New home buyers should be extremely cautious about hidden property defects in a foreclosure real estate purchase. Recent national real estate data reports that the majority of real estate transactions are now part of a foreclosure process. At the same time, a significant percentage of these buyers forego the recommended professional home inspection process. Buyers are skipping this careful inspection process in some cases because they have been misinformed by the bank, and in others that the property will only be sold “as is” and repairs will not be completed. As an experienced real estate inspector (involved in hundreds of foreclosure inspections), I can report that the “as is” rationale for foregoing a professional home inspection will not only cost the buyer thousands of dollars in purchase price and lost for repair, but also putting the buyer’s family at risk from undiscovered environmental and safety hazards.
Having a foreclosure home inspected by a diligent professional is just as important as inspecting an available owner-occupant home, perhaps more so. Sellers and their representatives are required to disclose all known significant defects. But, if a foreclosed home is owned by a bank, the bank has never lived in the property, so there isn’t likely to be much information in the disclosure statements. In this situation, it is especially important to take the necessary measures to know the true state of the property. Homes typically go into foreclosure because the owner can no longer afford the mortgage payments and has moved out. As a result, maintenance and repairs are also neglected. In many cases, the landlord or tenant gets angry and actually removes or destroys major systems in the house. It is critical that buyers know the condition of the structure and all major systems. Only a Certified Real Estate Inspector will provide that information.
The “as is” statement has been promoted to mean that the bank will not repair any defects found. My experience is the opposite. My inspection clients have reported that banks are often sensitive to costly or safety-threatening defects reported by a certified inspector. Even if the bank is unwilling to negotiate on discovered defects, the information the buyer receives from a thorough home inspection is invaluable in making an informed purchasing decision. And even if there are plans for a significant remodel, why risk discovering problems with the furnace, foundation, or structure after you close escrow and get to work? It’s best to eliminate any big financial, environmental, and safety surprises by knowing about issues up front by getting a detailed home inspection. The inspection process is really the only way to find out if the foreclosed property is really a good financial deal or not.
Home buyers, banks, or sellers should engage the services of qualified, trained, and experienced home inspection inspectors. It is also extremely important that the inspector be a certified member of a well-founded professional association such as ASHI (American Society of Home Inspectors). ASHI is the nation’s oldest and largest inspection association. Certified ASHI inspectors must adhere to the CREIA Code of Ethics and follow the Standards of Practice developed and maintained by the Association. Recognized by national consumer associations, these Practice Standards are considered the source for the home inspector’s Standard of Care by both the real estate and legal communities.