Buying Distressed Assets


Posted on Monday, October 18, 2010

THE INSPECTION Let’s say you do manage to get a loan, resist the auctions and take the straight sale approach, shopping through a real estate agent. You’ll want to make any bid for a home contingent on a thorough inspection from someone familiar with foreclosed properties.
Mold may be your first concern, especially in more humid climates, given that many foreclosed homes have been uninhabited for months.
Then there’s sabotage. You should arrange (or have the real estate agent arrange) to have the power and water turned back on before the inspection if possible. Why? The previous owner (or vandals who have been in the home since) may have cut wires behind walls or poked holes in pipes in various places. Having running water and power can make these things easier to detect.
The pour-concrete-down-the-toilet trick is one that most good inspectors know to look for. But Jon Bolton of The Inspectagator in Oviedo, Fla., recently ran into a bit of destructive ingenuity he’d never encountered.
“Someone went on the roof with a bag of cement and dropped it down the chimney,” he recalled. “It rained, and now you have a solid block of concrete somewhere where it’s extremely difficult to get in to break it up. That’s just wrong.”
Also, don’t forget to inspect the minutes of the condominium board or homeowners’ association, if there is one. It may be in deep financial trouble if other foreclosures have occurred. Ms. Tolbert says that a good title insurer may be able to help with contacts if you have no luck finding the manager or treasurer on your own.
THE TITLE INSURANCE Speaking of which, title insurance is a must, particularly now. In the unlikely event that a former owner somehow wins back rights to the foreclosed home you end up buying and then tries to kick you out, you will need to make a title insurance claim.
And if you plan to put a lot of money into fixing up the home, you’ll want to ask about a rider on the insurance policy that can cover you for more than what you paid to buy the property.
THE WAITING GAME Still worried about the prospect of former owners showing up someday and asking for their home back? Cyd Weeks, a real estate agent with in Palm Coast, Fla., suggests waiting a few months before trying to buy a foreclosed home. Now that all eyes are on the foreclosure process, he said, homes coming on the market early next year will probably have been foreclosed upon with much more care and precision.
Indeed, Ms. Weeks’s tip suggests a larger point. Given the foreclosure moratorium that some banks have put in place and the lengthy investigations and lawsuits that are sure to follow, there is no rush to buy as long as you don’t have to move or if renting is an option.
Take your time. Assemble a panel of experts and apprentice yourself to them. And watch the listings carefully. For better or for worse, foreclosed properties are going to be available for a very, very long time.
Maxine Hick NYT

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