Do You Get a Home Inspection With a Foreclosure/Bank-Owned or Short-Sale Property?

You may be wondering if you're able to do a home inspection on a foreclosure/bank-owned or short-sale property prior to writing an offer or afterwards. Well, the answer is "no" and "maybe". The "no" is the easy part - the "maybe" is where it gets tricky.

The easy part…You definitely do not get to do a home inspection prior to submitting an offer. That's the case with most all residential real estate sales - foreclosures/bank-owned properties, short-sales, traditional resales and new construction.

The tricky part…you may or may not be allowed to do an inspection of the property after verbal or written ratification. Let me explain…

Some banks will let you do an inspection of the property within a certain time frame from the date of ratification, either written or verbal ratification. If that's the case, you can have the property inspected and if there are "material deficiencies" (e.g. cracked foundation, water damage, holes in the roof), you can give notice to the bank and walk-away from the contract. You must provide the inspection report noting the "material deficiences" along with the notice that you're walking away within the specified time frame.

But…

Some banks will not allow you to conduct an inspection nor have a clause that lets you pull out of the deal if you find something "wrong with the property" after the contract has been ratified. And no…you can't just ask your agent to "open the door for you" and let you waltz around the house doing an inspection anyway.

The contract will most likely state that the bank will give you "reasonable access to the property" and accessing the property for an inspection that is not agreed upon in the contract is not "reasonable". I'm not a lawyer, but I wouldn't be shocked to find out that the bank may view something like that as trespassing and possibly a breach of contract. (Thank goodness that I've never had to find that out for real)

How do you know if an inspection is allowed and whether there's a clause that protects you and leaves you a way out?

Have your agent find out for you or, if you're in Dual Agency, ask the listing agent (I do NOT recommend Dual Agency, but that's for another post). There are other ways to protect yourself such as putting certain language in your offer, but I won't get into details about that here on this post.

And make sure you find stuff like this out before you write an offer so you're not wasting your time nor getting stuck buying a property that ends up being a lot more hassle and work than you originally thought.