More On Foreclosures

Inspections: Protecting Your Interests

Contact Us

i

Foreclosed homes are sold “As Is”, but that does not mean “sight unseen”.  You should always have the property professionally inspected to ensure there are no unexpected defects. 

The Arizona Purchase Contract provides for a 10 Day Inspection Period in which the Buyer is allowed to perform any and all inspections.  Each Lender will also have their own Addendum, which the Buyer is required to sign, that also covers inspections.  So who decides?

The Lender’s Addendum, in almost all cases, replaces or overrides similar language in the Arizona Purchase Contract. For example, if the Arizona Contract specifies a 10 day Inspection Period, but the Lender’s Addendum says 8 days, the Lender’s timetable prevails.

That is just one of many reasons that you must carefully read and understand the terms in the Lender’s Addendum.  This article is about Inspections, so let’s start by reviewing the steps in a “normal” Home Inspection Period of 10 Days:

Weekday       Inspection Activity                                                                             Day No.

Monday          Purchase Contract Accepted, Inspection Period Begins.                               

Wednesday     Home is Professionally Inspected, Roof Problem Noted.                                    2

Wednesday     Home is checked for Termites by a Professional, Clear.                                    2

Friday            Inspection Report & Termite Report Received.                                                4

Saturday        Roof Inspected.                                                                                        5

Monday          Roof Inspection Report Received.                                                                 7

Tuesday         Review Reports, Prepare & Submit BINSR                                                       8

This is a typical inspection process, although scheduling a Home Inspection on the 2^nd day after Contract Acceptance is pretty fast.  During the Inspection, it is not uncommon for the Home Inspector to recommend a follow-up inspection by a specialist, such as Roofing Contractor, Air Conditioning specialist, etc.

In the above example, we acted on the Home Inspector’s recommendation and we were able to schedule an inspection by a Roofing Company on the upcoming Saturday.  By acting immediately we are able to fit in the roof inspection before the end of the Inspection Period.

This is an important lesson. Do not wait for the Inspection Report if the Home Inspector will clearly recommend the need for a follow-up visit by a contractor or specialist.   

In the above scenario we were able to complete the process within the ten-day Inspection Period, but not by much.  How are inspections of Foreclosed homes different?

Are the Utilities On?

Before scheduling the Inspection make sure the utilities are on.  If the utilities were not on when you showed the home, chances are they have not been turned on. Check with the Lender’s Agent to find out what their policy is regarding utilities. 

In many cases, Lender’s will not take any responsibility for having the utilities turned on for inspections. Their Addendum will often specify that it is at the “Buyer’s Cost, should they need to turn on the utilities for inspection purposes”.  

If that is the case, then you might have a problem with the number of days allowed for the Inspection Period. You should have a full ten days, providing the utilities have been turned on.

First, find out how long it will take to have all of the utilities turned on and the cost, if any.  You can then request an extension of the Inspection Period to include these extra days. A written Addendum, which is signed by both Buyer & Seller, is used for this purpose.

The best way to protect your Inspection Period rights is to write it into the original contract.  If you know in advance that you will be making an offer on a Foreclosed property, you can find out from the Seller’s Agent the status of the utilities.  You could then write language into the Purchase Contract that states, for example, that “the Inspection Period will begin when all utilities are turned on”; or something similar.

Lenders Will NOT Pay For Any Repairs….Or Will They?

The “As Is” Addendum states, to paraphrase it, “take it or leave it, do not ask us to do repairs, do not pass Go”, etc., so why waste our time?  The fact is, there are circumstances in which the Lender will pay for certain repairs. Here are three examples:

Agency Required Repairs:             If required by a Government backed loan.

HOA Mandated Repair:                  HOA May Hold Up Title If Violation Not Satisfied.

Major, Unforeseen Repair:             New Roof, Mold Discovered, etc.

I have seen Lenders accept offers that included expenses for the above repairs.   In the case of the roof, the Lender agreed to pay ½ of a new roof installation.  We told the Lender that our client was prepared to pay for a “damaged” roof, but we convinced them that requiring them to pay for an entire roof was too much. 

There is one more way to have Lenders pay for repairs, and that is to write it into the contract to begin with. For example, if you know that the glass in the Patio Door must be replaced, write it into the terms of the contract.  If the Lender does not remove or alter those terms in a Counter Offer, then they are required to fix it at their expense.

These are just a few suggestions and items to watch out for. To summarize a few Key Points:

• Schedule a Home & Termite Inspection Immediately.
• If recommended in the Home Inspection, schedule any follow up inspections immediately. These could include some of the following:

• Roof Inspection
• Heating & AC Inspection
• Foundation Analysis
• Building Contractor (Repair Estimates)

Or any other specialists that are needed to thoroughly inspect the condition of the property.

• Try Negotiating Any Major, Unexpected Repair
• Submit the “Buyer’s Inspection Notice & Seller’s Response” form to the Seller’s Agent prior to the end of the Inspection Period.  This is your document to either accept the property “As Is”, to request any repairs or to cancel the contract, should you decide not to continue with the purchase.
• Extremely Important: If you decide to cancel the Purchase Contract, it must be done in writing and before the expiration date of the Inspection Period.

Buying Lender Owned (Foreclosure) Properties

i

Foreclosures: A Buyer’s Overview

i

Buying Short Sales: The Good, The Bad & The Ugly

i

Short Sales: A Buyers Overview

Short Sales & Foreclosures: A Homeowner's Perspective

Short Sales: A Seller's Overview

More Help For Buyers

Buying Short Sales

Property Search

About Us

Contact Us

Do you qualify for the Existing Homeowner Tax Credit? Or are you a First-Time Home Buyer that may qualify for the First-Time Home Buyer Tax Credit? What about Short Sales & Foreclosures? Are these a bargain and what are the pitfalls? How should I start my home search? Answers to these questions and more may be found above.