Buying a foreclosure, aka REO, property seems like a great deal. However, there may be unexpected charges that make your purchase more of a headache than a deal. This series deals with the roadbumps that you may experience during and after purchasing a foreclosed property.
Code violations can transfer with a property. If these violations are not dealt with by the seller at or prior to closing, they may be passed on to the buyer. Unrecorded municipal and HOA violations are not covered through title policies and may not be identified by the lender's closing company. Daily fines for violations including registration, non-compliance, maintenance issues, improvements made without permits, and public safety issues could have compounded for years, costing you thousands of dollars that were not planned for.
Most frequently, banks are requesting buyers to close through the bank assigned closing agent. However, these closing agents are working in favor of the banks. They may not always address code voilations that have been incurred on the property.
Although REO properties are usually a good value, you need to proceed with caution. That is why it is a good idea, that even if you close with the bank's closing agent, you get the transaction reviewed by an independent attorney.