back on will stress the plumbing, HVAC and electrical systems in the home. Never turn the utilities on yourself - always insist that the bank or bank’s agent to turn these systems back on. That's why inspectors ask that they be turned on before they get there. Having your agent actually check that ALL the utilities are on before the inspection is recommended. Seeing is believing and, with inspections, the only way to know for sure is to have everything operating in order to gain the most knowledge about what things will need repairing.

Reason #4 - Banks Need a Report Before They Agree to Pay For Repairs

Even though banks say they will not negotiate for repairs, in some instances they may repair essential items such as safety issues, plumbing leaks, gas leaks, or serious electrical issues. The decisions for these kinds of repairs are made on a case-by-case basis, but almost certainly a bank will never make a repair without a professional home inspection to indicate the need for the repair.

Soooo….

Having a bank-owned home inspected may require a little more preparedness on the part of the home buyer and their realtor. Start early to get the utilities turned on prior to the home inspection, preferably 2-3 days before the inspection. In some cases, home inspections have had to be postponed because the utilities did not get turned back on. In other cases, when the plumbing is turned on the day of the inspection, slow leaks in the supply and waste lines and can go unnoticed.

Bank-owned homes can be an fantastic bargain for smart home buyers. But the smartest home buyers will still have the home inspected to catch the little problems that may turn into large problems, to make sure the plumbing, electrical and HVAC systems are functioning properly, and to possibly have some essential repairs made at the bank’s expense.