by Sean Hess (Sean@StAugTeam.com), Broker and Manager for St. Augustine Team Realty (www.StAugustineTeamRealty.com). Join us on Facebook.
What are the 5 biggest pitfalls when buying a foreclosure?
In the 2012 version Pitfall Harry has to dodge mold covered drywall and failing septic pumps.
1) The bank has never lived in the home, so they can’t disclose anything about it.
The solution? Get a really good home inspector and a really good pest inspector. I’m not being trite.
The bank can’t help you with the home’s history, nor can the listing agent. Everything you will know about the physical condition of the home will come from the inspections. And don’t forget inspecting the septic system, if the home is not on sewer.
Oh, and the bank that owns the home won’t do repairs, either. Which leads to the next item.
2) Despite a good inspection, things will break down.
Budget for repairs after the fact anyway. Things will break down that worked perfectly during the inspection.
Why?
If the home has been foreclosed on it probably sat empty and unused for a while. Because of the lack of use, seals in pumps, appliances, plumbing, wells, etc. may have dried out or suffered dry rot. They will work perfectly for a few times during the inspections, but then fail within a month or two afterwards.
So expect some things to break, and put some money aside for that.
3) Mold.
Yep, that’s the elephant in the room here in Florida.
A house that’s sat empty for two years without heating or cooling in our humid climate just ain’t a good thing.
It comes back down to good inspections.
But make sure you look yourself, too.
If there are drywall access panels in the attic or under stairways, look behind them. Examine the drywall in the garage, especially around air handlers. Check under and inside cabinets around sinks, etc. Even lift up the carpet a bit if it’s loose.
4) Bank addendas
When you buy a foreclosure, the bank you buy it from gives you a lot of forms to sign. These forms, as part of the sale agreement, are extraordinarily stilted in the banks favor.
For example, normally the seller pays the doc stamps on the deed. But when you go to buy a foreclosure, YOU will pay the doc stamps on the deed. Because the bank won’t.
The solution?
Hire a good real estate attorney. For a few hundred dollars a good attorney will make mincemeat of these forms. And even if a bank won’t agree, through their own attorney, to remove some of the more questionable items, at least your attorney can alert you to any legal pitfalls before you sign.
The bottom line is: know what you are signing.
5) Bank title companies
The bank that owns the foreclosed home will want to use their own title company. Typically it’s an attorney’s office Not In This Part Of Florida.
While I’m not in a position to make a judgment myself, every title person I’ve talked to locally says that the title insurance these companies issue at closing is essentially worthless. As I understand it, the insurance is good for everything except anything that could go wrong.
For example, it’s a bit like giving someone car insurance that covers everything except if the car gets damaged, stolen, or broken into.
The solution?
You can choose your own title company and closer (you do this as part of the initial offer). You will pay for it, but at least you will have good title insurance if there’s a title issue in the future, say, due to robo-signing. Just make sure you purchase the robo-signing endorsement.
Also, you may even come out ahead moneywise.
These bank title companies are notorious for charging buyers fees that are much, much higher than fees that the local companies charge for the same work.
Hire St. Augustine Team Realty when you are in the market for a foreclosure home. Email ReQuestion@StAugTeam.com or call Broker Sean Hess at (904) 386-8327.
