The Journey to Home Ownership these days

As some of you know, there is someone in our family that has been looking to buy a house for the past 6 months now.  Being a homeowner myself (7 houses over 32 years), I have had to try and educate myself on the many ups and downs of home purchase in these very interesting economic times now.  Here's the disclaimer for this column.  I am not implicating any banks, realtors, ect.  These are just some of my opinions on what we have experienced. 

Here are some things that I've learned as we contemplate whether or not to put a bid in.  This may also explain some of the problems that need to be addressed in the banking community.  The odds are on their side when it comes to being able to pass on numerous problems to unsuspecting buyers.

1.  Foreclosures in our area run the gamut of being in great shape to being on the verge of being a knock down.  We have seen homes that were once in great shape, not be winterized, have the pipes freeze, varnish and paint ruined, floors buckled, ect.  It appears that some banks are not doing what they should be doing in order to maintain the home as it was when they took possession of it.  While I'm not sure how much it costs the bank to have it winterized, I am assuming that it would be well worth it in order to sell it for the best price possible.

2.  Deeds come in many forms.  I've found that in my searches via the county/city websites on property tax and assessment areas, that most of the banks have taken possession of the properties with the standard and preferred Warranty Deed in place from the previous owners.  For some reason, the banks are then turning around and selling them without this type of deed being passed on to the buyer.  We've seen many different kinds of warranties via the contract for purchase.  Most realtors are not listing what kind of deed will be given to the buyer on the property info sheets.  If you don't get the Warranty Deed designation, be prepared to have additional expenses ranging from attorney fees for a title search to actual creditors notifying you that you are now responsible for debts from the previous homeowner or even the bank.  Yes, we are finding that some banks are not even bothering to pay the property taxes.  You can find this via the county/city websites also.  Penalties and Interest are adding up on these and the local communities are now trying to figure out how to get these payments.  You can try adding to your offer to purchase a clause stating that the seller is responsible for all liens and encumbances (correct verbage can be found via an attorney), but most of the banks/sellers will not accept one of these offers due to the fact that they don't want to spend the money to run a title search.  So much for doing what is best for the customer.

3.  Inspections are very important if you are going to be looking to buy one of these properties.  Don't try and save a few dollars by hiring the least experienced Home Inspector.  Plan on spending at least a couple of hours at the home going through everything from top to bottom.  You should also be getting a very detailed written report from the Home Inspector with notes on what needs to be fixed, addressed or looked into.  This will also help you to schedule contractors for estimates on the repairs.  Also, take the time to go to the city building inspector office and ask to see the file on the property.  If necessary, ask to make an appointment with a building inspector to ask any questions on things that you've seen or the Home Inspector has pointed out that may have been done without a permit.  Ultimately, the Building Inspector will be the one that will have to approve any additional work done on the property as well as help to walk you through what has not been installed or done correctly.  On your offer to purchase, make the offer contingent on a satisfactory inspection by the Home Inspector of your choice. 

4.  Being able to get a mortgage on any of these homes is tough to do in these times.  The banks won't even look at financing you if the house is being sold 'as is' and has things that would cause it to not pass the Banks' inspection.  The reason that we are seeing so many houses sitting and vacant is that most of the real estate investors are now short of cash to buy these houses.  FHA will not approve a mortgage unless several conditions are met.  Thus, no approval on the mortgage, means no completion of purchase for you.  Also, make sure that when you submit the initial offer to purchase that you put in the contract that the offer is contingent on being able to obtain financing.

5.  We have found that by having a Realtor that represents our family member, we are able to find out quite a bit of information through her vs. using the listing agent as our source.  It's well worth finding someone that you trust that will be willing to spend the extra time finding things that you would not think to ask about.   

In researching many properties before we go and look at them, I am seeing the names of several financial institutions that tells me why they needed the TARP bailouts that they took back in 2008 and early 2009.  Based on how they did business over the years, it's quite obvious that this was one of the many reasons that we are now where we are at when it comes to the economy.  It's also very frustrating to see that they are passing on lots of problems for future homeowners that don't know how to play this game. 

Maybe I'm being naive, but I am really surprised at how the laws/regulations/rules are still not the best for the consumer.  We definitely are not holding the cards.  Even sadder is the fact that many of these houses were once filled with families that thought they were ok.  If walls could talk...

Have a great week!