Foreclosure Property Money Pits – Tips from a Certified Home Inspector
New home buyers should be extremely cautious regarding hidden property defects of a foreclosure real estate purchase. Recent national real estate data reports that the majority of real estate transactions are now part of a foreclosure process. At the same time, a significant percentage of these buyers forgo the recommended professional home inspection process. Buyers are skipping this careful inspection process in some cases because they have been misinformed by the bank, and in others, that the property will only be sold “as is” and repairs will not be completed. As an experienced real estate inspector (involved in hundreds of foreclosure inspections), I can report that the “as is” rationale for forgoing a professional home inspection will not only cost the buyer thousands of dollars in purchase price and losses for repair, but also put the buyer’s family at risk from undiscovered safety and environmental hazards.
Having a foreclosed home inspected by a diligent professional is just as important as inspecting a home where the owner-occupant is available, perhaps more so. Sellers and their representatives are required to disclose all known significant defects. But, if a foreclosed home is owned by a bank, the bank has never lived on the property, so there is likely to be little information in the disclosure statements. In this situation, it is especially important to take the necessary measures to know the true state of the property. Houses typically go into foreclosure because the owner can no longer make the mortgage payments and has moved. As a result, maintenance and repairs are also neglected. In many cases, the landlord or tenant becomes angry and actually removes or destroys the main systems in the house. It is critical that buyers know the condition of the structure and all major systems. Only a Certified Real Estate Inspector will provide that information.
The “as is” statement has been promoted to the effect that the bank will not repair any defects found. My experience is quite the opposite. My inspection clients have reported that banks are often sensitive to costly or security-threatening defects reported by a certified inspector. Even if the bank is not willing to negotiate on discovered defects, the information a buyer receives from a thorough home inspection is invaluable in making an informed buying decision. And even if there are plans for a significant remodel, why risk discovering problems with the furnace, foundation or structure after you close escrow and start work? It’s best to eliminate any major financial, environmental, and safety surprises by learning about problems up front by getting a detailed home inspection. The inspection process is really the only way to find out if the foreclosed property is really a good financial deal or not.
Homebuyers, banks or sellers should retain the services of inspectors who are qualified, trained and experienced in home inspection. It is also extremely important that the inspector be a certified member of a well-established professional association such as ASHI (American Society of Home Inspectors). ASHI is the oldest and largest inspection association in the country. Certified ASHI inspectors must adhere to the CREIA Code of Ethics and follow the Standards of Practice developed and maintained by the Association. Recognized by national consumer associations, these Standards of Practice are considered the source for the Home Inspector’s Standard of Care by both the legal and real estate communities.