Buying a Foreclosure Home from the Bank

My home inspections range from 5,000 sq. ft. mansions to modest double-wides, in every stage of condition. This sample report was for a bank-owned home that had been foreclosed upon, which often adds to a variety of unknowns: the utilities have been turned off, electric panel and crawl space have been padlocked, and sometimes thieves have scavenged the property for copper plumbing pipes and appliances. Disclosures, too, are frequently lacking full transparency. The bargain price, however, can sometimes justify the investment.

2016-07-31 07.56.04

FORECLOSURE – A sample inspection report for this home accompanies this post.

I never try to steer the clients one way or the other. That’s not my job. What I do is make sure they thoroughly understand the condition of the property prior to taking possession of it. What kind of safety issues are present? What systems or components are not functioning as intended? Will it be necessary to budget to replace a major ticket item in the next five years? These are the kinds of questions I’m paid to answer. I’m in the crawl space; I’m in the attic; I’m on the roof; I open the service panels on the HVAC and electric panels; If it’s accessible and can be safely accessed without damaging the seller’s personal property, I’m going to visually inspect it, photograph any deficiencies, describe them in my report, and provide recommendations.

Walking the clients through the property and letting them put their eyeballs on the various deficiencies I’ve identified helps them grasp what they’re getting themselves into. It also helps me help them understand the gravity of each deficiency, so that they are not unduly alarmed by the small stuff, nor left lacking full appreciation for a condition or conditions that really should be taken seriously.

Anyhow, here’s a good exercise for any new buyer. Let’s presume you have made a conditional offer on this house that your real estate agent estimates is $25,000 below its comps in the market. During due diligence, I inspect the home for you and provide the inspection report. How would you proceed? Would you: Buy the house; try to negotiate with the bank for repairs or a reduction in price; walk away? There’s no right answer that is universal for every buyer. My recommendation: review the report with your real estate agent, discuss your concerns, ask me for any clarification you may need, and then make the decision that’s right for you!

About Eric Schult

I am a licensed, professional Home Inspector (NC LIC.# 3579) - doing business as OZ Home Inspections, LLC - in the greater Fort Bragg region of south central North Carolina.
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