What must banks tell you about a foreclosure property?
Financial institutions have no obligations to disclose or fix flaws in an as-is property, so buyers need to do the due diligence and hire seasoned foreclosure home inspectors to make sure they are not stuck with a lemon.
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Q: When a bank forecloses and then sells a house, do they have to disclose any faults or flaws? My friend bought a house that had been foreclosed and didn't get the power turned on to see if the well and heat pump worked. They don't!
A: Though some banks are fixing up foreclosure properties, the vast majority are sold as is, hence these institutions have no obligations to disclose flaws and typically don't know exactly what the defects are, anyway. Moreover, banks are under no obligation to fix as-is homes, and they tend to provide only a narrow time frame for inspections. (Bing: How do foreclosures work?)
So it's usually up to buyers to do the due diligence and a thorough inspection. As your pal discovered, it's not a stretch to suspect that the previous owner of a distressed home let maintenance slide. Further, many such homes are vacant for months with no caretaker. Plumbing and sewer problems result.
Unfortunately, your friend found out the hard way that getting the power restored is a must when examining a foreclosure. Granted, getting that done is not always easy. Banks often state upfront in their special addendums that they won't be responsible for having utilities turned on to allow inspections.
And little wonder: Electric companies often remove a home's electric meter after terminating service, which complicates the whole process. Depending on the site and city, it might cost money to have a meter reinstalled, a permit fee may be required, a county inspector may have to inspect the meter post, and an electrician may even have to conduct an inspection to make sure the house won't burn down when power is restored.
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In short, some would-be owners find themselves forking out $400 to $900 just to get an inspection. As a result, some will drop the deal. Others, like your friend, simply choose to forgo that part of the inspection entirely.
One cheaper way is to secure a foreclosure inspector who can power the entire home with a portable generator to check the furnace, heat pumps, condenser, water heater, appliances, lighting, outlets and any electrically operated well, as in your friend's case. A call to such an inspector will let you know if this is allowable in your area.
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Let this serve as a cautionary tale. As tempting as it is to go it alone in an effort to save some bucks, a foreclosure buyer is always wise to hire a real-estate agent experienced with foreclosure deals and their nuances, get that power turned on and use a seasoned foreclosure home inspector to give it the twice-over. Good luck.
You shouldn't advertise 9 ways to make It better and not put them in. Having a title 9 more ways is absolutely deceiving. I am a Realtor and I hate it when companies bait and switch.
Congratulations MSN you get the bait and switch award for the month.
I find your lack of understanding of the process unbelievable. I am a Realtor who works very hard for my clients. I strongly recommend to my buyers that do their due diligence with inspections. I show them comparables of other similar homes so they know what has sold recently and at what price. Realtors don't ultimately set the prices of homes. If we price the home to high, no one will buy it. If we set it to low there will be a feeding frenzy pushing the price up. Short Sales and Foreclosures hurt all of us. It hurts the communities we live in too. We have to sell a lot more homes to make our own mortgage payments. When the prices get to high we have to worry about our own children buying a home. There is a lot of blame that can be spread around to what happened to the economy, don't blame Realtors. We are the messenger. Prices are going back up, but they are still reasonable in most parts of the country, this is the cycle. If you don't like it rent, I am sure some investor will be happy to take your money every month.
The big banks hae screwed around with the real estate market and continue to do so making billions in the process. Foreclosed homes that have stood empty with inadequate heating and sometimes looted copper piping and looted metal fixtures are all over the map. If the banks were smart they would not let them get into this condition but they just don't care because the transaction phase is all over now and they have made their money.
Investors now have to pick up the slack and buy up these properties as they constitute a blight on many neighborhoods. Do the due diligence to assure that you make a profit and do it soon as many of these properties are moldering away and will be worth nothing soon.
How can you successfully get a good deal on a house, if it is appraised at , say 100k, what should you offer?
The FHA 203k loan is tremendous product to use when purchasing a Bank Owned property. A HUD approved consultant will work with the buyer in determining what repairs are needed or any room additions or major remodeling desired. Once estimates are complete the appraiser with determine the As-Is Value and After-Improved value. The homeowner still only needs a 3.5% down payment of the After-Improved value with escrows. Fannie Mae offers a similar program but is only eligible for Fannie Mae owned homes.
By having a HUD consultant evaluate the property for repairs you mitigate property problems not disclosed by the bank. This is a simplistic overview of the FHA 203k loan but the gist of the utilizing this loan is protection for the buyer from unknown problems not disclosed and a reduction in cash they would have needed to make the necessary repairs. Qualifying for this loan is no different than qualifying for a traditional FHA loan.