Agreeing to buying foreclosed house before inspection?

Question

Hi everyone,

I'm in the process of buying a triplex (foreclosure). It looks like it's in very good condition and should be move-in ready. I will be using FHA Financing.

The problem is that the bank gave me only 10 days to do the inspection. Unfortunately I did not receive the agreement of sale until 2 days later (I guess it took the listing agent some time to send it to my realtor), so I really only had 8 days for the inspection.

The house was winterized, so I had to get a plumber in to de-winterize it and the Gas Works to turn on the utilities...unfortunately there was a mix up and the Gas Works did not turn all utilities on...therefore I had to cancel my inspection which was scheduled for the next day, and had to reschedule both the appointment with the Gas Works & the inspection. Of course this included several days wait time for new appointments.

Long story short, I wasn't able to get the inspection done within 10 days and the bank refuses to give me an extension! What should I do? My 10 days inspection period runs out tomorrow (Friday) and the inspector is not coming until Saturday...So basically I need to agree to this house before I get the inspection done.

My realtor says not to worry, since I am doing FHA financing...if anything is horribly wrong with the house, FHA would not approve it & would not give me a loan. Therefore I would be able to get out of the contract without losing my deposit (since the sales contract is contingent on me getting FHA financing).

What do you guys think? Is his advice correct? The house is looking pretty good, I do not foresee major issues...however, who knows what an inspection will turn up? I'm worried that I will lose my deposit if I need to back out of this contract...

Thanks for the advice!

Wayne Brooks · Answer

In your area a plumber should be familiar with pressurizing/leak testing a system with air. You can always use a generator to power the system for inspection. Anything major, will fail your FHA inspection as others have said, even though AC is not a FHA requirement even here in Fl.

Raymond B. · Answer

@Sophie Mia,

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Jeff Jamieson · Answer

I'm a loan officer and he is correct, FHA will not make a loan on a beat up property. 8 days should be enough for an inspectIon, did your realtor or loan officer offer you a home warranty?

Joel Owens · Answer

Sophie your agent is referring to the FHA finance contingency. When the FHA appraiser comes out the property has to meet certain live ability and function standards to be approved for a loan.

The inspection contingency is just ONE contingency of many likely in your purchase and sale agreement. As the time lines go down the contingencies start getting waived and checked off the list. As each contingency is waived that is one less option you have for pulling out of the contract and keeping your earnest money.

We are not physically looking at your agreement and you would need to see if you have an FHA contingency in there and what conditions it sets for interest rate, amortization schedule, and condition of the property. One thing you need to watch out for is bank foreclosures often have RIDERS attached to the purchase and sale your agent does. The rider often states that if any items in the rider conflict with the original purchase and sale agreement that the bank rider WILL CONTROL.

So if the rider says no FHA condition contingency or loan etc. and your purchase and sale says it does have a contingency the bank rider will control and you would lose your earnest money based on counting that contingency for cancellation of contract.

Any items not mentioned in the rider or they are the same the purchase and sale parts would stay in affect.

If you are unsure your agent is giving correct information ask to speak to their broker to clarify. If the broker will not clarify you might want to ask the closing attorney or title to review for you.

With the inspection costs if you end up not buying this property ask the inspector for a discount on the second property and they will usually oblige.

No legal advice

Bryan L. · Answer

@Sophie Mia - If the deal is that tight, and you are that low on cash, you probably shouldn't be buying a tri-plex even if it is in good condition. How will you handle it when a tenant trashes a unit and won't move or pay for 4 months? And then, once you get them out you need about 5 grand to get it back up to rent-ready condition?

Sophie Mia · Answer

@Joe Gore: It's not enough time if the utilities are not on. There were several issues with the utility company which prevented me from getting the utilities turned on (they are still off in fact). Mainly issues on their side, technicians getting the order wrong etc. Inspectors need the utilities to be on for the inspection.

@Bryan: I don't have a lot of money to fix up a house. I am buying this house under the assumption that it doesn't require major repairs. Those would be a deal breaker.

Bryan L. · Answer

@Sophie Mia - Real estate investing is risky. I usually make offers on foreclosures with no contingencies at all. But your Realtor may be right about the loan appraisal. Check with your loan officer.

Agreeing to buying foreclosed house before inspection?

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