This is a difficult question to answer, but generally speaking the risks with purchasing a foreclosure home are far higher because the previous owners that have left the property, have left so unwillingly and many times have taken their frustration out on the property.
In the case of foreclosure homes, many homes have been vacant for lengthy periods and without proper HVAC have suffered as a result of humidity build up, deferred maintenance, neglect and in some cases vandalism. In humid climates, HVAC systems can remove in excess of 300 gallons of moisture from the air per year!
If the bank has conducted any repairs, many times there will be no disclosure or paperwork insofar as the repairs performed, nor will there be any information as to warrant repairs. Permits or other required documentation is probably non-existent. Seller’s disclosures are rarely available and the knowledge of whether the home is constructed of defective materials that have resulted in class action lawsuits such as Chinese Drywall is not available.
Here are some problems associated with foreclosed homes that are identified on inspections on a regular basis.
- Damaged finishes/fittings/fixtures
- Mold – microbial issues.
- Chinese Drywall issues.
- Deferred Maintenance/Vandalism.
- Roof damage and/or leakage.
- Improper repairs or partial repairs.
- No documentation, warranties or permitting information.
- No Seller’s disclosure.
If you decide to purchase one of these homes, it is recommended that a full home inspection is conducted with microbial testing. It is also recommended that you attend the inspection and take the time to walk every step of the home with the inspector and understand every issue involved. Take the time after the inspection to do additional investigation work from a perspective of online research of permitting, past history on the home, etc. Meet with contractors where repairs are required to ensure you have confidence in the repair estimates given so that you do not assume any additional hidden risks associated with purchasing a foreclosed – distressed home.
Remember, most people buying a foreclosed or short sale believe they are getting a deal and are buying the home “as is”. You must know the “as is” and don’t assume you are getting a great deal in today’s real estate marketplace until you understand the home’s true condition and the costs associated with bringing the home back into a habitable state post closing.