Dream Come True or Recurring Nightmare?
July 2008 (Palm Springs, Calif.) — The California Real Estate Inspection Association (CREIA) strongly advises the public to exercise caution when buying a foreclosed property. Banks have no knowledge of its condition and it is sold “as is”. There are few if any disclosures regarding the condition of the property and the Latin phrase caveat emptor (let the buyer beware) cannot be over emphasized.
California law requires a home owner to disclose "accurate information of material fact" that affects the desirability or value of the property before the close of escrow. Lenders of foreclosed properties are exempt from this law. Foreclosed properties deserve diligence above and beyond those for which there is full disclosure.
Lenders are in the business of loaning money, not holding real estate. Foreclosed properties are usually priced below market value. Bargains abound, but care needs to be exercised. A few thousand dollars saved in the purchase price can quickly evaporate with conditions discovered after escrow has closed. Even if a condition becomes known before the close of escrow, you may not be able to back out of the transaction without losing your deposit.
Be sure you know exactly what you are buying before your offer becomes irrevocable. Do not enter into a transaction unless there is a reasonable period of time for which to do your due diligence. If the lender will not allow a reasonable contingency period for you to have the property professionally inspected, have it inspected before you enter into the transaction.
Losing one’s home through foreclosure is traumatic and can bring about ugly behavior. Most foreclosed properties are in a state of disrepair greater than on average. CREIA members have reported that some foreclosed properties appear to have been sabotaged. Perhaps the owner feels victimized and takes revenge in a passive aggressive way.
Protect your investment. California does not license home inspectors and no knowledge or experience is needed. Hire the most experienced, best educated home inspector you can. Look closely at the inspector’s experience, education, reputation and service. You are paying for knowledge and thoroughness, so be sure that is what you are getting. Now is not the time to shop for the cheapest inspector. Invest some of the money you will be saving on the purchase price to assure that you are getting your dream home, not a never ending nightmare.
The California Real Estate Inspection Association was established in 1976 and is the largest and oldest state inspection association in the country. CREIA inspectors are tested for their inspection knowledge and must maintain at least 30 hours of continuing education each year, adhere to CREIA's Code of Ethics and follow the Standards of Practice developed and maintained by the Association. CREIA is dedicated to consumer protection and education. To locate a qualified CREIA inspector near you click here or call CREIA at (800) 388-8443.
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