Thinking about purchasing a foreclosed home? You may be able to take some of the stress out of that distressed-property transaction by investigating how long it’s been vacant, the experts say. With a glut of foreclosed properties flooding the market following the housing crash and economic downturn, many of these homes have sat vacant for months or years.
In fact, RealtyTrac recently reported that owners have vacated more than 167,000 foreclosure properties nationwide, representing 20 percent of all American homes in the foreclosure process.
But like a stagnant pool that quickly grows contaminated with bugs, homes left empty for too long can breed all manner of problems that prospective purchasers should consider.
Some homeowners are angry and bitter about losing their homes, says Marc Israel, attorney and executive vice president of Kensington Vanguard National Land Services, a national title insurance company in New York City. “This situation can lead to intentional damage and destruction caused by the homeowner and years of neglecting basic upkeep.”
For instance, he says, “Major systems and things such as plumbing, electrical and the roof all need regular and consistent upkeep, and when these systems are ignored, the damage that can be caused is significant.”
Terry Martin-Back, a certified general contractor, broker associate and co-owner of Exit Realty Producers in Gainesville, Fla., says theft is another common concern in long-abandoned homes.
“I often find that the HVAC condensing units, appliances, light fixtures and copper pipes and wiring have been stolen. In a few cases, I’ve also witnessed all the cabinets and vanities removed,” Martin- Back says. “Vandalism, ranging from broken windows to graffiti on interior walls, is another issue.”
Extremely cold weather could cause pipes to burst; on the other end of the spectrum, warm and humid weather could encourage mold and mildew growth.
Prior to committing to any distressed home purchase, shoppers should have a thorough home inspection performed by a professional, learn the true value of the property from their real estate agent and ask as many questions as possible from the bank or entity that owns it.
“Learn how long the property has been idle, what repairs or improvements have been made since the foreclosure and if they were permitted and inspected,” Martin Back says. “Ask if any water intrusion or flooding occurred in the home. And did environmental conditions cause the previous owners to abandon the property?”
It may be difficult to get straight answers, because the bank that owns the home rarely knows much about the history or condition of the property, says Bill Golden, agent with RE/MAX Metro Atlanta Cityside in Atlanta.
Unlike transactions where the seller is a private citizen, “The bank is probably not going to make repairs for the buyer based on inspection,” Golden says. “Buy only if the price affords you enough room to take this worst-case scenario into account without over-improving the property.”
In other words, the cost of repairs should not be higher than the amount of money you save by purchasing the distressed property, as compared to other similar properties nearby.
Reggie Marston, president of Residential Equity Management Home Inspections, LLC, in Springfield, Va., mentions that in some cases, for the bank to accept a contract on the home, the purchaser has to waive all inspections and take the home ‘as is.’”
That’s a much riskier transaction, and Marston recommends that buyers always find a “competent team of professionals” to review a property first.
Golden says foreclosures can still be a good value for the right buyers, so long as they are well informed.
Smart buyers who understand the risks in purchasing a distressed, vacated home “can do very well if they carefully shop and negotiate for the home,” Israel says. © CTW Features