With foreclosures at record highs, buying a foreclosed home might be a great deal, but the risk of getting a lemon also is greater.

Home inspectors don’t always catch all the flaws in foreclosed homes that have remained empty for months, if not a year or longer.

Here are the top areas, from air conditioning to plumbing, that a potential homebuyer should either urge a home inspector to thoroughly check, or bring in a specialist to examine:

Heating, ventilating and air conditioning (HVAC) unit

Most home inspectors don’t check the HVAC completely, giving a mostly visual check, said Bill Cunningham, product manager for Lennox. Beyond simple maintenance that the previous homeowner might not have done, such as changing the filter regularly, a home repossessed by the bank might have had the electricity cut off. That could lead to damage in a cold environment, for example, if the heater hasn’t been turned on for a winter season.

Air conditioners are also full of a few hundred pounds of copper coiling, which vandals could steal to sell. That type of theft should be plainly visible, Cunningham said. Replacing an entire air conditioner could cost $2,000 to $15,000, he said.

A drawback to buying a repossessed home is that there’s probably not a maintenance record, he said. It’s a good idea to look at the back of the air conditioner to see what year it was built (it should be on it somewhere, much like a car’s vehicle identification number is under the hood) and see if the system is beyond the average lifespan of 10 to 15 years. If it is, you might be buying a new one soon.

Mold

Mold can grow when a house is closed up for too long, both behind the walls and out in the open. A humid climate, or leaky faucets if the water hasn’t been turned off, can lead to mold. Beware of a house that has been boarded up, preventing air circulation.

Water problems

Leaking valves, gaskets and appliances are common for houses that have been empty for a while. Every plumbing fixture and appliance has at least one valve, gasket or hose that can dry out if the item isn’t in regular use.

Hard water left in a water heater for too long can cause problems, said Andy Jasper, owner of Village Plumbing in Indianapolis, Ind. Freezing can cause problems with water in the bottom of dishwashers, as well as in the ice-maker lines to refrigerators, Jasper said.

Allowing a sewer trap to dry out can allow methane gas back up into the house, and older homes with old sewer lines could be clogged from tree roots.

Unwanted guests

Vandals and animals can damage a foreclosed home that has been empty for a long time. Along with the copper in an air conditioner, vandals might also rip out wiring, cabinets and plumbing fixtures to sell. Ripping out such components could cause structural damage to the house, something an inspector should be aware of.

Small animals such as raccoons, along with rodents and insects, can damage a home by chewing through walls and leaving unsanitary conditions.

Buying a foreclosed home can be a good deal, as long as you’re aware of the increased potential for problems that need fixing. Even if the damage is in obvious sight, get a home inspector to look for additional damage you can’t see, and don’t count on a thermal imaging gadget alone to do the job.

Source: Housing Watch

The lenders or the bank who owns the property through a foreclosure have a problem. Why? Because lenders are in the banking business and the banking regulators don’t like it when the lender forecloses. It is seen as evidence that the bank does not observe good lending practices because if it did the property would never have gone into foreclosure.

Secondly, Lenders don’t like to take real estate in their foreclosure because they must carry the real estate “ free and clear” which means the they have to tie up a lot of cash , when they can lend out the money instead at a higher rate which is how they make most of their money.

Thirdly, Banks don’t like to take real estate because it is considered a depreciating asset and appears as expense on its financial statements. Now you understand why banks would want to sell the foreclosed properties as soon as possible.

The simplest way to see if foreclosure buying is right for you is to go to some of the foreclosures in your area and just watch. You will quickly learn the process and the players and you can make a much better decision after you see what happens. You may find that you don’t like the process, but that you can develop a good relationship with someone who does. He may be willing to flip some of his properties to you for a small, but quick profit.

Now on the conditions of the foreclosed properties, many of these properties have damages…such as leaking roofs, clogged toilet bowl, about to fall roof ceiling, dilapidated wall coverings, etc. due to neglects of the former owners. These properties are sold at bargain prices. Experienced foreclosed property buyers will have a good assessment of the damages and costs involved to put it back into livable condition, sell it at a profit or rent it out.

If you are interested to purchase BDO foreclosed property, you will have to submit an offer or a bid for the particular property. Depending on your levels of interest, you may submit an offer or a bid which may be higher or lower than or equal the indicative price. This you will have to do immediately after receiving information that the property is still available. BDO Management will deliberate on several bids or offers of different buyers and the highest bid or offer will win the bidding.

Source:  How To Buy & Sell Real Estate For Financial Freedom By James Dicks and JW Dicks