Quite the interesting REO experience I just had:
I put an offer in on a property last week w/ a 10 day inspection; the bank countered with "0 days" for one. Now, since this would be my first rehab, I'm not comfortable with foregoing an inspection at this stage (nor will my private lender lend w/out one).
When we nicely explained the inspection would be needed to go forward with the purchase (or we'd simply move on, no harm/no foul), we got this looong email from the LA, demanding to know why I was asking for inspection days, why I hadn't inspected prior to making an offer (as if I'd spend $$ to inspect a property I hadn't yet won a bid on!), utilities wouldn't be turned on, etc. Mind you, nothing was stated in the listing about inspections not being allowed. And I guess this guy never heard of structural inspections--which is what my inspector does for REOs w/ no utilities--just to make sure there's no structural stuff I was unaware of (including buried oil tanks, etc.--which I narrowly missed recently, thanks to said inspection!) Then again, this is an agent I found out later was charged a couple of years ago w/ theft from a rival, so I guess shady behavior is a thing....the defensiveness not only left me incredulous, but looking at the seller & LA w/ a crazy side-eye--something to hide, perhaps?
We (professionally, of course) told them to stick it where the sun don't shine, lol.
But I just had to vent...since when does a seller get so bent out of shape because a buyer "dares" to ask for an inspection??? SMH...
wow... I guess you hear something new every day. Thank you for sharing that. yea I mean anytime an agent or seller does anything outside of the normal procedure, you should always have a mental red flag raised. Refusing inspection is just absurd, they probably won't ever sell that house unless its a cash buyer. I mean what traditional lender would go through a deal without inspection.
Exactly. And it wasn't even do much about not allowing inspections ( because I've seen some REO listings that don't)-- but then why not just say that upfront in the listing?
Plus the L.A. was so emotional about it, lol--which led me to believe they didn't have any other offers. Because why not just move onto the next, instead of wasting time with a long angry reply to me?
Most of us who buy REOs do our own inspections. And, once you've bought a few and done the rehabs, you can walk through one and do that inspection on your own in about 15 - 30 minutes. I rarely hire a home inspector. And I often make my offers on REOs with no contingencies - none at all. No inspection contingency, no financing contingency, nothing. This is often what it takes to get a good deal on an REO.
True, Bryan-- most experienced rehabbers forego formal inspections--- I'm just not at that point yet, though it does seem like banks are more partial to those offers.
Shorten the inspection period .. if they won't agree I guess you have to pay for an inspection prior to acceptance or move on..
@Vonetta Booker Good for you for standing your ground and walking away. There are difficult, shady, incompetent, or otherwise problematic real estate agents out there. If the agent is this problematic at the get go, how do you think he will act during the rest of the transaction? I find that it's a waste of time and a headache dealing with them and I'd rather move on to finding the next deal. Yes, some rehabbers will waive their inspection period and I understand why. But a 7 or a 10 day inspection period is completely reasonable.
Good job! I personally preinspect and then waive the insp contingency. It just makes my bargaining position stronger. It helps that i can do my own. But i take my time. Usually in the two to three hour range. I would just kick myself too hard if i missed something major. It could still make sense to pay for an inspection pre offer especially if the pricing is good. Just the cost of doing business. If you do enoigh deals your inspector might just cut you a discount. Worth a try.
Many times there's a standard inspection period in that packet of addendums the bank has for their REOs. Its often short, maybe a calendar week from their acceptance. Did they hand over their addendums?
HUD properties, when you're making an as an investor, don't have an inspection period. But REOs usually allow one. Weird situation.
An update: I found another (HUD) property that I got an offer accepted on--for 10k less, with around the same ARV. Had an inspection done (no hassles there), everything looks good & we're closing on the 29th. In subsequent flips, I'll feel more comfortable with doing what you did, @Eric B. --not a bad strategy. But since this is my first, I didn't want to make any extra-risky moves based on my experience. :-)
Do keep in mind that when you bid as an investor on a HUD property there is NO inspection period. If you hand over your EM, its gone. You may do an inspection and find some glaring problem, but you won't get your money back and HUD won't negotiate. With HUDs its essential to do an inspection before making the bid, if you have concerns.
Yep, @Jon Holdman , I took a look at all the ins & outs on HUD & knew what I was getting into before I went in. Everything looks good to go ahead & close :-)
Well sounds good glad it worked out for you @Vonetta Booker . I just did a similar thing. Ran into a seller that was being really stubborn two weeks ago and something else came on the market last night. We inspected this morning and are offering about now. Also leased my last aquisition from last month at the same time. All before kickoff. Sweet. Go Hawks!
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