The Foreclosure Transaction and what to know – part 1

Foreclosures are sold “as is”, which translates to “the seller is gone and we (the bank) don’t know anything about this property and we will not do anything if we find something amiss, you inspect it and either take it or leave it”.

It is the giant red flag telling sellers to be very careful and to get the best help they can in purchasing this home.

The basic home inspection:

You are permitted to do whatever inspections you wish on the foreclosure property.

The purpose of these inspections is not to find items for the seller to repair, but to find out what you as the prospective owner will have to repair.  Will the repairs found to be needed exceed your budget?

The general home inspector may suggest that a specialist in a specific field be called upon to further evaluate a situation.  It may be the air conditioner, the roof, the plumbing or wiring or any other system or situation. The home inspector does not give estimates for repair so if you require replacing or repairing anything, you will need time to get a tradesman in for an estimate.

In your purchase contract the standard default for inspection time is 10 days, we suggest you amend the contract to give you 15 days to complete your inspections and determine if you will go thru with the sale.    With the possibility of needing time to contact a specialist, get them to the house and come up with a report, you will want every extra day you can get.  The day count starts with the date of the last signature on the contract.  You may be responsible for turning on the utilities for the inspection, even though the contract may say that it is the seller’s job.    That takes a few days.  The gas company will not turn on gas unless someone is at the home to allow them to light the pilot lights, the water company will want someone there for turn on as well.

The bank as sellers will not do anything to correct any problems that have been found, nor do they warrant that there are no additional problems. They may occasionally,  but rarely,  agree to a decrease in price to compensate for the cost of a major repair needed.  They are totally washing their hands of anything to do with the condition of the property.  If termites are found, it is your problem, and it is still your problem even if your lender requires a “clear termite” report or a “clear roof report” (clear meaning that if termites were found they have been treated and if roof leaks were found they have been repaired).

When all the inspection reports are completed and estimates done you will have the opportunity to accept or decline purchasing the property.   If you decline, your deposit will be returned .  If you accept you do so with knowledge of what has been found and no warrants from the seller that there are not problems that are yet to be discovered.

Be sure to read these other posts as well:

The Foreclosure Transaction and what to know – part 2

The Foreclosure Transaction and what to know – part 3

Comments

  1. handy to know! thanks