Often when a bank forecloses on a property owner there is a gap in time between when the owner moves out of the home to when the bank sends a representative to check on the property. In some situations it could be a couple months. In areas with cold winters like Missoula, these laps in time can be the difference between a great home and one that leaves more questions than answers.
The most common situation that I see is when the owner leaves the home and stops paying the heating bills. The heat is turned off and the pipes freeze. By the time a representative gets to the home it is too late. The pipes have burst creating water damage. This is the case in majority of the Bank Owned properties that we see in the winter and spring.
Many times it is not the water damage or fixing the pipe that created the expensive fixes. It is what follows the water damage, mold. Mold can be expensive to fix and in many of these homes it can be difficult to determine the extent of the damage. It is hard to determine if mold is behind walls, ceiling and other areas that are hard to see.
In most situations the bank will complete some form of mitigation. In some cases they will remove drywall, insulation and fix pipes to remedy the problem, however, the home is left unfinished for the next buyer to complete. Other times they will mitigate and finish the construction bringing the home back to its previous state. In both of these situations there are questions to consider.
First, if the bank is not completing the construction, will that affect your availability to get a loan? Some loan programs will require the home to be in a pre determined condition before the will lend the money. No matter how good the deal is, it’s possible that your loan will not qualify for the home.
If you are able to get the loan, the next thing to consider is how much it will cost to fix the home. Most buyers, especially if they are planning to do the work, will underestimate the true cost and time it will take to complete the construction. I recommend getting contractor bids to give you a worst case scenario for cost even if you are doing the work yourself.
Second, if the home has been mitigated and the construction has been completed by the bank, be cautious. Get records for the work that has been done and speak with the mitigation companies to verify that they are comfortable with the extent that the bank investigated the home. Hire your own inspectors to view the home including a mitigation company that you trust. This is serious, I have seen homes that banks have mitigated and repaired only to find that the extent to the problem is much much larger than the work that was completed.
The key to buying these homes are to minimize risk as much as possible. I recommend air test for mold spores to help identify unseen mold problems as a start. Work with professionals that know what to look for, use qualified inspectors and mitigation companies. The money you spend up front to verify the condition of a home can save you thousands if not tens of thousands in future unknown problems.
In the end what looks like the deal of the day could end up costing well more than market value after the work is complete.
Be an educated buyer and happy shopping Missoula. It is a great venture when done the right way.Jeremy Williams Williams & Associates