Let's face facts...buying a foreclosure isnt exactly a simply process. In fact, some would say the entire process sucks.
But, it can actually be even worse than you thought originally for your client without recognizing these 10 simple red flags. Knowing what to look for can save your clients thousands of dollars in the long run...
1. Air Quality: The air quality inside will tell you a lot about the over-all condition of the home. Musty or dirty smells can mean mold and mildew has developed. Perhaps a water leak...perhaps a leaky roof. Make sure you include air and surface testing in your home inspection. Yes, it costs money. But, that is a few hundred dollars well spent.
2. Peeling, bubbling or discolored paint: 9 times out of 10 this is caused by moisture...moisture that can cause mold. Swelling in walls or ceilings or a musty odor immediately point to water damage. Make sure you check the major surfaces in all areas around the kitchen and bathroom and UNDER these same rooms as well.
3. Missing sinks or other fixtures: We have all seen the news stories of disgruntled home owners that have been foreclosed on tearing out kitchen cabinets, toilets, sinks, etc. Make sure that, if the home you are looking to buy is missing these things, that they were removed properly and not simply torn from the wall or floor. That is the difference between replacing a toilet and replacing a wall, a floor, some plumbing, and a toilet.
4. Unheated during the winter: If the home was winterized properly, you have nothing to worry about. But, if not...there is plenty to worry about. Without it, water in pipes can freeze cracking seals, cracking pipes (both inbound and outbound) and potentially causing major water damage. Check all water lines leading to and from water heaters and all fixtures and the drain lines leading to the main sewer line until it leaves the structure.
5. Fungus growth: Fungus requires water to grow. If you find mold, there was or is water there. However, water flows downhill. So, look for the source of the water above where you find the mold.
6. Blocked drains: Blocked pipes will cause any number of potential issues including a sewage backup. Make sure all of your drains work properly and toilets flush with no issues.
7. Older homes with lots of renovations: Check with the city. Hopefully, these major renovations are tracible by being able to pull permits for the work that was done. Many older homes had asbestos (either in the insulation or in the tiles used). Make sure that any disturbance to this type of material was handled by trained professionals and that they potential risk is eliminated.
8. Excessive painting: Any "fresh" paint is subject to inspection. Especially if they felt the need to paint the molding, doors, even the wood floors. This is one of the main ways that people try to cover up the existence of mold. Out of sight, out of mind, right?
9. Discolored subflooring: When you are inspecting the basement, make sure you look up. Check out the subfloor above your head. Make sure you look for any evidence of discoloration or darkening stain residue. Also, look for holes in the subflooring that moisture could gather and create potential hazards later. Inspect those well to ensure they are dry and dont contain mold already.
10. Dingy walls or black cobwebs: If the walls have a dingy grey film on them or the light fixtures have a thin black cobweb-type appearance, you may be dealing with soot damage. Soot damage would be from several potential sources: a previous fire; a plugged chimeny associated with a wood stove; maybe even a malfunctioning furnace. Have your chimneys professionally cleaned and make sure that the furnace is tested by people that know what they are doing.
Yeah, you can get a great deal on a foreclosed home. But, knowing what to look for when in the buying process is the difference between getting a great deal...and buying a money pit.
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This is an awesome list! We need to get this to be a Featured post. Great info Clint, I recently had a client with a "Fresh Paint" problem. Turns out the sellers were trying to cover up toxic mold!
Excellent points. I have a pretty good sense of smell which goes a long way when showing foreclosures. I point out problem areas, but before you get too far down the road, a couple of hundred for an inspection can save you headaches and heartaches down the road, plus sinus infections, etc. Very well put.
Jennifer -- Thank you so much! Im glad you liked the post that much! When I was buying my home in June last year, we found a home that I suspected was trying to cover mold. Who paints the wall below the sink INSIDE the cupboard??? Red flag!
Very good list. I have seen all the points here. Depends on the buyer and their level of skill and confidence in construction, whether a project is too big for them. It is good for them to see the facts presented here.
This is a great checklist for clients to have and shows them some of the more common pitfalls. Everyone things that the foreclosure and bank owned homes are the best deals out there. Sometimes, they end up costing the buyer more than an owner/occupied home does tha tis not in distress.
Don -- Thanks! I completely agree on the inspection. Worth every penny!
Michael -- I have heard them all before...thats why I figured Id write them down finally. ;-) And Im not a handy man type person. if it requires more than hanging a picture level, Im hiring someone. :-)
Christine -- Thank you very much! And I agree with you!
Clint, with all due respect not sure why this list is geared towards just foreclosures. Isn't this true for any home and/or seller?
Blair -- No offense taken, my friend. And, surely this would apply to any listing regardless of the title associated with it. However, I have personally witnessed a good portion of these in foreclosures. Ergo, I decided to list it speciically for the clients interested in buying a foreclosure property. But, I get your point for sure.
Nice....we see it all the time and the copper gone.
Always inspect, yet know most of the time the bank will not fix.
In Ann Arbor the Health Dept requires a well and septic inspection. The banks know this so will do them as it requires a transfer of deed.
Missy -- The missing copper is a big one. Pretty easy to tell if this happens, tho. :-) Big holes in the walls and ceilings.
I think that you covered most of them. Too many times I have seen the paint one done.
Nicholas -- Yes, I hear horror stories all the time of sellers trying to cover mold with paint. Bad deal all the way around when it does happen.
Clint, very good article straight to the point. We have had problems in the past that were uncovered.
Excellent points, but to be fair, this is why inspectors are hired.
Ted -- Thanks! Much appreciated!
AA -- Amen! Inspectors should catch this kind of stuff...but, a smart person can save a bunch of money by spotting it themselves and not have to pay for it. :-)
Agents need to understand some of the additional risks foreclosures present so they can make sure the client knows what they might be getting themselves into. A home inspector can't see through walls and floors or know what kind of stress a house was put through sitting vacant. Some of these homes are vacant for years.
Yvettte -- I completely agree! :-)
Great post-glad you're featured-they need signs that say AS IS -- What part of FORECLOSURE do you not get Mr. Buyer???
Hey Clint. I am going to open a little can of worms here and hope others weigh in on what I say.
I used to list REO (bank-owned homes). It was ALL I did. I would have to disagree with Point 4. I have seen many winterized homes that still had either sustained freeze damage, either prior to proper service or because a small amount of water was left in the lines. These homes can sometimes be abandioned by the homeowner, or they can be holding out inside without central heat prior to the bank taking possession.
THERE IS ABSOLUTELY no way that you can catch every part of the house's history, and anyone who knows anything about the home is usually long gone.
The banks I worked with did not allow much negotiation, if any at all, beyond the accepted-offer phase. If you did your inspection after your offer, hoping to renegotiate, you were SOL. The banks would come back and say, "The property was offered as-is. No renegotiation." And in my area, they would not fix to bring to FHA standards.
If I were looking for a bank-owned home, I would probably make friends with someone who bought investment property as a serious hobby. I would make a list of 5 homes I was interested in, visit those with my friend (sales agents are not home inspectors and can bring liability to the brokerage if they act as such). I would ask my friend to help me narrow down my options, and I would get a home inspection for the one I liked best PRIOR to making my offer. Prepare to dewinterize and rewinterize at your own cost. I successfully negotiated cost for that into a purchase and sales agreement once, but it is unusual around here that a bank will pay for that.
I think that there is much less room for emotion when purchasing a bank-owned proerty. Unless you were born in the property and feel compelled to purchase it, be prepared to walk if the cost or scope of repairs is beyond your means.
KWR -- I know, right? Thanks for the kind words.
Diane -- I dont think your point on #4 is really accurate. PROPER winterization would mean that it was done correctly in an event to avoid damage. In the instances you named, that was not done. :-)
And, I would only do an inspection prior to an offer for that very reason. If the bank isnt willing to accept that, I would move on.
And, i think you have some really good advice with regards to a serious investor type person escorting you through the property. Great idea!
Those bad properties are always such a pain to move. Property AND Buyer have to qualify!! Good 'fungus among us' blog.
I guess what I meant is it can LOOK proper, and be done by a licensed plumber following proper procedure and you can still have issues afterwards. Just because there is antifreeze in the toilet bowl doesn't mean that the integrity of the system isn't breached. It ran close to $500 a couple of years ago to dewinterize and rewinterize to test the integrity. One big problem is heating systems that rely on water. Damage isn't as easy to see. Of course, if the copper is gone, it's a moot point!
Good blog - & very useful advice for buyers who think that buying a foreclosed property is going to mean they get a real "deal". Might be a good "deal" of cost & aggravation that they get!
Great tips! Many home buyers think they'll get a great deal on a foreclosure home. But, they never consider the time and money it will take to "fix" these homes to bring them back to their former glory. Many of the foreclosure homes for sale now need so much work that they end up costing full retail price after the repairs. A full CMA and repair analysis should be done when buyers are considering a foreclosure home.
Clint, this is a very good post and very detailed. Sometimes people don't think about all the items that are possible to contend with.
I have found that even homes in good shape originally start to smell bad if left sitting long enough.
great blog and lots of stuff i did not think about thanks for posting definately need to reblog this one
Great blog! We find tons of little red flags in these homes and in most cases, it adds up to not so great a deal when all is said and done. Occasionally you find a good apple - I bought a foreclosure that had been on the market before foreclosure and so the folks had moved out way before getting evicted, and didn't damage the house. Our worst expense was the well for the sprinkler system was bad, so we had to replace that. But rare indeed!
With the weather we have here and the length of time these suckers sit vacant (I've been watching one near one of my listings, it's been empty for over 2 years now and still not listed), there are a lot of issues involved.
Carla -- Yes, they suck...pretty much on every level. :-)
Diane -- Yeah, the missing copper is a pretty big clue that something is a-miss. LOL
Nancy -- "good deal of cost and aggrevation" Awesome point.
Steve -- And, when you calculate those costs, it is often times as much or more than buying a home that is not in foreclosure.
Mark -- Agreed....and thank you for the kind words.
James -- Amen!
GMS -- Thank you so much, my friend.
Sheree -- There are far too many to mention, but these are the biggies for me. As with anything, there is an exception to the rule, but for the most part...not. ;-)
You just never know what to expect out there. Thank you for this thought provoking post about things to be aware of in advance.
Good information. Sometimes using all our senses as well as some common sense can save our buyer's a ton of hassle and headaches later on. Glad to see this kind of information featured. Thanks.
I will posting a link to your post on my Facebook Business Page for sure!
Wendy -- You are quite welcome!
Cindy -- Thank you! Very pleased to have been featured as well. :-)
Dee -- Awesome!
Great blog....worthy of a reblog. Thanks
Damon -- Thank you so much!
Clint,
What happens when my cleint wants to buy a home that has ALL TEN of these issues present???
;)
The only time we don't inspect foreclosures is when the buyer is a trained conrtactor and has experience will ALL the issues that could come up.
David -- Either have him checked for a mental deficiency...or fire the dude. :-)
Excellent list Clint! We all focus so much on "to do" lists for normal sellers and buyers that we forget a list like this. Now you need to do one for short sales!
Clint - This is a terrific list, my man. I guess I haven't sold many foreclosed properties, although that could certainly change. :)
In Florida, without the electricity for air conditioning during the spring-summer-fall months, this can cause terrible mold problems.
The list is outstanding. You have covered all the bases. I think inspections are necessary on everything even new construction. On a foreclosure I would be tempted to walk away from a buyer who refused an inspection.
Some of these look good when we see the price but if you factor in the needed repair you might better buy a traditional home and not take the risk.
This is a great list Clint. You just never know what to expect, so should alway have a home inspection and expect the unexpected.
Some of the forelcosures I have seen have been very scary. Several needs thousands of dollars of work. The "winterizing" often doesn't seem to work. I have seen various mold factories in foreclosed homes and trees growing out of the roof and gutters.
This is a good list Clint and well worth the feature. Thanks.
Yes, I've seen all those things except frozen water pipes which doesn't happen here.
Great advice for buyers/investors who are considering the purchase of a foreclosure.
Barb -- A list for short sales???? Oh, dear Lord... LOL! :-)
Jason -- Thanks, my friend.
An -- It is especially important to check these things in homes where electricity has been shut off. No electricity usually means no heat.
Tom -- Agreed
Terry and Bonnie -- I agree completely!
Roland -- Amen, brotha!
Joan -- Same here...especially the trees in the gutters thing. LOL
Wayne -- Thank you!
Richard -- Even forgiving climates can cause issues. ;-)
Christine -- Thank you!
Good morning Clint,
Excellent post with some great advice to buyers looking at Forclosure properties!
Dorie -- Good morning to you too!! And, thank you very much! Glad you liked it.
This is a great list and is exactly the reason we do a home inspection whenever we get close on an approval. Investors always love to see the home inspection and repair estimates because they need to know what they're getting into and we love giving that to them. I'd also add all forms of roof issues to this list. You talk about basements and subflooring but we've definitely had more roof estimates done recently than we ever have before! A simple rafter issue, caving or even a soffitt looking a bit unfinished can be investor turnoff's and can get expensive when looking to repair.
Jorge -- The ones I included in this list is all things I would expect a potential buyer or buyer's agent to see in places they can look. Roofs really are hard to see. :-) Definitly something that inspectors should be all over, however. So, your point is well taken. ;-)
Great Information. This is useful stuff. Hopefully it will be a featured blog. Agents are paying for this information. Thanks.
We see lots of freeze damage here in the Northeast, and then followed by water problems like mold/mildew. Yuck.
Good tips. Foreclosed and distressed homes can be great values; but they come with risks. As an Investor, the risks are well worth it; however, future homeowners need to be careful and understand the cost of repairs.
Looks like one of the houses I showed yesterday, the bubble in the ceiling was filling up so fast with water it look like it was about to explode. Buyer beware when it comes to foreclosures. Excellent post.
Niema -- Ummm...it was featured. :-)
Erica -- Freeze damage is never any good...
Aaron -- Agreed.
Diane -- LOL! I hope you got pictures of it!
Clint looks like you've been moseying around some of Lee's REO's LOL!
Nice post Clint! I've reblogged it!
Pam -- LOL!!
Michael -- thank you very much!