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Typical repairs when buying bank foreclosures
By Vic Hurlstorm | January 16, 2010
For investors or residents who are considering purchasing a foreclosed home, there are often repairs needed that should be considered when agreeing on a purchase price. The difficulty with most foreclosed homes purchased at auctions is the inability to inspect the home prior to purchase. Foreclosed home investors need to have an idea of common repairs and pitfalls associated with purchasing a foreclosed home in order to firmly assess whether or not they are getting a good value for their dollar.
Call for a Dumpster to remove trash and debris
Some investors might be lucky enough to snag a foreclosed home that is intact. Others will be facing huge amounts of clean up. During the foreclosure process, it is typical for the home owner to forgo regualr maintence or vandals to damage the property when it is vacant. The types of damage left behind in these situations are often cosmetic and simply need a major clean up which can involve the following types of repairs:
• Personal items and debris left throughout the home
• Removal and replacement of carpet
• Refinishing and repair of hardwood floors
Damage to the sheetrock caused by punching holes in the walls or damage caused by exposure to water
• Bug infestations and rodent removal
Some major repairs that could potentially be looming involve the structure or other major elements of the home such as plumbing. With these expenses included in the purchase price, they could determine what kind of deal you actualy get
• Burst pipes or leaking pipes that could have damaged anything from the walls to the floors
• Electrical upgrades to meet code requirements
• Foundation problems including leaking and faulty support systems
Mold resulting from poor ventilation
In damaged homes, many of these major repairs are not discovered until well into the process of rehabilitating the house. In traditional home buying there is a level of expected disclosure that allows a homebuyer to exercise some disclaimers or even warranties on the previous homeowner during a specified amount of time. This is simply not the case in foreclosures where in most cases it is an ‘as is’ purchase.
A Quick Exit
When home owners are forced from their homes, many do so unwillingly. Consequently, they will leave with nearly everything that can be removed from the home including lighting fixtures, kitchen appliances, the washer and dryer, air conditioning units, ceiling fans and anything else that is removable. These items can add up to some lofty expenses if the potential buyer has not taken these costs into consideration when bidding for the property. Most of these items are also easy to have replaced but with average expenses for middle range appliances totally as much as an additional $5,000, this could put a major bite in your budget.
While buying brand new fixtures and appliances would be ideal, it just doesn’t always fit into the finances. One of the best ways to reduce expenses is to find newly used appliances on Craigslist.org. The appliances that have been used as display models or even other appliances that were sent to a customer and returned are all typically un-used an often not affected by anything visibly noticeable. There are also warehouses and salvage shops which sell these gently bumped appliances, older models that have been replaced on the showroom floors or even used/refurbished fixtures and appliances.
For foreclosure buyers wanting to create a home for themselves, there is more concern over the long term quality and warranties associated with appliances. For investors looking to purchase the property for re-sale purposes, it is important to consider the type of home being sold and then purchase accordingly.
Higher end home buyers will likely demand new appliances and lighting fixtures that match the aesthetic of the home. Details are important such as the brand on all the appliances should match and the finishes on the fixtures should be cohesive. Middle to lower range home buyers will be more inclined to accept the property as it is with the intent to repair or replace items going forward.
Things You Can’t See
Investors walking into a home they have just purchased from the foreclosure sale may be overwhelmed with the project on their hands. The types of repairs the house obviously needed could be pricey enough, such as exterior upgrades, landscaping improvements and interior re-furbishments. What the buyer can’t visualy observe is often where the most trouble lies however. The following types of repairs are pricey problems that can be difficult to detect without fully inspecting the home and even opening the walls and getting on the roof investigate:
• Mold in the attic and lurking behind sheetrock, particularly in bathrooms
• Uneven and rotting floors due to previous water damage
damage that was caused by pet stains or water
improper drainage causing flooding during rainy season
• Tree roots within the sewer pipes leading to blockages
Structure damage from wood destroying insects
These types of issues are difficult to spot when initially evaluating the repairs necessary on a foreclosure, even if the house has been well taken care of. These hidden problems are why experienced home inspectors are incredibly valuable to a homeowner.
Buying a foreclosed home can appear to be a great bargain. However, without having a thorough inspection before purchase and very little recourse for major repair issues, it can be very difficult to have an accurate gauge on your actual cost at the very moment you are establishing a purchase price. By keeping in mind the potential for the many common repairs necessary for a foreclosure, investors can be more prepared when considering the value they are receiving for the foreclosure price.
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