Friday, March 2, 2012

When a bank forecloses and then sells a house, do they have to disclose any faults or flaws?

Though some banks are fixing up foreclosure properties, the vast majority are sold as is, hence these institutions have no obligations to disclose flaws and typically don't know exactly what the defects are, anyway. Moreover, banks are under no obligation to fix as-is homes, and they tend to provide only a narrow time frame for inspections.

So it's usually up to buyers to do the due diligence and a thorough inspection. It's not a stretch to suspect that the previous owner of a distressed home let maintenance slide. Further, many such homes are vacant for months with no caretaker. Plumbing and sewer problems can result.

And little wonder: Electric companies often remove a home's electric meter after terminating service, which complicates the whole process. Depending on the site and city, it might cost money to have a meter reinstalled, a permit fee may be required, a county inspector may have to inspect the meter post, and an electrician may even have to conduct an inspection to make sure the house won't burn down when power is restored.

In short, some would-be owners find themselves forking out $400 to $900 just to get an inspection. As a result, some will drop the deal. Others simply choose to forgo that part of the inspection entirely.

One cheaper way is to secure a foreclosure inspector who can power the entire home with a portable generator to check the furnace, heat pumps, condenser, water heater, appliances, lighting, outlets and any electrically operated well, as in your friend's case. A call to such an inspector will let you know if this is allowable in your area.

As tempting as it is to go it alone in an effort to save some bucks, a foreclosure buyer is always wise to hire a real-estate agent experienced with foreclosure deals and their nuances, get that power turned on and use a seasoned foreclosure home inspector to give it the twice-over.

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