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Know the Market of REO and Foreclosures
With so many REO properties on the market, it can sometimes be a difficult task to figure out if the property is a solid buy. Different areas around the Twin Cities have higher concentrated pockets of foreclosures.
One of the first things involved in purchasing a REO property is knowing the market. By not understanding the current market, it can really derail your successful purchase when it is all said and done.
What is happening
Look for trends in the market around the area that you are looking in. Get a market analysis done on the property with the current solds and pending properties. A sufficient number of comparables would be three in the immediate area. Determine if the property is in a declining area or if the market is steady.
What is does the growth of the area look like? Is there any development going on in the immediate area? All good things to look for when looking into the immediate market area.
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The problems with some REO inspections…
So, you just made an offer on an REO foreclosure property and things are moving right along. Wait, that is until you get to the inspection and find out that water can’t be turned on or any other mechanicals for that matter. Stuck, a little worried
What do you do?
This part of the inspection should be made clear before you write the offer on the property. Whether or not the water will be turned on or access to test out the mechanicals will be granted. If they are turned on you’re in the clear. If not however, you can always ask for them to be turned on if there isn’t something immediately wrong with them.
If a home is winterized, the bank might not want to pay for the property to be dewinterized and then it is solely up to the buyer to pay the fees.
Good luck getting an inspector to turn on things on
Before you hire an inspector, they will make clear that they will not turn on anything. Why? Huge liability issues if something goes wrong because they flipped or switch or turned a valve.
If something goes wrong it all comes back them and most insurance providers that inspectors have won’t cover that error. I have heard stories of inspectors being set up so when they turn something on it backfires, not good.
As is means As is
This came about recently in a transaction, at this point it is all up to the buyer. We found a great property for an investment opportunity but the water would not be turned on for the inspection. When we wrote the offer we were aware of water damage because the basement carpet had been removed, water was noticeable when we went through the house.
The client chose not to turn on the water during the inspection not wanting to risk further damage and being liable for it. It is somewhat obvious that a pipe that is broken somewhere but it won’t be known where until the water is turned on.
Just some risks to be aware of when buying a REO foreclosure and inspection issues that may come along with them.
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Will banks pay for assessments on a REO property?
Where to find assessments?
When banks take back properties in the foreclosure process, there is all sorts of unpaid bills on them. One thing that a potential buyer might not be aware of upfront are assessments that are levied on the property. First things first, where can you find information on this? You can always find this information out by contacting the county office to check into assessments on the property, some county websites are also providing information on this now as well.
Will they or won’t they?
In a regular purchase agreement, sellers can agree to take care of any assessments or pending assessments until the house closes. Banks on the other hands have contracts that to take precedent to a regular purchase agreement. This is where you can find out if they will or not.
Make sure this part of the contract is not taken lightly, it can cost you thousands if you are unaware of assessments. If they do not pay any assessments, make sure that it is negotiated into the contract that they will pay for assessments. Most banks won’t let a sale slide because of something this silly that cannot be taken care of on there behalf.
Be confident in asking for assessments to be paid, banks don’t hold any emotional ties to the property. It’s an added cost that shouldn’t be taken on by the buyer. Just ask and you probably will receive.
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