Foreclosure auction - unpermitted work

4 Replies

New to foreclosures. I've been researching a property for an upcoming foreclosure sale and found that it has several open permits and a zoning violation where some unpermitted work was done.

I'm trying to ballpark the costs for potential issues with the unpermitted work:

  1. - Cash purchase, so any lender issues would be down the line with a HELOC (is this correct)?
  2. - Insurance issue in the event of a problem with the property (i.e., fire); would there be an issue with getting insurance for the property after purchasing it--whether it's insurance for a foreclosed property or a general homeowner's policy?
  3. - Cost of fixing repairs if they aren't done well
  4. - Potential liens from contractors that may not have been paid (no contractors on file for the open permits, so I can't contact them)

What else should I consider about unpermitted work before making a foreclosure purchase (courthouse steps, not REO)?

    Thanks!

    1) Maybe...maybe not. Depends on what the underwriting conditions are for a HELOC. Many areas in today's market are desktop valuations so, no inspection or appraisal. Just public data.

    2) Not normally an issue. 

    3) Always an issue

    4) Not usually an issue as their liens may be extinguished in a foreclosure.

    Purchase expecting the worse.

    Originally posted by @JC Carter :

    Thanks @Ron S. For #3, is there a certain amount that you earmark for repairs generally? I'll know more once I can view the property, just wondering if you use any sort of baseline.

    it's typical for me to foreclose and get a property with unpermitted improvements. I do an analysis and if the numbers tell me to fix, I fix it, otherwise, I discount and sell as is.