Now that you have found an experienced agent and a potential property, you want to be mindful that many of these properties will not have utilities turned on, so scheduling during the day is often better. Sometimes, you may be unable to check out the electrical or HVAC units. There is also expected to be no running water, so you will not be able to test water pressure or check the plumbing on the property. These are all critical things to consider with a property sitting empty for an unknown time. The property may have sat through the winter, not winterized, causing frozen pipes to burst or crack.
Some companies will allow the buyer to have the utilities turned on to do inspections, but that is at the buyer’s cost, and if damage is caused to the property in doing so, that is also on the buyer. Buying a foreclosed property can be costly since most foreclosure companies sell their properties in “AS IS” condition.
This means the foreclosure company will not do repairs even if required by your lender, so you need to make sure before you start this process that you have the funds available to get the home into a livable condition. Many buyers think that because foreclosure companies allow inspections, they will be able to ask for repairs, which is wrong 99.9% of the time. The buyer must take the property “AS IS” and must be able to make those repairs after closing because they can’t do any repairs or get access to the property before they close on it.
If you are allowed to do inspections, they will be for information only, not a reason to cancel. But should you choose to cancel due to something you find, nine times out of 10, you will lose your earnest money. Since it was noted upfront that the property would be sold “AS IS.”
You will also want to make sure you purchase title insurance through the title/closing company you work with. Title insurance protects you as the buyer, ensuring that when the foreclosure was filed, they found all liens on the property. That may sound strange as most people think the only lien is the original mortgage, but the previous owner may have done some updates or remodeling and did not pay the contractor, and the contractor may have filed a lien on the property.
If that lien was not found and cleared up in the foreclosure process, the money may still be owed before you can get a clear title. Getting title insurance is essential so that you will have a clear deed on the property and will not have to worry about someone coming to you after the fact and wanting to be paid. There have also been times when the legal description of a property was incorrect in the foreclosure process, which can create significant issues. Even if you are paying cash and are not required to purchase title insurance, it is highly recommended on these types of properties as they can save you a headache.
