Foreclosure sales are plentiful in Northern Utah right now and they can attract buyers looking to save money.

The biggest issue with Foreclosure properties is that they are still in the foreclosure process and usually still occupied. At any moment in the process the owner can buy their way out of the process.

CONFUSION - Many buyers think that foreclosures are the same as REO Bank-Owned properties. So let’s clear up the confusion. The property is in foreclosure right up until the property goes for sale on the courthouse steps and the the eviction notice is delivered. If the home doesn’t sell at auction, then the bank takes ownership and it becomes an REO Bank-Owned property. The confusion comes because the agent will stick a foreclosure sign out on the yard to alert everyone to the distressed situation, but what the agent really should put up is an REO or Bank Owned sign.... And you wonder why there is confusion!?!?

KSL 5 FORECLOSURE NEWS STORY 2/09

AS-IS NO DISCLOSURES - Foreclosure properties come with virtually no disclosures. In other words, they are truly a “Buyer Beware” purchase. Sold “As-Is”, the more that a prospective buyer knows about the property, the better the offer they can make. The constant in this process is that once the deal is completed, there is nobody to go back upon later when you find major issues that you were unaware of when you made your offer. This is where the inspection process really benefits those that invest in a foreclosure property.

PROJECTIONS - Historically foreclosure properties have always been available in a scattered fashion, yet they have never been this plentiful. In a recent Utah Board of Realtors’ training, the foreclosure specialist said that the current foreclosure is expected to double by the end of 2009. Double?... They have reported 8,000 Northern Utah foreclosures in 2008.

BE CAREFUL - As a prospective buyer, you need to be very patient in a foreclosure purchase. The bank dictates the process and the transaction can be very delayed. I have seen some banks seemingly stonewall the inspection process by rushing the agreement period and making it near impossible to get the utilities turned on for inspection. Buyers need to be prepared to pay all of the fees involved with getting the utilities turned on and off again. The expense is deemed appropriate since the buyer is getting “such a good deal.” Whether or not it is a good deal, greatly depends on what turns up during the inspection process.

ANGER & SABOTAGE - Prospective foreclosure purchasers need to realize that most prior owners are not very happy when they are foreclosed upon. I have witness vandalism, damage, and sabotage by those evicted from their homes in the foreclosure process. Sometimes they take all of the appliances. Other times the light fixtures will be missing. Holes are often beaten through walls, and some evictees flood the home to cause major damage. The visual sabotage is pretty straight forward to document. As a long time inspector, I become much more sensitive to all of the unseen damage that a frustrated owner can do to discreetly sabotage the home.

REAL LIFE STORY - A few years back I was called upon by a younger couple looking to purchase a Sandy, Utah foreclosed home. I urged them to get the utilities on and they were having success with the power and water, yet the gas was proving to be an issue. They heeded my stern advice and they paid the fees and back payment penalties needed to get the gas turned on. I clearly remember the backlash that I was taking from their agent who was pressuring them to forego the inspection process and just close on this really great deal.

I remember arriving at the home and starting the inspection when the gas company finally arrived. So far the home looked to be in pretty good condition. Once the gas was turned on we cranked up the forced air heater and the moment that the hot air passed through the duct work we came out of the house coughing and gagging.“What had died in the ductwork?” we wondered. It turned out that the owner was upset and had poured urine down many of the main floor heat registers. The urine flowed through the ducts and leaked out the joints onto the basement ceiling drywall below.

The result of the urine sabotage was the need for all of the ductwork to be removed after the basement ceiling drywall was also removed. This greatly altered the transaction and even though this was “As-Is”, the bank renegotiated the deal to cover the great expense of the newly identified health risk. But what would have happened if the gas was not turned on until the deal was consummated? The buyers would have been stuck with the expenses of the toxic cleanup process. What would have happened if the bank had not agreed to pay for cleanup? My clients could have gotten bids and made the decision to either budget for the upgrade or walk from the deal altogether. Almost needless to say, I am adamant about foreclosure purchasers needing to get the utilities turned on for the inspection... I never would have known about the urine sabotage without the ability to run the furnace during the inspection.

SHORT FORECLOSURE VIDEO - While searching for information I found this good 97 second video that discusses Foreclosure purchases. Click on the following image to access the video.