After my son read my last week’s post about buying a home, or homes, at auction, or during the foreclosure process, he asked me why a bidder simply couldn’t make his or her bid contingent on a professional home inspection. On the surface this seems like a sophomoric question.
That’s on the surface. When you dig deeper into the question, you realize the processes are a bit different even though the subject, foreclosure, is the same. A house that hasn’t been foreclosed upon isn’t being auctioned. Unless, of course, an owner decided to use an auction as a means of selling his/her home. I was not, and am not, talking about this type of auction.
When a potential buyer attends an auction, it is presumed (s)he has read the rules, procedures and advisories the auction company makes available before the auction. Auctions, to my knowledge, don’t accept contingent bids. If they did, they would never sell anything. It just doesn’t work that way.
As a reminder, please read everything the auctioneer has in print or on their website so you can be informed BEFORE you decide to participate. I’d bet somewhere in their information, contingent bids are listed as a no-no. When I worked at my buddy’s auction, he always opened the auction with a statement to the effect that if you are the winning bidder you own it. That statement alone eliminated any and all contingency type of bids.
On The Other Hand
If you are buying an REO, for example, you certainly can place a home inspection clause into the contract. In fact, it is a great idea to do just that. It is a great idea because you don’t want any surprises.
If you are attempting to buy a home that is in the process of being foreclosed, you don’t need any type of home inspection contingency clause. I say that because if you are in that process, you should have already inspected the property. I can’t imagine a buyer of a foreclosure plodding along without having done an inspection.
By the way, there are six states that don’t require a mandatory seller’s property condition disclosure. Most people believe this disclosure is made part of the contract by their real estate agent. They are correct in 44 states.
Alabama, Arkansas, Kansas, Vermont, West Virginia and Wyoming are the six states. This doesn’t mean the state licensing agencies of these six states don’t require real estate agents to tell buyers what they know. I’d bet they do.
Regardless of state laws, the members of the National Association of Realtors are obligated by their code of ethics to disclose any defects they know about. Hence, it appears the buyer using an agent has several layers of protection.
As with anything involving humans, things can, and do, go wrong. Hence, the amount of homework you do is probably proportional to the outcome. No homework, oops. Diligent homework, wow! I got a great deal.
For anyone wishing to be armed with an inspection checklist, probably the easiest way to get one is to do an Internet search. I did one and landed at: http://www.americanhomeinspectordirectory.com/inspection-checklist.html. I am NOT recommending this site or this company or their information. I am merely using it as an example as it appears to be pretty thorough and it happened to be at the top of the first page of the search I entered.
If you have friends in the business, ask them for a copy of the checklist they use. Or, go to the public library and go through the real estate books. I bet you find one you can use.
Having said all that let me repeat my advice: Do your homework BEFORE you jump into foreclosures or foreclosure auctions.