Hidden dangers in your repo purchase
Just a few years ago buying repossessed homes was one of the hottest niches in the real estate world. Repo papers would barely hit the courthouse steps and buyers were lined up to buy the newly abandoned structures before they ever even hit the market. Competition grew fierce for these properties and bidders grew less and less concerned about the homes conditions. With the rising prices of homes and the low costs of getting a bank repossession, things like new roofs, plumbing issues or termite damage were less and less as an obstacle then they had ever been. With just a minimum of investment and easy financing for everyone, grabbing a 'steal of a deal' and selling it for a handsome profit even after repairs was good for all. That is, all who found the obvious damage and not those who glossed over massive termite damage that was hidden behind the walls.
A major shift in the repo market that was intended to speed up the process of moving these homes was instituted by the federal government. H.U.D. (Housing & Urban Development) issued a letter which 'suggested' that banks and real estate agencies wave customary inspections and services in order to streamline the sale of these properties. The problem was that this memo was only a suggestion and was not intended to take erase these services from the process if in the area it was customary and needful to have such inspections. The institutions however took this letter as gospel and termite work and inspections were cut from the buying process all over the country. Government bureaucracy as usual was to slow to react and indeed said nothing as record sales poured in faster than at any time in previous years. Unfortunately this lack of foresight opened the door major problems that have only recently begun to manifest for unsuspecting homeowners who thought they were getting the deal of a lifetime.
Termites are blind and shun light, they prefer to live in complete darkness and spend all their lives beneath the soil or in the hollow of your walls feasting on the studs that you'll never see. It is this behavior that allows the termite to be undetected even when the perspective buyers were walking through the home and dreaming of hanging the family portrait on the wall that was infested with this subterranean threat. Without the needed termite inspection there was no chance of picking up on this destructive insect and in most cases the damage was far worse by the time it was discovered.
There is very little a new purchaser can do about hidden termite damage in a repo home. The contracts usually are 'as is' and have no provisions for recourse when deficiencies are discovered. Repo homes are a great deal a lot of times because the risk is put on the buyer and the bank will hear nothing later on when it comes to paying for repair or treatment costs. Proving that something was visible or detectable at the time of the sale is very hard to prove and in most cases costs more in court than it will to just fix the damage. This is especially true when a few years passes before there is even a hint of a problem and though you may strongly suspect it was there all along it is a different thing to show and convince the judge.
H.U.D. has since clarified it's intent with their famous memo and thankfully lenders and realtors have come around as well. Termite inspections are being ordered again as a normal method of operation but in some areas the suggestion still stands. As a buyer you can safeguard against this ill logical decision by standing your ground and demanding a termite inspection before ever purchasing a bank repo'd home. Even if it is not a requirement the odds are in your favor that the lender will relent and have the service performed. While repossessed homes are at an all time high, sales are down to to stricter credit rules and banks are desperate to get rid of inventory like never before. It may take more effort in the negotiation process but having the leverage of walking away from the deal and leaving the bank with another monthly payment is usually more than enough to get them to bend. Bank repo's are still a great opportunity for many to purchase the home of their dreams, it's even better now to buy them without the termites that could ruin it.
A major shift in the repo market that was intended to speed up the process of moving these homes was instituted by the federal government. H.U.D. (Housing & Urban Development) issued a letter which 'suggested' that banks and real estate agencies wave customary inspections and services in order to streamline the sale of these properties. The problem was that this memo was only a suggestion and was not intended to take erase these services from the process if in the area it was customary and needful to have such inspections. The institutions however took this letter as gospel and termite work and inspections were cut from the buying process all over the country. Government bureaucracy as usual was to slow to react and indeed said nothing as record sales poured in faster than at any time in previous years. Unfortunately this lack of foresight opened the door major problems that have only recently begun to manifest for unsuspecting homeowners who thought they were getting the deal of a lifetime.
Termites are blind and shun light, they prefer to live in complete darkness and spend all their lives beneath the soil or in the hollow of your walls feasting on the studs that you'll never see. It is this behavior that allows the termite to be undetected even when the perspective buyers were walking through the home and dreaming of hanging the family portrait on the wall that was infested with this subterranean threat. Without the needed termite inspection there was no chance of picking up on this destructive insect and in most cases the damage was far worse by the time it was discovered.
There is very little a new purchaser can do about hidden termite damage in a repo home. The contracts usually are 'as is' and have no provisions for recourse when deficiencies are discovered. Repo homes are a great deal a lot of times because the risk is put on the buyer and the bank will hear nothing later on when it comes to paying for repair or treatment costs. Proving that something was visible or detectable at the time of the sale is very hard to prove and in most cases costs more in court than it will to just fix the damage. This is especially true when a few years passes before there is even a hint of a problem and though you may strongly suspect it was there all along it is a different thing to show and convince the judge.
H.U.D. has since clarified it's intent with their famous memo and thankfully lenders and realtors have come around as well. Termite inspections are being ordered again as a normal method of operation but in some areas the suggestion still stands. As a buyer you can safeguard against this ill logical decision by standing your ground and demanding a termite inspection before ever purchasing a bank repo'd home. Even if it is not a requirement the odds are in your favor that the lender will relent and have the service performed. While repossessed homes are at an all time high, sales are down to to stricter credit rules and banks are desperate to get rid of inventory like never before. It may take more effort in the negotiation process but having the leverage of walking away from the deal and leaving the bank with another monthly payment is usually more than enough to get them to bend. Bank repo's are still a great opportunity for many to purchase the home of their dreams, it's even better now to buy them without the termites that could ruin it.
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Are you sure a new roof is all you need for that repo purchase? What about termites? Be prepared and get the inspections that could save you thousands of dollars.
posted by Vittoria @ October 25, 2011
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