One effect of down housing markets is the number of foreclosure homes that end up in those markets. However, even a down housing market with a higher-than-average number of foreclosure homes presents opportunities for homebuyers and property investors. Foreclosure homes tend to sell for significant discounts and many really are good values, though some need significant inspection and repair. The question of responsibility for inspection of foreclosure homes is normally a matter left to individual foreclosure home sellers, though.
Foreclosure homes are those that have been foreclosed, typically for mortgage loan default or delinquent taxes. Many foreclosure homes end up going to new owners through auction sales, though many also end up with their foreclosing lenders as real estate-owned properties.
Generally, most REO homes, tax-foreclosed homes and homes owned by federal agencies are sold as-is. If you're buying a foreclosure home, you can usually expect to be responsible for all inspections and repairs.
HUD homes, for example, are always sold as-is and HUD never assumes responsibility for inspections or repairs. HUD allows winning home bidders to conduct their own inspections but won't pay for them and won't cancel winning bids because of them.
The same premise holds true for a house, regardless of whether you intend to live in it, or fix it and flip it. The Realtor may be trying to salvage a deal that could possibly be scrapped if an inspector uncovers damage that the bank is unwilling to pay for, and you, as the buyer, have to realize that the agent's advice is not in your best interest. Any Realtor advising against an inspection on a foreclosure or neglecting to recommend that one be performed is ignoring the likelihood that, long before the previous owners stopped making mortgage payments, they deferred required maintenance tasks.
Moisture intrusion leading to leaks and mold are just a few of the major problems commonly found by inspectors in foreclosed properties. Tales abound of bizarre discoveries in abandoned properties, from wild boars to colossal bees nests.
Former owners may loot their own properties, taking with them anything they can pry up or unscrew, and leave behind trash and junk that you have to pay for to have removed. There are also stories of foreclosed properties that have been intentionally vandalized by their former owners in acts of retaliation against their banks. In such cases, it may be impossible to find out how well the home was cared for, or whether major damage was done right before the past owners left the property.
Ask the bank how much time you have after your initial offer to have an inspection performed, and schedule one immediately. That alone is worth the price of an inspection. To find foreclosure homes that are qualified for an inspection, you must work with a buyer agent who will guide you through the process. Here is what you should expect from the home inspection:. If you plan to buy a foreclosed property, you can expect to take on the responsibility of paying for inspections.
Properties owned by the Department of Housing and Urban Development will always sell as-is. Each federal agency has a different policy concerning pre-sale inspections. You cannot preview a tax-foreclosed home before you buy it. On the other hand, HUD homes often sell through approved brokers, making them available to preview before you buy.
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