Facing the constantly rising housing prices in the United States, many people are turning their attention to bank-owned foreclosure homes that are priced much lower than the market value. However, real estate lawyers remind that thorough research must be done before purchasing to guard against hidden risks; otherwise, one may end up paying a steep price.
In the conventional housing market, the median house price in the US was $416,700 in August, and in California, it was $888,740. However, foreclosure homes owned by banks do not follow the usual pricing route, as the prices are set by the banks, often very enticing and sometimes even half the market price.
Nevertheless, there are pros and cons as foreclosure homes are typically sold “as-is,” meaning the buyer must bear all responsibilities for repairs, renovations, and more. Additionally, while the bank may disclose basic information about the property, crucial details may be missing, such as illegal occupation, tenants, potential residency issues, missing documents, etc.
Bijan Shakibkoo, a veteran real estate lawyer in Los Angeles, points out, “The biggest risk in purchasing foreclosure homes is not knowing the condition of the property you are acquiring and what subsequent issues you may face, much like buying a blind box.”
Shakibkoo emphasizes that there are uncertainties with foreclosure homes, “Two crucial points need to be thoroughly investigated. First is the condition of the property; because buyers lack understanding of the title situation, everything must be ensured to be in order. It is also essential to confirm if there are hidden conditions, structural issues, foundation problems, etc.”
Common property conditions may include thieves or previous owners removing valuable fixtures from the property, poorly maintained foreclosure homes possibly having structural issues that may violate local building codes, long-vacant homes where utilities like water, electricity, gas do not function correctly, and buyers potentially facing challenges in obtaining regular financing for foreclosure home purchases.
Some foreclosure homes may also have issues related to debts, unresolved liens, encumbrances, etc., preventing the buyer from acquiring clear property rights, leading to legal disputes.
Shakibkoo advises that before deciding to purchase a foreclosure home, buyers should thoroughly evaluate the property’s condition, calculate potential repair costs, and seek professional assistance if encountering any title-related problems.
Secondly, investigating whether the former owner or tenants still reside in the foreclosure home is crucial. Shakibkoo notes that many buyers commonly face situations where former owners or tenants refuse to vacate the property, may cause damages, or the property is unlawfully occupied due to prolonged vacancy.
“If tenants have no lease agreement, buyers are unaware of rent payments or the duration of occupancy,” says Shakibkoo. “Specific regulations dictate procedures for evicting former owners. Unfortunately, if it is previous tenants refusing to leave, additional eviction measures must be sought.”
The eviction process can be cumbersome, especially in Los Angeles, where it is challenging, involving costly legal fees. Shakibkoo recounts a client who spent over a year on an eviction process with subsequent ongoing issues, describing it as a distressing experience.
He believes that prospective buyers should physically visit the foreclosure home they intend to purchase, conduct inspections inside and out, review the surrounding environment, and assess the resale value potential.
Professionals in the Los Angeles real estate industry recommend that buyers of foreclosure homes enlist the services of real estate agents and lawyers to assist in completing transactions. Failing to inspect the property beforehand may result in not achieving the anticipated economic returns.
(translation sources: 大紀元, The Epoch Times)