Expert: Matt Heisler - 10/24/2011

Question
QUESTION: Hi John,

I wasn't sure whether to ask this question of a real estate professional or a home inspector, but I hope you might be able to help.  I am interested in purchasing a house that is currently bank owned.  It is a rowhouse that has been converted in three apartments.  It has been sitting vacant for about 4 years after about 70 percent of the renovations had been completed.  There seems to be some issues with the roof because a couple areas of the house contain some extensive water damage. My question is at what point do I do an inspection/have a contractor come and look at the house. I have not put an offer in on it yet, and I have heard conflicitng reports as to when I should have some one look at it to give me an estimate of what the repairs and renovations are going to cost.  Should I have someone look at it now and then put in an offer, or should I put in an offer with a contingency that says if the renovations are over x amount I can be let out of the contract.  Thanks for your help!

Kurtis

ANSWER: Hi-

I'm not John.  But the answer to your question is as follows:
A) If there's going to be an auction, do your inspection first.
B) If it's an REO Property, home inspections are typical conditions.

Why not just use a buyers agent with experience in foreclosure purchases to assist you? What would be the down side of that?  It sounds like you could use the help.

Sincerely,

Matt Heisler

---------- FOLLOW-UP ----------

QUESTION: Hi Matt,

So sorry about typing the wrong name, but I really appreciate the help.  There is no auction scheduled as of now, it is being listed on the mls with a real estate agency.  I am working with an agent, but they don't seem to be to knowledgeable in the area of foreclosures.  My agent told me to have a contractor go out and look at the house with me before I put an offer in.  My thought was to try and agree on a price that I think is fair (what is the point if they won't come down on their price to a place that I feel comfortable) and then have a contractor go out.  Can I include in the contract an amount that if the contractor says it will cost more than that, I can opt out of the contract?

Thanks!

Answer
How the contingencies work depend on how they are written, what state you are in, and the conjunction of both of those items.  You can certainly set it up that way, but banks don't like complicated contracts.  

Oh, Kurtis, where to start!  It's late and I'm a little punchy, but here's a quick hit list for you.

1) Get an agent that is comfortable with foreclosures.  You're about to pursue a significant investment.  Don't work with an idiot.  If I was facing a criminal court proceeding, do you think i would use a real estate attorney just because we have a relationship?  No freakin' way.  I want an expert to protect my butt and help me make the most of my investment.

2) You're negotiating with a bank.  Forget "fair".  Fair is for schoolyards.  Do you think the bank was fair when they threw the previous owners out in the street and took their house?  Play to WIN!! The bank has safeguards in place to make sure they don't give it away, but if they WERE to give it away, wouldn't you want it to be to you???  I know I'd want it to be to me.

3) Buying foreclosures involve risk.  Taking on risk rewards the buyer with compensation in the form of lower prices.  Get informed, get a plan, and execute it. Here's an overview Foreclosure Purchasing