Buy a home that's been vacant?
Thursday, December 30, 2010
It may seem like a great deal, but be aware of possible expensive repairs lurking inside.
By Patrick Doty, Editor Bellevue home Team Blog
A for-sale house that's been vacant may look like a bargain, but buyers ought to be cautious, because expensive problems often lurk inside homes that have been unoccupied for some time.
A home can become vacant due to a wedding, job relocation, death or other life event. But vacancies today are more often due to a bank foreclosure or short sale in which the lender accepts less than the mortgage balance. It's these bank-owned properties — sometimes called "real estate-owned," or REOs — that tend to be "problem homes," says David Tamny, owner of Professional Property Inspection in Columbus, Ohio, & 2010 president of the American Society of Home Inspectors in Des Plaines, unwell.
Vacant homes can suffer from a wide range of ills due to neglect, deferred maintenance on the part of the earlier cash-strapped homeowner, & vandalism, Tamny explains. Broken water pipes, stolen copper wiring, damaged appliances & mold are but a few examples of the potential problems that may await buyers of these homes.
The risks for buyers are front & middle since the number & percentage of vacant for-sale homes has increased in the coursework of the housing slump. over 2.2 million for-sale houses in the U.S. were vacant in 2008, according to the U.S. Census Bureau. That figure was over double the 1 million vacant for-sale homes in 2000. Vacant homes exist throughout the country, but the percentage of vacancies in 2008 was higher than the national average in the South, Midwest & West, & lower in the Northeast.
Turned-off utilities limit home inspection
Homebuyers usually hire a professional to conduct a visual inspection of the home & prepare a document on its condition. That's a wise precaution, but not even a well-qualified & thorough home inspector can see inside walls. Nor can an inspector evaluate the condition of a home's plumbing, electrical wiring, heating-and-cooling process or major appliances if the water, gas or electricity has been shut off.
"Buyers often don't understand that if there is no electricity, they are going to receive a very limited inspection," Tamny says. "You could end up with lots of surprises in the event you don't have those systems turned on prior to the inspection."
Swimming pools, which naturally are more common in such states as California, indiana, Nevada & Florida — where foreclosure rates have been high -- are also a special concern if a home has been vacant. Some inspectors won't include a pool as part of a basic inspection. Others will include the pool, but again, it may be impossible for the inspector to check out the equipment if the utilities have been shut off.
"You probably will must accept the pool (as-is because) it's unlikely that you'll be able to get the whole thing up & jogging for the purpose of an inspection & then shut it back down," Tamny says. "You could have thousands of dollars in repairs."
As-is home purchase can be risky
Some banks have procedures in place that allow potential buyers to turn on the utilities, but the buyer may be necessary to pay a deposit to the utility company & put his or her own name on the account, even though he or he doesn't own the vacant home. That inconvenience may prompt some buyers to forgo parts of the home inspection that can't be performed unless the utilities are on.
That can be dicy, because unanticipated repairs can cost thousands or even tens of thousands of dollars, & the buyer usually will have no recourse with the bank. That means the buyer will be stuck with whatever problems the house has.
"Buyers are drawn to a house because it's discounted from what it sold for a lot of years ago & they are hoping to receive a bargain. they don't always understand that sometimes the problems make up the dissimilarity between the cost of the house & what they are getting for a discount," Tamny says.
Vacancy may affect homeowners insurance
Home buyers also ought to know that insurance companies may decline to issue a homeowners insurance policy owner until the agent looks at the vacant home, says Dick Luedke, a spokesman at State Farm in Bloomington, unwell. The agent's once-over isn't the same as a professional home inspection, but it can mean additional expense if the home is in poor condition.
"If the home is uninsurable, they wouldn't write the policy owner. If the problems increase the risk of the potential of a future claim, then that might increase the premium," Luedke says.
A homeowners insurance policy owner also may need a vacancy endorsement, again at an additional charge, if the home will continue to be vacant for over 30 days after the sale. If the vacancy is due to major repairs, a dwelling-under-construction rider may be necessary as well. Read more...
