Foreclosure in Chicago>Question Details

Kris, Home Buyer in 60647

Home inspection on 'corporate owned'

Asked by Kris, 60647 Sun Mar 30, 2008

We want to make an offer on a 'corporate owned' house. We do not know yet if it is foreclosure or relocation, but it has been on the market for a long time without any contracts. It has been winterized. No heat, no water. How big of an issue is this when the home inspector checks it out? Will there be huge gaps in our knowledge or are there ways to tell anything about these systems that are not on?

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I have purchased many foreclosures & corporate owned homes personally. Typically they are winterized and all of the utilities are turned off. Most of the time the buyer is allowed to de-winterize and turn the utilities on at their own cost, but then they have to re-winterize immediately also at their own cost. Ask your agent to refer you to a home inspector who specializes in foreclosed properties. A good inspector can still help with foreclosed properties.

Have you considered purchasing a Home Owners Warranty such as American Home Shield, RS Andrews etc? While I typically consider these warranties a waste of money, in this situation it may provide you some peace of mind. I have had several buyers purchase these warranties and were happy they did.

No matter what you do, prepare for unexpected costs. These homes typically sit for awhile before they come on the market. Plumbing gaskets will dry up crack causing leaks, gutters aren't cleaned causing leaks, animals may nest or chew causing electrical or plumbing issues, etc. Additionally, the previous homeowner probably didn't maintain the house knowing that he was leaving.

Finally, none of the above will matter if you can get a good deal. Homes are a steal right now, and distressed properties can be absolute giveaways. Plumbers, Electricians and HVAC guys aren't cheap, but $10,000 will repair most of your typical problems. If you can save $20,000 or more on the purchase of this home, then go for it.
2 votes Thank Flag Link Wed Apr 2, 2008
I purchased my own home this way and I would say prepare for the worst. When the water was turned back on- it rained in the house and many of the walls needed to be cut into to repair pipes that had burst from the home being neglected. All and all- I did so well with the purchase price compared to the market that it was worth it- but set aside $$ for repairs.
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2 votes Thank Flag Link Mon Mar 31, 2008
Get the inspection!!! You need to know what you are dealing with. I do the best I can to size up any major issues and pull comps. If the numbers add up we place the offer with an option period. Granted the buyer may be out the fee for inspection but the equity may be worth it. The foreclosures in my area are winterized but the water and electric are not turned off. A good inspector will know how to work with it. Make sure the inspection is done during the option so you can walk away without losing earnest money as well.
2 votes Thank Flag Link Sun Mar 30, 2008
1 in 15 homes in Illinois have termites and termite areas are scattered throughout the City, especially east of Ashland (although the Belmont & Kedzie area is especially nasty re termites). FYI, a termite inspection is included free with my home inspections. -Mike Savage
1 vote Thank Flag Link Sat Apr 5, 2008
It is difficult to do a proper inspection on a home that is winterized and without gas or electric. If the gas is shut off, I cannot operate the furnace or boiler. I cannot check for gas leaks. I cannot operate the hot water heater or the dryer(if any). If the electricity is off, there is no way to check polarity or to see if GFI's are wired properly and functioning. Without water and electricity, it is impossible to test the dishwasher and washing machine(If any). The disposer cannot be tested. Without water, the plumbing cannot be tested.

The home can be inspected without utilities on, but it would be a limited inspection. I think it would be worth while but not as good as with the utilities on. Yes, there will be huge gaps in your knowledge.

I would recommend a limited visual inspection, and then have the place re-inspected if you choose to move forward. Since the first inspection is limited, I will often give a discount on the re-inspection.
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1 vote Thank Flag Link Fri Apr 4, 2008
I have inspected several homes where the utilities were off and, while there will undoubtedly be limitations to the inspection, the visual inspection will often tell you what you need to know. As others have pointed out, turning the utilities on is sometimes easy and you can sometimes get the utilities turned on for 24 to 48 hours for an inspection. Hope this helps.
1 vote Thank Flag Link Thu Apr 3, 2008
Hi Kris,
Yes, there will be gaps in your knowledge about the property. There are always gaps unless you personally watch every single component of the that home as it's being installed. It is obviously best to have the utilities turned on for an inspection but if that's not possible you can still glean a lot of info from a good inspection/inspector. Don't be pennywise and skip the inspection unless the purchase price is so low that it effectively indemnifies you from any major repair. I inspect vacant/abandoned properties often and it's never been a waste of time or money. Good luck!
1 vote Thank Flag Link Wed Apr 2, 2008

You cannot do a complete inspection if the house has no water or heat. Do you know if the furnace or boiler that provides heat was turned off or is it actually damaged? Do you know if the water was shut off to prevent a leak from getting worse or because the home is vacant? Not until you have all utilities turned on can you test every component of a home and feel comfortable that they are working as they should. Ask for the home to be de-winterized prior to the Inspection. If that doesn't happen you've the choice to proceed or walk away from the purchase. It's all down to how much risk you're prepared to take for the potential reward from making the purchase.
Make sure you have an adequate Inspection/Attorney review Contingency period built into your contract to allow sufficient time to conduct the Inspection and address issues that arise.

Good luck, Ken.
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1 vote Thank Flag Link Mon Mar 31, 2008
If the heat and water are turned off at the time of the inspection, we usually have the seller put some money in escrow in case they do not work after closing. This may be a little difficult to do if it is owned by the bank, and they may be selling as is. If it is bank owned and selling as is, depending on what the home is worth, it may be worth the cost of repairing the furnace. Your real estate agent should be able to guide you through the process. Good luck to you.
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1 vote Thank Flag Link Mon Mar 31, 2008
Here in Southern Califirnia we can usually get the utility companies to provide a "courtesy turn-on" of the utilities. Check with your Realotr of home Inspector to see if they can assist you with that. Houses that are left vacant have the potential for many issues. Be sure to get an inspection.
0 votes Thank Flag Link Fri Mar 13, 2009
"One in 15 sounds like a high estimate for the percentage of homes in the city proper with termite activity"

It's a very accurate number.

Inspector Mike Savage
0 votes Thank Flag Link Fri Mar 13, 2009
With out the utilities turned on it's impossible to get a clear picture of the condition of the house. I have completed many foreclosed property inspections in the pasty year and found frozen pipes from improper winterizing of the home. Most of the time the water heater will need replacing, the heater is another issue if it's a newer system and has a humidifier installed it also may have froze and caused damage to the heater. It can be done but you have to expect some additional cost after the utilities are turned on
0 votes Thank Flag Link Thu Mar 12, 2009
The seller should turn on all utilities for you. You should not be guessing.
0 votes Thank Flag Link Fri Apr 25, 2008
Hi Kris,

I inspected two large multi-family homes in Bucktown yesterday that had extensive termite damage in their crawls. One in 15 sounds like a high estimate for the percentage of homes in the city proper with termite activity but they are by no means rare. Best of luck in your new project.

Dan Cullen
0 votes Thank Flag Link Fri Apr 11, 2008
Congratulations, Kris! -Inspector Mike Savage
0 votes Thank Flag Link Fri Apr 11, 2008
We got the house (well, our bid was accepted)! And they are going to let us de winterize! Thanks again to everyone!!
0 votes Thank Flag Link Thu Apr 10, 2008
Thanks for all the answers and advice, it is very appreciated! We do have a great agent and never had any intention of NOT doing the home inspection. She also advised considering a home warranty. I didn't know about the 'possibility' of temporarily turning utilities on at our cost; I will ask about that, however I've been told that winterized for water means antifreeze or something was poured into the pipes to keep them from freezing. The electric is on, but not water or gas. No dishwasher, no clothes washer.

We are mostly concerned about the BIG repairs. Roof, foundation, wiring. Obviously gas and plumbing is a problem though :( It is a really good deal (still don't know if we got it), baring really huge repairs, though. We have some experience with fixing up, as long as it's not something like replacing a roof or fixing all the plumbing.

This is an 'as is' property, so we won't even have a lead paint or termite disclosure (are termites a big problem in Chicago?).
0 votes Thank Flag Link Fri Apr 4, 2008
I highly recomend always having an inspection by a certified inspector. You may have a lovely home and a great deal but if the home has some hidden problems that are not detected than the home you will have purchased may not be a great deal after all especialy if you have to replace the roof, air condition, heater or any large ticket item..As an agent I insist my clients have a home inspection . As a potential home owner you have the right to make sure the home you will live in is in good working order be it electrical , roofing, air conditioner heater ,including all other features of the home ....
You owe it to yourself and your family .
Be protected not mis-directed.
0 votes Thank Flag Link Wed Apr 2, 2008
The water may not actually be turned off, only from the valve inside the unit. Make sure you use a plumber whenever water is turned back on.
0 votes Thank Flag Link Wed Apr 2, 2008
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