Thursday, September 13, 2007
Lately, almost everything that I’ve been showing to buyers are bank repo homes. Buyers have become accustomed to looking for foreclosures. Now, everybody wants to get a good deal, but that doesn’t have to mean looking only for foreclosures. Many regular home buyers have dropped their prices to compete with the foreclosure market, so not looking at them might mean that you’d be missing great buys there, too.
The repo homes range from stripped or vandalized, basket cases to really nice homes that are in good shape. Many are actually new-builds that bankrupt builders lost to the banks. They might need some light fixtures and plug covers and other finishing touches, but some of these are also in great shape and are very good deals. Lots of the repos that banks have owned for a while need considerable maintenance attention. It’s amazing how fast nature can try to take over a home. Some have been broken into and vandalized. In some areas copper thieves have broken in and stripped all of the copper plumbing out of the houses. In many the jetted bath tubs have been stolen. Most don’t have any appliances either,
Most repo houses have been winterized, which means no water and no power or gas. Some things, like water heaters don’t necessarily take well to being turned off and drained, so expect some leaks when the house is de-winterized. If you make an offer that is accepted, you should ALWAYS de-winterize the house for the home inspection; even if the repo company makes you pay for it. You should also get the power and gas turned on, too, which you may have to pay for, too. Not doing these things will severely hamper your home inspector and give you an incomplete report upon which to base going forward. A good home inspection will give you a list of things that need to be done and allow you to factor those costs into your decision to proceed. Remember that dissatisfaction with the home inspection results is one of the two major “outs” that you have on any deal (the other is inability to get a mortgage loan).
Lastly, make sure that you and your agent check with the Home Owners’ Association (HOA) and the local governmental entities – township, village or city – to see if any unrecorded liens or outstanding debts (like an unpaid water bill) exist that could come back as your responsibility later. The seller (even a bank) is usually responsible for those things, but if they aren't found by the title company you could be on the hook for them later. Banks sometimes refuse to pay for local government or HOA mandated grounds maintenance, i.e. lawn mowing or bush/tree trimming that a city/township or HOA orders done and sends them the bill. You likely would be on the hook for that, too.
If you bid on a foreclosed house, you will get a bank document package that may be 40-50 pages long. Read through the whole thing and have your attorney review it, too. Most of these bank packets are like a legal variation on an old Paul Simon song – they are 50 ways to say “We know nothing! We are responsible for nothing!” You’ll have to sign that document and likely initial every page, to indicate that you read it. By signing it you are relieving the bank of any responsibility for anything; and, guess who then picks up those responsibilities? So the old saw – look before you leap – is really applicable here. Bank-owned houses can be great deals, but they have their own unique set of potential issues. With foreclosures it is even more important to have a good Realtor on your team to run interference and make sure that you see and understand ALL of the risks involved and not just the rewards. Fortunately for you, you already know a good Realtor.