Inspecting Foreclosures

 Unfortunately, homes in foreclosure can represent a greater risk of liability for the home inspector.   Several factors play a role that can affect the home inspection:

•    Foreclosure homes are often in poor condition and could require more inspection time and documentation than a “normal” inspection; many inspectors charge higher fees for foreclosures because of the extra effort and time.  Poor maintenance is a common situation as sellers who have trouble with house payments also fall behind on home maintenance.  Break-ins and vandalism in these vacant homes often contribute to damage of walls and floors as well as theft of appliances and lighting fixtures.  It is not unusual for some evicted homeowners to create their own damage to walls and doors in frustration of their difficult financial situation.   In foreclosure inspections, it is very common to find missing appliances, light fixtures, garage door openers, air conditioner units and other items that can’t be inspected and will need to be replaced.  The combined cost of replacing these items can become a considerable expense for the home buyer.

•    Many foreclosed homes have been vacant for several months with little or no ventilation, creating opportunities for mold and fungus growth that the inspector and buyer may be subjected to during the inspection.  Because of the health concerns and the potentially high cost of mold remediation, this issue can become a “deal killer” concern if large quantities of suspected mold is present.

•    Another common problem is that many agents are misinformed about whether the utilities are on for the home inspection.  It is all too common to be told the utilities are on, only to find out they are not, which restricts the ability to perform a full inspection. Most real estate contracts specify that the seller agrees to have the utilities on for the inspection; some home inspectors also remind their clients in the pre-inspection agreement that it is the responsibility of the client to have the utilities on for a full inspection.  In some cases, when the bank or seller will not turn the utilities on, the buyers are forced to call for utility service themselves to obtain a full inspection; in this case, buyers have to agree to pay a deposit in order to turn on power, water or gas.   Sometimes, the initial inspection can be completed as a limited inspection, with disclaimers.  Re-inspections can be scheduled after utility service has been restored, usually at an additional cost to the homebuyer.

•    Most homes in foreclosure have been winterized, a process where the plumbing system has been turned off and drained, including supply lines and the water heater.  In some cases, the plumbing supply lines have been cleared by compressed air and anti-freeze has been added to drains and toilets.   It is not be wise for the home inspector to turn on the water supply after the home has been winterized, even with permission from the listing agent.  The risk of leaks and water damage are great, including leaks from damaged pipes that may not be visible inside walls and ceilings, and open washing machine hookups and ice maker lines that can spray several gallons of water before the system can be turned back off.  Damaged ceilings, walls and floor coverings from these leaks could become the responsibility of the inspector and, possibly at great expense.  In some cases, with the proper amount of notice, the winterizing contractor can de-winterize the home in time for the inspection, if requested.

•    Finally, foreclosures often do not come with any seller’s disclosure statement as a result of the bank not having any history of the home; this situation can eliminate helpful information for the home buyer as well as the home inspector.  Most foreclosures are sold “as is”, which creates an even greater need for a thorough home inspection.  Many times, the inspection report is the only reliable information the buyer has available to them to make an informed buying decision.

With the growing number of foreclosures, there is an opportunity for home inspectors to replace some of their lost inspection business with foreclosure inspections.  Things to consider in attracting more foreclosure business is to change search engine meta tags and website content to include more home foreclosure information that search engines, investors and home buyers  will find.  Other options include marketing to real estate agents specializing in foreclosed properties and to local real estate investor groups that are active in the foreclosure market.

While foreclosure properties have their share of aggravations and increased risks for the home inspector, foreclosure inspections can be a welcome source of new business for inspectors in this slow real estate market.  The presence of this large inventory of foreclosed homes is expected to continue at least through the end of the year, and possibly beyond, creating continued opportunities for home inspectors.