Buying Foreclosures Has Some Caveats
I’ve shown many homes listed by the Department of Housing and Urban Development (HUD) that have been foreclosed for non-payment of mortgage. HUD homes in good shape are the rare birds and usually go quickly.
If you’re thinking about buying a foreclosure, you might note that you may not be buying a complete home. People tend to get angry when the bank is about to take a house back and they fall into the “I’ll get even” mindset. Or their complete lack of money and/or ethics drive them to strip a house to sell the goods.
Most of the foreclosures I’ve toured have something missing including, cabinet doors, lighting fixtures, stoves and dishwashers. They have missing doors, missing light bulbs, missing mirrors. And lots of holes in the walls. And - shockingly - gaps in the plumbing and air conditioning where the previous owners have stripped the copper for resale*.
Even if you want to buy a foreclosure, it may take a lot of work to make it liveable again. Before you write a contract, take copious notes and get estimates on what the actual cost to you will be to repair or replace missing pieces. Go in with your eyes wide open because you can quickly add up a bill for tens of thousands of dollars more than you expected.
But if you’re thinking about buying a foreclosure house, there are some things that you need to keep in mind. First, consider that folks who couldn’t keep up their mortgage payments might have had problems keeping up their house.
For instance, they might have let a roof leak go without repair, they might have postponed maintenance on their heat-and-air systems, or they might have turned the heat-and-air systems off. Believe me when I tell you, a house with no A/C can go bad in just one hot, humid summer.
I added the bold for emphasis. Foreclosure is not an option for my home, but I do need new gutters and need to paint the trim. If it’s taking me an extra few months to get this done, imagine how difficult it would be for someone to find the money to do it when they can’t even find the money for a house payment.
But as we talk about homes that have been stripped of their mechanicals, sellers should be aware of the legal ramifications of what they’re doing. Larry Cragun of Real Estate Undressed compares this to monopoly: Lose The House, Strip It, It’s Not A Game: Go Directly To Jail. He linked to this article in the Pocono (Pennsylvania) Record about a man who went to jail,
A former Mercer County mortgage broker who gutted his $1.2 million home before a sheriff’s sale has been sentenced to three to 15 months in jail and must pay more than $174,000 to an insurance company.
The seller’s excuse? He didn’t know he couldn’t take the items. I’d think that common sense would dictate that indeed toilets and garage doors are a necessary part of a home and they should be permanently attached.
May the buyer beware.
*I’m now seeing outside heat/air units wrapped in CHAINS to prevent them from being stolen.
