With a myriad of distressed properties on the market and more looming, many home buyers are clamoring to purchase foreclosed homes. But you need to be aware of the potential pitfalls in purchasing a distressed property, especially the risk associated with the cost to repair any deficiencies that a buyer assumes in an as-is foreclosure transaction.
Here are 10 areas to watch out for when considering a foreclosed home:
1. No power to the house. If the home has been without power for some time then chances are it has not been properly air conditioned. With our hot humid Florida climate prevailing most of the year, there is a good chance the house may have mold issues. Most banks are now requiring their asset managers maintain power to the house but it may still have sat vacant and powerless for several months prior to foreclosure.
2. Peeling or discolored paint, swelling in walls or ceilings, stains around windows or baseboards indicate water damage and possibly the presence of mold.
3. Mold growth or stains inside cabinets, behind drawers and built-ins. This is another sign that water damage may have occurred.
4. Missing sinks, toilets and other fixtures- check on repairs needed to replace any fixtures that were improperly ripped from walls and floors.
5. Plumbing or wiring issues. Check for blocked drains, broken or stripped pipes and wiring.
6. A cracked foundation, sagging roof or other structural issues may require costly repairs. Lenders may deny loans on such properties.
7. A "re muddled" home or a home with extensive renovations. Check for code violations and that permits were pulled.
8. A malfunctioning water heater, A/C unit or other mechanical equipment (pre-closing repairs may be required to satisfy FHA loan requirements).
9. Owner inflicted vandalism. Acts of vengeance by the former owner can be expensive to fix. Seemingly simple repairs can morph into a major renovation. Some banks are now addressing these issues and may perform the repairs when they acquire the "asset".
10. Air quality issues- testing should be considered with your home inspection, especially when water damage is observed or there is a musty odor in the house.
These and other pitfalls can be minimized by employing a qualified home inspector to assess the structure's soundness and uncover potential problems.