Home Buying in Studio City>Question Details

Ch, Home Buyer in Studio City, CA

I am in the process of buying a foreclosure house. (First Time Homebuyer.)

Asked by Ch, Studio City, CA Wed Jun 10, 2009

Currently, I am waiting for the seller to sign back the documents for my purchase contract. However, I just found out the house had a $50,000 WATER LOSS INSURANCE CLAIM about 3 years ago from the previous owner. My questions are:

Do you think the house is still worth it to buy?

Or, should I continue with the contract and get an inspection before giving up this house?

At what kind of extent of problems or costs, should I let go of this house purchase?

If I find out from the inspector that there are costly residual repairs needed for water damage, can I still back out since I have the inspection contingency in the contract even though it’s a foreclosure property? (The seller sells this house AS IS)

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Answers

5
You should investigate this claim very thoroughly during your inspection contingency period. Make sure that you are aware of when that contingency expires and quickly conduct all of your investigations during that time so that you can cancel if necessary. You should have a very good inspection (talk to your Realtor for a referral) to make sure that this claim does not mean that there are current issues with the property. You should also find out if there is a current lien on the property by reviewing the preliminary title report (this comes from the title company shortly after you are in escrow) and informing the title company of this so that they can help you investigate. If you have the name of the insurance company involved in that claim, you should call them and ask them if there are outstanding issues.

You also want to review a natural hazard report (should be provided by the seller) to ensure that the home isn't currently in danger for being damaged because it is located in a zone prone to natural hazards. I would also go to the City to see if there are any liens or notices out on the property due to failure of a previous owner to maintain or correctly repair the property. Be sure to check the permit history.

Whether or not you go forward depends on what you find, what it will cost to rectify those issues (if remedying them is necessary) and your own financial situation. Your lender might also take issue with this so that might kill the deal as well. Make sure that your lender gives you a determination before your loan and appraisal contingency dates expire.

Remember, one of the bigger issues with REOs is that you cannot get as much information from the owner because the owner is a bank and has never lived in (and maybe never even seen) the property. This makes conducting a full investigation of the property even more important.

You can back out during the inspection contingency for any reason related to your investigations of the property. Be sure to take note of the deadline. Most of the REO contracts say that the property is being sold as is, it usually indicates that they don't want you to ask for them to do repairs. It actually has no bearing on whether or not they will actually give credits, reduce the price (which are also options if you find out there are issues) or do repairs. However, it has no affect of your right to inspect and cancel due to issues that you learn about during the inspection.
1 vote Thank Flag Link Wed Jun 10, 2009
Agree with Joe who answered here that you should consider not throwing money at this home and get out of the purchase contract if that is possible.

If you are using a Realtor agent for this transaction, talk with that person and the responsible broker ASAP. If you are not using a Realtor, contact a lawyer now and as soon as possible about your contract rights and responsibilities.

Harrison K. Long, Explore Group, Coldwell Banker Previews, Irvine, CA.

http://www.ExploreRealEstate.net

Harrison
0 votes Thank Flag Link Tue Jun 16, 2009
Stop throwing money at this home. Review the insurance claim first. Was the mold remediated and documented? Were the repairs completed and inspected by the city of Los Angeles? Ask your insurance agent and Realtor if this insurance claim will effect the marketability of the home when you try to sell it. Perhaps this stigma will drive away other interested buyers and drive down the price. Call me at 818-883-8816. No charge for the phone consultation.
0 votes Thank Flag Link Fri Jun 12, 2009
Farah and Richard have given good answers. We don't know what the house is worth; we have not seen the house. Ask your buyer's agent for their professional opinion.
Once you construct, sign and present the offer to purchase the sellers ( even banks) need to accept by signing. When both you and the seller have signed the initial contract, you will have the number of days specified in the contract for the Inspection Period. Ask your realtor to point this clause out to you and, maybe give you a few extra days if you suspect you will need them.
Be sure to submit your Resolution of Unacceptable Conditions and Inspection Notice prior to the deadline. That is where you will address the findings from the Inspection. You have 3 options when submitting notice: Accept the Property as it is; Reject the property for cause found on inspection and cancel the contract; or Counter. The counter would be the resolution.
You will still be responsible for the cost of the inspection even if you decide not to purchase the property.
0 votes Thank Flag Link Wed Jun 10, 2009
Answers:

You should always get an inspection from a professional inspector with a long track record in the industry, and you should always get a bid from a licensed general contractor that you trust to perform corrective work to all of the items noted on the inspection report. Just because there was a large claim doesn't necessarily mean that the house is a bad purchase. The work may have been completed perfectly - it also may have been done poorly, its up to the inspector to let you know. After you add up the cost of repairs and the cost of the home, you have to decide if thats the best deal for you, or if you could reasonably find another house for less (of similar quality). I can also help you try to negotiate a price credit or reduction from the seller.

And yes, you can cancel under your inspection period, even though the house is "as-is." As-is means the seller won't do any work, and that the seller isn't responsible after the close of escrow.

If you have any other questions, please do not hesitate to contact me.


Richard Schulman
REALTOR
schulmanrd@yahoo.com
310-482-0173
0 votes Thank Flag Link Wed Jun 10, 2009
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