What to do if you can’t view a foreclosure
Inspecting a foreclosed property firsthand is as important as inspecting any potential home purchase. Only by verifying what you are being told in the details can you make a sensible decision whether to buy or not. However it is quite common to prevent an internal inspection of the property until the title has been transferred.
Foreclosed Properties
The current economic climate is causing foreclosures to escalate in the United States. The big manufacturing industries are contracting, meaning that there are mass redundancies in certain states. This change of financial status is causing many homeowners to default on their mortgage payments which will inevitably lead to the houses being seized by the lender through the foreclosure process. The properties are subsequently resold, usually through auction.
The common response to foreclosure actions is that the homeowner becomes less interested in keeping the building in a well maintained state and more focused on survival and preserving funds for the post-foreclosure period of their lives. The condition of a foreclosed property can vary from decaying decor to major structural damage.
As a result, the properties are sold in an “as is” or “buyer beware” condition meaning that no guarantees are given that the house will be insurable and no repairs are included in the selling price.
Background Research
Foreclosure buying always entails more research than you would expect to conduct in a house-buying situation. Most of the financial risk when buying a foreclosure is associated with the title. Often the financially stressed previous owner used the property as security against multiple loans and there may even be defaulted property taxes due to the IRS. In some auction transactions only the principal lien, the first mortgage needs to be dealt with; all subordinate or junior liens on the title are cancelled but this varies from agency to agency and from bank to bank.
Your research also needs to look at the assessed values of similar properties in the same neighborhood and actual recent sales prices to allow you to make an educated judgment of the foreclosed property’s value.
Repair and Remodeling
On occasion the details produced will give a very good description of the “distress” that exists within the property and will provide a reasonable guide as to the scale of repair and remodeling work necessary to bring the building back to its full market value. The US Department of Housing and Urban Development (HUD) provide a comprehensive inspection report that points to major problems with the property however the inspection is necessarily time restricted and if conclusions cannot be finalized in the time of the inspection it is noted as such. So you’ll know you’ve got a problem, say, with the heating system, but you won’t know if it’s major or minor.
Bidding Blind
Is it worth buying a foreclosure without doing the background and, at least, driving up to check the neighborhood, the location and the general exterior condition? Only if you like surprises! Even a house that is fully maintained and up-to-date can provide you with unpleasant shocks when you finally take possession. The worst that can happen is that you will be unable to resell the property at a profit. If you really can’t manage to be thorough about preparing your project and understanding all there is to know about a foreclosure, walk away and spend your money on something more certain like poker.