Buying a foreclosure and fixing inspection items help!

mrsnala · July 2014

I was wondering if anyone had any luck when buying a foreclosure to get the bank to fix some items on the inspection list. We are in the process of buying, and our inspection is next Thursday. I am mainly concerned with the roof, and know the roof has a small hole in it near the garage. Just looking for others stories/advice.

G2SoccerTaz · July 2014

We bought a foreclosure and it was as is.

Usually when you buy a foreclosure, you buy it as is.

OtterJ · July 2014

We were told by our realtor that any property that is bank or government owned is sold "as is." I have no idea if there are ever circumstances where there is an exception to this rule, so ask your realtor if they have any wisdom on the subject.

If you're using a loan to purchase the house, check with your lender to see what their requirements are for the condition of the house. When we shopped for our loan, we asked our potential lenders what type of damage would stop a loan from going through. The answers we received were generally along the lines of:
The house must hold value
The house must be safe (no exposed wires, etc.)
The house must be insurable.

I think it's pretty standard that lenders require you to purchase homeowners insurance, but in our area, we are also required to purchase Wind & Hail insurance for our home. To get Wind & Hail insurance, the roof must have a current windstorm certificate.

When we started looking at houses, we had hopes of finding a great little fixer-upper, but had no idea that there were so many restrictions on the condition of the house that we could purchase. We were still able to find a house that needs some work, and lots of updating, but the main things (roof and foundation) were recently fixed by the seller (it's not a bank or government owned property).

If you're purchasing with cash, then you don't have to worry about lender restrictions. Foreclosures are often sold for far under their value, so it makes up for the fact that you'll need fix it up after you purchase it.

Sisugal · July 2014

After the inspection, get quotes for necessary repairs. Then sit down and see if you can afford them. If not - move on. The bank is not going to pay for them. (If you cannot afford a small roof repair - I would reconsider your financial preparedness to become homeowners at this time)

scooter777 · July 2014

While the bank/lender won't make any fixes, definitely try using a realtor who will provide commission rebates to help offset any potential costs. I'd agree with the other posters that you be prepared to pony up for the fixes. Good luck!

mrsnala · July 2014

Thanks for the advice everyone. We will see how the inspection goes.

And we are already homeowners and are aware of our financial preparedness of being a homeowner.

speakeasy14 · July 2014

We put an offer on a foreclosure about 7 months ago, and still have not closed.

The bank will not do any repairs. If the appraisal comes back with flagged items, and the bank says the house is not mortgage-able until repairs to those items are done, you may be able to get the owner to repair them. If you are not in a rush to move into a house, I would have your realtor request the owner repair any items that fail the inspection and/or appraisal.

For our situation the house is owned by Fannie Mae, and since our offer was more than the listing price, they agreed to do the repairs. The downside, we have no say and they take their time to get contractors and the work done. They could have said no it is "as is,"or change the house to cash only sale; but it was worth having our realtor put in the request. Though waiting months for it to be done is exhausting.

BlueBirdMB · July 2014

Ummm yeah nope. You don't like it, you can walk away (well and usually lose your deposit). You buy as is. In fact we signed like a 50 page document at closing absolving them of all responsibility.

BlueBirdMB · July 2014

And also, we got a great deal on our house because it was a foreclosure. It was totally worth it. We did have to call a plumber and have the hot water tank replaced the moment after we signed on the dotted line.

cmoran · July 2014

the hole in the roof is going to be a problem. depending on where the property is located and the cost of it you could look at doing an FHA 203k or a Fannie Mae Homestyle Renovation mortgage.

see links:

https://www.fanniemae.com/content/fact_sheet/homestyle-renovation-product-matrix.pdf

BlueBirdMB · July 2014

AprilH81 said:

BlueBirdMB said:

Ummm yeah nope. You don't like it, you can walk away (well and usually lose your deposit). You buy as is. In fact we signed like a 50 page document at closing absolving them of all responsibility.

You shouldn't lose your deposit if you walk away based on a valid reason, and a poor inspection result would qualify. You can't walk over a cosmetic reason but if there are issues with the mecanicals, property drainage, deck, safety, etc. you can walk away without losing anything EXCEPT the cost of the inspection.

It depends on the P&S and how it's written. It will tell you specific issues that can get you out of the deposit. And it's not just cosmetic issues. We had a rusted hot water tank and rusted plumbing among other issues.

CItyLimit · July 2014

Most banks dont want to fix a single thing, and would rather sell a house for cash with a huge reduction in price than even think about ding repairs. My first house was a bank foreclosure with a bad roof and damaged drywall, no one was willing to touch the place for financing and the bank finally cut the price almost in half from their original price. I had enough cash on hand to repair the damage within 3 weeks and did a home repair loan via fannie mae, meaning I had to put double the cost of the estimated repairs into escrow, to be released at the end of the 3 weeks as long as all work was done.

If you are looking for a bank to repair these days, its not likely to happen, after the market crash they are just happy to dump them asap with no work. If you can afford a home repair loan go that way, if you can afford straight cash do that, if not, I would move on.

Buying a foreclosure and fixing inspection items help!

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