11/03/2012
Should A Buyer Pay For An Inspection For a Repossessed or Short Sale Home Purchase?
Most repossessed and short sale homes are purchased “as-is.” Does that mean that the buyer should not purchase a home inspection? Our opinion is “Absolutely purchase an inspection.” Purchasing a property “as-is” is fine, as long as you know what “as-is” is. These homes are usually marked down to compensate for the condition of the property, but not always. There may problems so big that you would not have purchased the property if you had know they existed.
The inspection is used as a fail-safe for the buyer. He has agreed to a sale in which he buys a property without any seller repairs, even though he does not know the extent of the necessary repairs, or their cost. By asking for a period of due diligence that includes a home inspection, the buyer in effect gives himself an out if the repairs prove to be too burdensome. In many cases, the discount a buyer can get on a distressed property more than offsets the costs and inconveniences of required fixes. Painting and minor drywall problems are within the budget of most buyers, and if buyers are do-it-yourselfers, even less expensive. But the buyer needs to know what the extent of the outlay will be, and determine if that fits within his budget and within the value of the property once it is repaired.
Many distressed homes have had poor maintenance by their owners. After all, if they are losing a house, why would they maintain it? Some homes have been deliberately vandalized by the previous owners or by malicious trespassers. The electrical wires were all cut in the attic in one home we sold to a buyer. When the home inspector touched the fuse box, he got a serious shock. If we had not insisted on an inspection, we would not have known that. The buyer was a single woman, and did not have the money or expertise to make the repairs. The seller was a bank, and the sell was “as-is.” However, the bank did agree to make the repairs to the electrical system, though they did not have to. Because we had included acceptance of the inspection in the contract, the buyer had the option of canceling the sale if the bank had refused to repair.
Different entities have different policies regarding repairs on these properties, but it never hurts to ask for repairs to be made, even on “as-is” sales. You may just get lucky.
Some fairly easy fixes are a broken window, leaking seals on the plumbing, destroyed door locks, broken interior doors, paint and limited drywall repairs, and missing light fixtures. Repairs that may require significant outlays would be extensive drywall damage, missing kitchen appliances, serious electrical and/or plumbing problems, destroyed lawns and sprinklers.
So would we advise a buyer to get a home inspection when he/she is buying a repossession or short sale. ABSOLUTELY YES.
