Dealing With The Cost Of Repairs
Now that more opportunities are arising to purchase homes at reduced prices, the buyer has a much wider selection from which to choose. Although not all REO properties are bargains, if you work with a real estate professional who is savvy with foreclosures and real estate owned (bank-owned) properties, you may be able to find something well worth the time it takes to find it.
Both the house and the buyer must qualify for a loan, especially when it comes to REO properties. Once the repossessed property is available for sale by the bank, then there are a number of things you, as a buyer, should do to ensure you are able to successfully purchase it.
Damage To Distressed Properties
Distressed properties, which is a term frequently applied to foreclosure properties, are usually sold "as is". That means that you may soon discover through a quick tour of REOs, that people who have lost their home to foreclosure care little what shape they leave it in when they vacate. Many of the former owners of the homes you may look at have likely been struggling financially for some time before they had to leave the house. Sometimes it can take close to eight months for a foreclosure to complete and the house to be confiscated. During that period, the residents may become angry, and since they are losing the house anyway, decide to do some damage on their way out. The house may not be maintained properly, windows have been broken, appliances are missing, carpeting may be torn up or taken up, there may be holes punched into the walls, and any number of other damages may be evident.
Get A Written Estimate From A Professional
It is wise to hire a licensed home inspector to inspect the property and give you an itemized, written estimate of the damages and cost of repairs. That amount should be budgeted into your purchase price for the house. Even though the bank may offer the house "as is", there is a possibility that some of the repairs may be done by the bank, should you decide to buy the house. Another factor is that the cost of repairs can be part of the negotiation with the bank for the purchase.
If You Say It Right, The Bank May Pay For Some Repairs
Before the offer is officially made, meet with the lender and their appraiser to find out which repairs are mandatory in order to expedite the loan and put a price together to cover the cost of these particular repairs. It may be possible for the bank to accept an offer, including the cost of repairs, if the wording is right on the offer. When making the offer, include the dollar amount necessary for "appraisal-condition repairs" or "lender-required repairs". Either of these terms sells better to a bank than "miscellaneous repairs". Be aware that serious problems can arise if you do the inspection yourself and miss the fact that, say, the roof needs to be replaced. The bank's appraiser may report that the roof is not good and the cost of that project alone may disqualify you for a loan because it wasn't included in the original offer and the risk is too high for the bank.
