Bank owned properties can be great deals, but know the possible costs going in

The bulk of real estate sales continues to be pre foreclosed and foreclosed properties, largely because they are, square foot by square foot, the best deals on the market. With the number of foreclosures on the market and more on the way, cities are reacting to ensure the integrity of neighborhoods, and long term property values. This is equating to some additional costs for buyers.

The saavy buyer already has some upfront costs when purchasing a property. I always recommend, and nearly all of my clients do, a home inspection. This can run from $250 to $400. In addition, more and more buyers are electing to have their potential new home tested for radon. This test can run from $180 to over $200 depending on the footprint of the home and the layout of the living spaces above.

In addition to these costs associated with purchasing any home, bank owned properties are bringing some extra expenses. Many of these properties have been winterized by the property preservation departments of the owner/bank. This means that the water has been shut off, pipes drained, gas shut off, and often the electricity. A buyer on this property must pay to have the home “de-winterized” for their property inspection. The buyer then must pay to have the property re-winterized, whether they decide to pursue the purchase of the home or not. This cost has typically been around $300 to de- and re- winterize.

A second cost to buyers of bank owned properties is being instituted by local cities and villages. Both Romeoville and Aurora now have a mandatory city inspection of all bank owned properties paid for by the buyer before a certificate of occupancy can be issued for the home. This inspection can also hold up the closing of the sale, and the new owner may not occupy the property without the inspection. The new owner is also responsible for any repairs, if any, that the inspection turns up. The inspection is mainly for safety and building code issues. In addition to this, the city of Romeoville now also mandates an air test for mold for all bank owned properties, at a cost of $200 or more. If mold is found in the air, it must be professionally mitigated and the property must pass a second air test before the buyer may close on the home.

The reasons for all of this testing is not just to make the purchase of a bank owned home difficult or to raise revenue for the city. Municipalities are simply taking action to ensure the quality and integrity of their neighborhoods. An unaware buyer purchasing a home with mold, then becoming extremely ill, could result in the home going right back into foreclosure. Buyers must make sure that the “deal” they are getting is good enough to cover all of these potential costs. Agents may want to call the cities that they do business in and be sure you can educate your buyers on what each city is requiring.

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