Hi everyone,

Any ideas and guidance welcomed.

I bid on an REO being auctioned on a popular auction site.

All of the processes seem to be running well until I received the lein search and found that there were code violations declaring the property uninhabitable.

I believe that the issues found are repairable, but it will take a significant amount of money relative the the value of the property.

Any suggestions on how to proceed?

-A

Did you win the auction?

Assuming you won the auction:

Obviously, you didn't completely understand the condition of the property you bid on.

Was there any language in the auction terms about the liens becoming the buyer's responsibility?

Was a QCD with no title insurance offered or was title insurance offered?

Is your question about how to get out of the deal or whether to stay in it?

Originally posted by @Brian Garrett :

Did you win the auction?

I did win the auction at a rate that if I were to put in about $5000, I could still come out with a cash flow.

Originally posted by @Wayne Brooks :

Assuming you won the auction:

Obviously, you didn't completely understand the condition of the property you bid on.

Was there any language in the auction terms about the liens becoming the buyer's responsibility?

Was a QCD with no title insurance offered or was title insurance offered?

Is your question about how to get out of the deal or whether to stay in it?

I did win the auction.

I did't see any language about lien's becoming the buyer's responsibility, but I will certainly go back and dissect the terms more thoroughly. 

As to backing out of the deal or staying, I don't mind staying if the bank will lower the cost, but if they do not budge, how do I back away from this and (possibly) keep my earnest deposit?

-A

Unless the auction provided for clear title with title insurance And the bank can’t/won’t clear the liens to obtain clear title, you probably won’t get your EM back as I assume there is no inspection period/clause.
Not sure a Condemnation Order would be considered “not clear title”.

Did you inspect prior to bidding?

Originally posted by @Wayne Brooks :

Unless the auction provided for clear title with title insurance And the bank can’t/won’t clear the liens to obtain clear title, you probably won’t get your EM back as I assume there is no inspection period/clause.
Not sure a Condemnation Order would be considered “not clear title”.

Did you inspect prior to bidding?

No.  There wasn't any ability to inspect prior to bidding.

One way to avert this in the future is to run a title search before bidding. Pick out the property(ies) that you are interested in and do some pre-work. That can help alleviate a headache down the road!

This doesn’t seem to be lien issue, but more of a “needs mire work than I thought” issue.

This is a good idea.  What would the ongoing costs associated with multiple title searches?

Originally posted by @Brenda Flatter :

One way to avert this in the future is to run a title search before bidding. Pick out the property(ies) that you are interested in and do some pre-work. That can help alleviate a headache down the road!

Is it really only going to be $5000 to get it repaired to a place where it isn't condemned?

Originally posted by @Craig Smith :

Is it really only going to be $5000 to get it repaired to a place where it isn't condemned?

 Not any longer.

I ended speaking with code enforcement and they let me know what was really going on.  It would be significantly more than 5k.

End result:

I spoke with code enforcement and they gave me an insight into what was truly the issue in the unit.

The repairs would be significantly more than originally expected which amount to about 10-11k.

I sent back a list of items that would need to be repaired and respective costs to the bank and requested a price reduction.  They obliged and dropped the price from $18750 to $7500 and we will be closing today.

On to the repairs!

Thank you all for your input.

Originally posted by @Aladdin P.:

End result:

I spoke with code enforcement and they gave me an insight into what was truly the issue in the unit.

The repairs would be significantly more than originally expected which amount to about 10-11k.

I sent back a list of items that would need to be repaired and respective costs to the bank and requested a price reduction.  They obliged and dropped the price from $18750 to $7500 and we will be closing today.

On to the repairs!

Thank you all for your input.

 Aladdin,

I am in a very similar situation. Despite buying as-is through the auction site you requested a credit for repairs?  Through the title company working on behalf of the bank?  Love any details as I just recieved the city inspector report. 

Thanks,

Dennis 

Hi Dennis,

Looking at at the contract, I was not able to make offer contingent to the inspection report. Without a report, you can't materially request credit for repairs, but I was always able to request a Price Reduction.  So, I cross-referenced the recorded code enforcement violation on the county's website and called the code enforcement personnel directly.  Once I told him my situation, he seemed more than willing to help and gave me a rundown of the property and it's issues.  They "condemned" due to a toasted breaker box, but he shared other issues unrelated to the recorded condemnation like, the condition of the floors, the kitchen, and the drywall.

I wrote up a list of repairs, consulted an attorney, and requested a Price Reduction (not a credit for repairs) from the sellers agent.  In this case the agent was the auction houses representative.

Purchase Price: $7500

Repair Est: $10-11K

ARV: $30-35K

Thanks!

Update on my situation... I requested a $7,500 reduction due to issues identified by code inspector. The bank agreed to a $3000 reduction in price. This was on a REO bought off an auction site, with no contingencies.

Until I read this thread I was on my way to close next week. Now I’m doing so for $3k less. Never hurts to ask!! Thanks again for the post!