Currently there are a vast amount of foreclosed homes on the market and there are a lot of programs for the first time home buyer that assists them in purchasing these foreclosed homes. There are a few cautions that should be made by any buyer who wishes to purchase a foreclosed home; cautions that may not be as necessary for other homes.
Before purchasing a home most buyers will be provided with a written report from an independent housing inspector that has thoroughly evaluated the house. The purchase and sales contract must first contain an “inspection contingency” with requires the seller to inform the buyer of any problems with the house within a specified time. Should problems be found the contract is either voided with the earnest money deposit being returned, the seller can agree to make the repairs, or he can provide cash settlement for the buyer to perform the repairs. Additionally, before the inspection takes place the buyer must insist that all utilities be in working order to allow for a full inspection.
Many states have certain “seller disclosure” requirements to protect the buyer from purchasing a home that is not in good order. These requirements are similar to the inspection contingencies for home buying. The foreclosed home often does not have the same regulations or requirements leaving the buyer unprotected. Certainly a foreclosed home is often sold for bargain prices; however, some may become a money pit requiring more repairs and investments than the home is worth.
In most cases the utilities of a foreclosed home has been shut off and it is then uncertain, even by the bank that foreclosed, if the plumbing and heating systems are in working order or even if the foundation is faulty or not. Banks selling foreclosed homes are not normally required legally to provide a disclosure stating the home is in good working order. Neither are they required to perform inspections if it is not specifically requested of the home buyer.
Since many of the foreclosed homes on the market today are being targeted to first time home buyers who are inexperienced in home buying it is more important than ever to educate yourselves. With the number of foreclosed homes on the market many of them are sitting empty for a length of time. Additionally many of the previous home owners stopped performing the necessary maintenance and repairs on the home before it was foreclosed. Without inspections purchasing a foreclosed home is a risk; often a risk that cannot be afforded by the first time home buyer.
By stipulating that a full inspection of the property must be made before escrow takes place a home buyer can be protected. All home buyers have a right to a pre-settlement inspection that is added into the sales contract. This final inspection should take place the morning of settlement during the day when everything inside and outside the house can clearly be seen. Should the home fail the inspection the home buyer is not required to close on the home possibly saving themselves the headache and heartache of a money pit.