Need helps ASAP - bank owned property won't allow inspection?

18 Replies

I found a property that can make great money as a rental.  The house appears to need mostly cosmetic TLC and some updating.  

Here's the issue....

The property is bank owned as is being sold as-is.  The bank wanted best and final offers from all parties 3 days ago and it turns out my offer wins.  However, in my offer I stipulated that the offer was contingent on an inspection that was satisfactory. 

The bank is not allowing any inspections and ALSO is not allowing prospective buyers to turn on any utilities until after the sale of the house.

My initial feeling was that this is because there is something terribly wrong with water pipes, or some kind of other issue that I'm not seeing.  As my agent explained (and I trust her... she stands to gain very little in this whole interaction) the bank wants the place sold.  They (bank) don't know if the property has been winterized, they don't necessarily know much about the property at all.  What they do know is that if an inspector DOES find something, they would have to disclose it for 6 months.  If there was an issue with the utilities they would then have to disclose that as well to potential buyers.  My agent also explained that the house is so cheap they have the leverage to do this.... if it was 165k or something, they probably would never sell it with that stipulation.  For what its worth, the electric is still on and fine.

Now the house is CHEAP.... I've been in it 3 times, my father-in-law twice (handyman), and a contractor today will be there just to give us a general idea of what issues he could see in the house.  

I guess my question is what would you do in this situation?  No inspection / utilities check seems like a walk away situation, but I understand that on very low cost properties it's semi common for banks to sell as-is and mean it.

Any and all help is greatly appreciated

If the place WAS winterized, you would see some telltale signs: red colored antifreeze in toilet bowls, field service stickers with phone numbers, signs on the water faucets that say it has been winterized, etc. 

Water supply can generally be tested with compressed air so that leaking water does  not cause any damage. Waste pipes if cast iron can be the real challenge, since there could be cracks in them. 

Know what youre looking at when you see a house needing repairs. Bank owned homes arent contingent on inspections. Its called rolling the dice. An experienced person can look at a house like this and know what, if anything, is a problem while also realizing that repairing such items isnt that big of a deal. For example, all a water line is, really, is cpvc, glue, a pipe cutter, some clips, and a you tube subscription. All inexpensive.

Makes sense... thanks thus far for your responses!  I am quite handy, and I have a group of friends that help me out from time to time... we can do almost any job in a house from plumbing to electric.  It's not so much the type of repair that has me worried, but the possibility for the repair being on something significant.  I suppse like you said: its a gamble.  Anyone on here ever buy a house without an inspection / utilities turned on?

YES, but the price we bought it for was nowhere near 100K,..not even 50K. And the house had SAT on the market for some time. (i think a year) Look at the overall picture and what your ROI is going to be. That should help determine if you'd want to take the gamble or not.

I make offers on REOs all the time that are with no contingencies and without the utilities being on.  It's part of the game.

Unfortunately, this is pretty much how most banks handle their REOs. It can definitely be an issue for some folks. If it makes you feel uncomfortable, you may want to look at pursuing other options for obtaining leads down the road. 

Best of luck! 

I have did it once and it was well worth it.  I had an inspector come back w/ me to look at it before we made our final offer and had a good idea of the issues going in.  It doesnt mean there is anything wrong w/ it, it just is they way they do things to prevent the property from going back on the market or things fall apart after taking it off.  Figure worst case of what you see into your price and go from there.

@Patrick Hepner congrats on being top bidder/winner/whatever. My initial thought in this, without reading anyone else's opinion is that you should be only purchasing property in this manor if you have some inside knowledge of this particular area. What I mean by that is, hopefully you have either purchased property in this very exact area, know people that have, are familiar with the quality of construction, perhaps the association if it applies, etc. because of the whole as-is scenario.
When we buy property, we don't care what they look like or anything because we know what we're getting into because we shop for all the same property and know what to expect. Of course, there is always something that comes up we didn't anticipate, but that's why we pay so dirt cheap for the properties because their sold as is, where is. My point is, hopefully your bid is cheap enough that whatever comes your way you can handle and the numbers still make sense. It sounds like you've seen it before and your familiar, so just pull the trigger. What is the worst that can happen do you think? Is there room in the budget to handle some unexpected stuff?

@Patrick Hepner  Are they not allowing inspections, or are they not allowing an inspection contingency?  There's a difference and I can't tell from your post if it's the former or latter.  The banks I've dealt with have allowed a due diligence period, meaning do whatever you'd like during that time, including an inspection, but you have to decide during that period if you're going to move forward or not.  If that period expires, you're all in and cannot back out because of an inspection.  Some will say you can do an inspection but cannot turn on the water.  Others have had the property de-winterized so that a full inspection can be performed. 

Take a seasoned investor that you trust with your as you look through the property.   Someone you trust not to steal your deal.   a second pair of eyes that can spot out and project the worse case scenerio and estimate costs.    This may be a superb deal in the making

Good Luck

Not uncommon really. I doubt they are hiding anything, because I doubt they know anything -- it's just an address on paper to them. The assumption, especially with lower priced bank properties, is that you have evaluated the house before putting in your bid. Whether you do this on your own or hire someone is up to you.

Just as an example -- HUD homes allow inspection contingencies for owner occupants, but not for investor offers. I think this is because they think owner occupants need to be protected from making an expensive mistake, whereas an investors would know enough to figure the cost of repairs and factor them into the offer.

Budget for a gut rehab and if the numbers work then you're good. If it's anything less than that you've won.

If the bid + expenses + repairs + unknown = profit then I would go for it.

I have something similar now and it is going well.

If there were existing plumbing issues you would most likely see evidence, mold, rotten drywall, musty odors, etc.

If new broken pipes from lack of winterization then be very diligent when the water is turned on. Make sure everything is turned off first then watch the meter, if it is running then you may have a leak.

I agree that the bank is probably not trying to hide anything. My guess is they have never even seen the house.

@Patrick Hepner  you said your offer was accepted and it had an Inspection Contingency. Is that contingency still in there or did you have to drop it to be accepted?

If it is still in there, I bought an REO a few years ago when there wasn't as much competition, and used the inspection to leverage another 10k off the price, by producing contractor bids for various capital expense items that would now have to be disclosed to any future offers should mine not work out.

I would take 10 gallons of water to pour down drains and make sure toilets flush.
This would make sure the drains have no cement in them. If the water pipes have issue would have mold or holes in sheet rock

Originally posted by @Patrick Hepner:

... Anyone on here ever buy a house without an inspection / utilities turned on?

Happens all the time - think of sheriff sales and trustee sales. 

Since you've been allowed to make multiple visits, it seems like they saying "no inspection contingency". and utilities can not be turned on........Not "no inspection".  Take a plumber who will air pressure check the system.  Take a 10k generator if you want to check the electric systems.  Problem solved.

The REO's we target the only offers that would have a chance being accepted are

Cash with no contingency.

Never heard of a bank allowing someone to turn on the utilities.

Also another piece of information. Do not always assume that a house was properly winterized. Just because you see the stickers doesn't mean they actually did it correctly. It happens.

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