The question of whether a particular bank owned REO (Real Estate Owned – Bank foreclosure) home is as good a deal as it first appears can only be answered by the buyer performing their own due diligence…and not stopping until they have the answers they need.
THE HOME INSPECTION
Yes, it is common in Hemet, CA for a homebuyer to hire a home inspection company to perform a routine home inspection. I have recently found a company that will deliver a printed version of the report on demand at the end of the inspection – while everything is fresh in the minds of the prospective new homebuyer.
The inspection should not be about bells and whistles though – it should be on the thoroughness of the report and the knowledge of the inspector. The inspector should not be preoccupied with his own lack of work that he (or she) is turning the conversation to some multi-level marketing plan…which is why I had to find a new inspection team. (After nearly 4 years of good service, I have quit referring business to an inspector that I have faithfully relied on because he actually defended his right to bring up his on-line travel business as he meets new people…well guess what, I’m not making any more of those introductions. I sure hope his travel business pays off for him. But this is a whole different story.)
The inspector should be confident enough in their work to allow you, the new Hemet homebuyer, to follow them through the entire inspection process and engage in questioning the findings, every step of the way and not defer your interest until the end of the process. This does not mean that the inspector should blow off the final presentation either, if there is a second interested party present.
Just for the record, as a REALTOR®, I typically do not stay for the entire inspection. I like to be there to open up and make sure everyone is comfortable with the process. I get the ball rolling and then I move on to the rest of my work for the day. Three will be times when I sense that I am needed for a longer period, and then I will make adjustments to be there. I will also have an assistant show up before I take off, just to hold things together.
The inspection is a critical milestone in the buying process, which is why having the report at the end of the inspection is so important. Other than financing, the inspection is probably the second most critical element to a transaction and based on the results, can either keep a deal together or be the point where it unwinds.
THE HOMEBUYERS RESPONSIBILITY
As a Hemet REALTOR®, my job is to help the homebuyer find the home that meets their needs and structure the offer to maximize every advantage for my buyer clients.
Yet, the homebuyer has responsibilities that must be taken seriously, or they should be prepared to be dissatisfied with the purchase of their new Hemet home as the months turn to years.
First and foremost, you have to be there and you have to participate. Yes, as your REALTOR® I have assembled a trusted team to get you through the process – but none of us can make decisions for you. If there are issues with the home inspection, then you have to ask the questions until you are satisfied with the answers. If you do not feel comfortable talking about maintenance and repairs because you just don’t understand what is being talked about, then please bring a friend or relative with you that will be your eyes and ears – but please be there.
Many times a home inspection will recommend additional professional inspections. For example, there may be something that does not look right with the air conditioner. Well, the home inspector is not a licensed HVAC contractor and cannot make any determination that requires a licensed professional to determine. All an inspector can do is say, “Hey you may have a problem here – If I were in your situation, I’d get it checked out by someone who has the equipment and knowledge to determine just how bad the problem might be”.
WHAT OTHER “DO DILIGENCE” DO I HAVE TO DO?
This is a question I am asked every time I represent a homebuyer. Everyone wants to make sure that they ask all the right questions and get all the right answers – but few are actually willing to put in the extra effort to uncover what might be right before their eyes.
THE NEIGHBORHOOD
First, you need to understand that as a REALTOR® I have legal limitations as to what I can reveal. We all know about Equal Opportunity and Fair Housing. These are not optional issues for me – they are the law that I must adhere to. So, if you have issues with a neighborhood, you had best be checking it out for yourself and not relying on me to tell you who lives where.
Talk to your neighbors. It will be easy to find out who has all the gossip, because they’ll be watching you every time you return. This is one time when it is advisable to listen to gossip – but take it all with a grain of salt, because everyone does have their own agenda.
See if there are any recent improvements to homes in the neighborhood? How many for sale signs are there on this block? In the subdivision? The overall community?
Improvements will tell you that the people who are here are here to stay for the long term. Lack of signs will tell you that you are in a desirable neighborhood – too many signs may mean that the neighborhood is in trouble and may be a ghost town in a few more months.
I strongly recommend that once a home is selected that my homebuyer returns to the neighborhood at several times of the day over the next week. Come back at 6:00 at night to get a feel for the kids playing on the block. Are there excessive cars parked on the street? Anything else trip your trigger that you do not care for? Return again at 10:00 on a Friday or Saturday night to see if there are loud parties taking place. How about a Saturday afternoon? Trust me, if you don’t do this know, you will find out the answers to these questions…but it will be too late to do anything about them if you have already moved in.
There are numerous online resources where you can research crime, schools and even sexual predators in the neighborhood – all important facts to consider. This is another one of those areas that as a REALTOR® if I lead you to a resource and that resource omits something that is relevant that I could then be found liable for providing inadequate information. So, since most of my clients today are internet savvy, I always ask them to do their own research and satisfy their own needs.
You will also want to find out about future developments that are currently being planned. The city should be able to give you some indication of what is in the process of taking place and what is being planned. Ask to see a copy of the “General Plan” and a “Zoning Map”. Will the future plans add value to your new neighborhood or take away from it?
PERMITS
Again, an issue you should resolve for yourself. Here in Hemet I have never had to wait more than a few minutes for service at the permit desk. Let the clerk know that you are in escrow on a particular Hemet home and that you need to know everything there is to know about the property, from their point of view.
You should have been able to determine if there has been work done to the property, such as a room enclosure or addition. In Hemet, patio enclosures are very common… unfortunately unpermitted patio room enclosures are very common.
You want to determine if there were EVER any permits opened and not given the final sign off by a city inspector. If this is the case, it may be impossible for you to pull a new permit until the previous project is signed off on, which may be very expensive, time consuming and could even result in a sub-standard project being ripped out at your expense.
Another factor to consider, especially with an REO property that has been vacant for months, is any fines on the property. If so, make sure they get resolved in escrow. It might be for weed abatement, pool draining or even graffiti or other eye sore problems.
Does the home still have a certificate of occupancy? They all don’t for a variety of reasons – so check it out. Satisfy yourself…remember, this is your due diligence.
UTILITIES
Since Hemet, CA REO bank owned real estate does not have an owner occupy the property, there is very little history available to the new would be buyer of this real estate. This is why due diligence is critical in purchasing a bank owned REO property in Hemet or anywhere else.
It is important to know how expensive it is to cool the home in the summer and how much it will cost to heat the home in the winter. The only way to do this is to directly contact each utility company and ask for a breakdown of the bills over the past two years.
Not only are you looking for actual dollars spent monthly, but more important the consumption of the utility. After all, there have been a lot if increases in energy costs over the last several years.
Where this gets tricky is trying to determine what type of usage the property received. This is where talking to the neighbors is always good. Find out if there was someone home all day, like a stay at home mom with a house full of kids running in and out all day or perhaps it was a young couple that commuted to work 6 days a week, leaving in the early morning and not returning until the early evening, day after day. Can you see where the utility usage might vary?
For a long time, Hemet was a haven for snow birds (retired folks spending their winters in the mild Hemet climate and then returning to their northern homes for the summers they love there). So, maybe the home sat vacant from Easter to October. This could certainly have a major impact on the annual consumption of utilities.
Due Diligence simply means researching and satisfying yourself of your decision and not relying on anyone else for the answer to your question, “Is A Hemet Bank Owned REO Home Going to Be a Good Deal in the Long Run?”
Blessings to all who read,
John Occhi, REALTOR®
Century 21 Crest - CrestREO
CrestREO.Com
Hemet - San Jacinto Valley
951-927-9473
Servicing THE REO Needs of Asset Managers, Banks and Lending Institutions in the Hemet - San Jacinto Valley, Temecula, Murrieta, Winchester, Wildomar, Menifee, Sun Valley, Perris, Moreno Valley, Romoland, Homeland, Nuevo, Banning, Beaumont, Cherry Valley, Yucaipa, Redlands, Mentone, Loma Linda and throughout South West Riverside County and The Pass Areas of The Inland Empire in Southern California. If you are a buyer, investor, first time home buyer or are just interested in REO real estate, please contact us at the above website or phone number.
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