Pitfalls Of Buying A Foreclosure- Sometimes The Bank Doesnt Disclose Issues With The Home

September 22nd, 2010 by Michael Oliver

Buyers should pay attention when buying foreclosures as the banks dont always tel you everything you need to know about the home you are buying.

When buying a foreclosure property/home sometimes the bank will not disclose issues with the home even when they are legally obligated to do so I recently had a foreclosure where the bank and bank listing agent knew of material issues with one of their homes and failed to disclose and furthermore tried to cover it up and half way repair an issue that needed a lot more done to it then what was completed. Im currently resolving the issue but its an important part that buyers should realize when buying these foreclosures from the banks in todays market. While most transactions go perfectly smooth others have hang-ups and the most hang-ups by far occur in the foreclosure home segment of the real estate marketplace.

Why do banks do this?

Mainly it is to save themselves money and/or market value on their home(s). If a home needs repairs that are hard to discover then the chances of a buyer discovering those issues are minimal, and the home will every time sell for more then its true market value would be if those issues were disclosed. Banks also have this notion that because they say a home is being sold AS-IS that means they dont have to disclose anything to anyone but this simply is not the case. State law dictates that if a seller (any seller bank or otherwise) know of material issues wrong with a home then even in an AS-IS sale the items must clearly be disclosed to the buyer. Failure to do so can result in the seller being held liable for damages if the buyer took them to court over the non-disclosure of material defects with the property that they can prove the seller knew of. (proving the seller knew can be the hard part)

Basically the lenders play the percentages by claiming they are not liable to disclose or follow state statute. They figure only a few of the issues will be discovered right away and fewer of those buyers will take the bank to court over the matter thus its cheaper for the banks to just stay quite in many cases and not follow all the rules they should. As a buyer wanting to buy a foreclosure this should let you know to keep your eyes open in the transaction, as the bank/ listing agent may not tell you items they should even those legally obligated they disclose.

What should buyers do to protect themselves?

Buyers should get an experienced Realtor to represent them in these foreclosure purchases that isnt affiliated with the bank or their listing agent/ company. Good inspections also are a must as that is how these potential issues are mostly caught. Dont be scared to do a few additional inspections to make sure all the systems check out within the home. Also a good Realtor can backtrack and in some situations figure out if the bank/ listing agent of the foreclosure is not disclosing everything properly. This isnt always the case but a seasoned foreclosure Realtor generally will be your best safeguard to the lender selling the home from being able to hide material facts and issues with the home you are making a purchase on.

If you would like additional information about buying a foreclosure home from a lender in Arizona and would like to ask questions or just discuss the general foreclosure market feel free to email/ call and I would be happy to do so. All emails and voice mails are returned by the end of the day most are returned within the hour.