What is the Usual Condition of a Foreclosure/Bank-Owned or Short-Sale?

If you haven’t bought a foreclosure/bank-owned or short-sale property in a while (or ever), you probably don’t know what the typical condition of such a property is. Here’s an idea of what to expect…

I’m working with a buyer who is buying a foreclosure/bank-owned property and did a home inspection this past Tuesday - here is what the inspection revealed:

1. Exterior wood rot on upper rake and gutter boards, front window and door
2. Gutter is falling - re-secure nails and gutter
3. Re-wire attic fan
4. Re-connect dryer vent in attic
5. Repair 2×4 lateral brace by chimney
6. Replace leaking interior hose bib shut-off valve
7. Upper bathroom has loose toilet and tank - repair
8. All windows are currently painted shut (thank you to Cheryl A for catching my previous typo - oops!) - free up for operation
9. Repair small leak on lower powder room vanity trap
10. Replace house roofing - interior attic system has severe black mold buildup - replace shingle and plywood - treat or clean attic trusses

How does this inspection compare to others? I have seen much worse and greater items on foreclosure/bank-owned and short-sale properties than this. Items 1 through 9 are typical if not less-than average. Item #10 is big item that is cause for serious concern though it’s not the end of the world. Check out photo of the mold below…

The good thing is that, even though foreclosure/bank-owned and short-sale properties are sold “as is”, banks are typically willing to fix mold issues. And once the necessary repairs have been made, the mold will no longer be an issue. The word “mold” is very scary to banks for a variety of reasons. Banks may either repair the mold issue or credit the buyer the amount to fix it themselves.

This home inspection is just one example of what issues you will come across. Here’s a partial list of some other common items you may see…

• water damage in ceilings/walls from leaky/busted pipes
• water damage in basement due to sump pump not working because property has no electricity
• missing appliances/fixtures
• electrical outlets not functioning
• window seals broken/leaking
• AC condensation line is leaking
• hot water heater is leaking
• bath tub stopper not working properly
• shower diverter not working properly

In the end, you have to add up the cost to purchase with the cost to fix and see whether it’s still a deal or not in the end. Foreclosures/bank-owned and short-sale properties should already be discounted to reflect the cost of fixing them up, but do the math and double check yourself before proceeding with the purchase of the property. Better safe than sorry.

One more thing…if you’re looking for the “perfect” foreclosure/bank-owned property or short-sale with no issues, good luck. If it were in that good of a condition, it would be more expensive to reflect the repairs and condition. You’re not going to get a foreclosure/bank-owned or short-sale property (or any property for that matter including new construction) that does not have at least a few issues that need attention.

Hope this helps. Let me know if you have questions or concerns or if you would like me to go into more detail about anything.

CLICK HERE TO SEARCH FOR FORECLOSURE/BANK-OWNED PROPERTIES IN LOUDOUN COUNTY

CLICK HER TO SEARCH FOR FORECLOSURE/BANK-OWNED PROPERTIES IN THE FAIRFAX COUNTY AREA

Local Government and Banks Discuss Short-Sales, Foreclosures and Loan Modifications

The Dulles Area Association of REALTORS® hosted a symposium yesterday with banks and REALTORS® to foster a greater understanding of the mortgage options for troubled homeowners and challenges arising from complicated real property transactions such as short sales. The event was held at George Washington University’s Ashburn campus and featured Congressman Frank Wolf and “top dogs” from HUD, the FHA, Bank of America and the Virginia Mortgage Lenders Association.

I wasn’t sure what to expect of the event because I was afraid politics and “prepared speeches” would get in the way of actually getting things accomplished (or at least discussed openly and honestly). There was a discussion/Q&A session at the end, but not much commenting came from the “top dogs”. And as far as the “advice” given, none of it was anything many of us didn’t already know.

It seems the people near the top of these organizations/companies are out of touch with what’s really going on in real life. Or maybe they do know, but don’t want to admit it or do anything about it.

For example, one agent commented how bank negotiators never return phone calls nor emails regarding the status of a short-sale in process. The response was, “Be patient. We get 180,000 phone calls per day and we don’t have the manpower to support the volume.”

So you want people to sit around for up to 6 months before you bother to get back to them? That’s your advice?! Gee, thanks. I feel much better now

How about this…You received TARP money (aka millions of tax payer dollars) plus you’re saving thousands of dollars by working out a short-sale rather than going the foreclosure route - so hire more (competent) people!

Another example (which I have been fortunate enough NOT to experience) is that the short-sale and foreclosure departments at the same bank don’t communicate with each other. Banks have been known to foreclose on a property in the middle of a short-sale negotiation (with the same bank). It’s 2009 - there are land lines, cell phones, email, IM, text, Twitter, Skype, etc. There is no excuse for such a lack of communication between two departments within the same company.

They defended the new HVCC appraisal guidelines quite a bit even though every agent and most sellers, buyers and those trying to refinance since May 1 have a horror story (or five) to share thanks to the HVCC.

And not too much new was talked about working out a loan modification. Things such as term length increases were number one on the list of possibilities with lowering the interest rate close behind. Either way, you have to prove to the bank that you can’t afford your current (or soon to be adjusted) monthly payment due to some form of hardship.

The point is…there are lots of issues and new problems arising from foreclosures, short-sales and the new appraisal process and not much is being done about it. As a consumer, make sure you’re properly educated and be prepared for hurdles along the way. And if you’re selling your house “short” or buying a foreclosure or short-sale property, make sure you have an experienced agent who knows what they’re doing when it comes to these types of transactions (I may know of one).

Related Articles

A Seller’s Guide to the Short-Sale Process

10 Questions To Ask Before Writing an Offer on a Short-Sale

10 Things to Look Out For With Bank-Owned Property Contracts

Do You Qualify for a Loan Modification?