Look out for termites in your repo purchase

Just a few years ago buying repossessed homes was one of the hottest niches in the real estate world. Repo papers would barely hit the courthouse steps and buyers were lined up to buy the newly abandoned structures before they ever even hit the market. Competition grew fierce for these properties and bidders grew less and less concerned about the homes conditions. With the rising prices of homes and the low costs of getting a bank repossession, things like new roofs, plumbing issues or termite damage were less and less as an obstacle then they had ever been. With just a minimum of investment and easy financing for everyone, grabbing a ‘steal of a deal’ and selling it for a handsome profit even after repairs was good for all. That is, all who found the obvious damage and not those who glossed over massive termite damage that was hidden behind the walls.

A major shift in the repo market that was intended to speed up the process of moving these homes was instituted by the federal government. H.U.D. (Housing & Urban Development) issued a letter which ‘suggested’ that banks and real estate agencies wave customary inspections and services in order to streamline the sale of these properties. The problem was that this memo was only a suggestion and was not intended to take erase these services from the process if in the area it was customary and needful to have such inspections. The institutions however took this letter as gospel and termite work and inspections were cut from the buying process all over the country. Government bureaucracy as usual was to slow to react and indeed said nothing as record sales poured in faster than at any time in previous years. Unfortunately this lack of foresight opened the door major problems that have only recently begun to manifest for unsuspecting homeowners who thought they were getting the deal of a lifetime.

Termites are blind and shun light, they prefer to live in complete darkness and spend all their lives beneath the soil or in the hollow of your walls feasting on the studs that you’ll never see. It is this behavior that allows the termite to be undetected even when the perspective buyers were walking through the home and dreaming of hanging the family portrait on the wall that was infested with this subterranean threat. Without the needed termite inspection there was no chance of picking up on this destructive insect and in most cases the damage was far worse by the time it was discovered.

There is very little you can do once a home is purchased in the foreclosure market to recoup for damages. It is by design an ‘as is’ contract and any deficiencies or defects are yours at the time of sale. Unless you can prove intent to hide the infestation or negligence you’ll have little footing in the legal process. It’s not uncommon for damages or repairs in a repo home but termites have always been one exception at least for the treatment. Many original buyers who purchase a repo find such damage and fix it much to their dismay. Others find it easy to cover up the infestation and with no previous findings recorded they can simply deny finding anything and you’re ledt with the burden of proff that the termites were there the whole time. That’s always a hard road to go.

Fortunately most real estate and lending firms have come back around to ordering these most crucial inspections. H.U.D. has also clarified it’s position and cleared up the mandate. In some areas however it is business as usual but there are ways in which you can protect yourself and in most situations have the bank pick up the tab. First, always insist on a termite inspection before bidding on the home. Next, should termites or damage be discovered ask the bank to pay for the treatment. In recent years this wouldn’t have been an option but in the current market the banks need to unload these homes and are desperate to do so. Use this leverage to get what you can out of these institutions and you might be surprised at what they are now willing to do. It may take a hard line approach to negotiating the sale but if you are unsuccessful remember, there are more repossessed homes on the market now than even during the boom years so simply take a look around and find another one with which you can get your deal. Banks know this too and will more than likely pay for the termite professional that should have been there all along.

Repo homes can have hidden costs, don’t let termites be on of them. Protect yourself with information and go to the negotiating table prepared.