Hi all,
I'm thinking about making an offer on an REO. Listing agent tells me that the utilities will not be turned on for inspections. Is this normal practice?? How am I supposed to do my due diligence if I can't even check if the plumbing and electrical systems work?

Also, how can the banks (or investor-owners) get away with "no SPDS, no CLUE"? They could at least fill out the SPDS and check "not to my knowledge" if they don't know about something.

It's almost like they don't WANT to sell their inventory, they sure don't try very hard.

Why don't you turn on the utilities for your inspections. After all, YOU are the one who wants to check out everything. REOs are offered/sold AS-IS 99.9% of the time. It's not like the lender is hiding anything, they just don't want/need the carrying costs associated with turning all the utilities on.

The lender/owner has not physically seen the property themselves and has most likely paid for the property to be winterized. They do not provide dewinterizations for everyone who just wants to check things out. Many times it is the buyers responsibility to pay to dewinterize, turn on utilities and rewinterize in the course of due diligence. Look at it from the sellers perspective.. why would you dewinterize and turn everything on to accommodate a buyer who has not even submitted an offer?

I don't know what the acronym SPDS stands for so I can't comment on that. Providing a CLUE report is something that you might want to request in the event your offer if accepted.

SPDS - Seller's Property Disclosure Statement. I fill mine out, or rather draw lines across each page, check the box that says it's was obtained by the lender through foreclosure and send that on to the buyer's agent. Keeps my broker happy and the RE Commission.

CLUE reports are the buyer's responsibility in my opinion, we don't provide them here as matter of course.

Common phrase we use "buyer to verify all", meaning it is up to the buyer and their agent to get all their questions answered on their own.

On my REO properties, my AM's require me to have the utilities turned on, at least the power and gas, water I leave until it has to be turned on. We have one city that is a PITA to get water on and there is usually an outstanding bill that goes with the property. Most utility companies will do a courtesy turn on 1 time only for inspections and for a few hours.

Our board attorney has recommended that we no longer provide sellers disclosures as they can never address/answer everything.

Instead, they recommend that we ask the buyers to indicate if they have any questions for the seller. If they do, they must submit all questions that they have regarding the property on one sheet (with signature) and it will be presented to seller for direct answers and a signature from them. If they have no questions, then they sign a document indicating as such.

Some of my REO sellers will sign the proeprty disclosure forms after putting big X's through everything or stamping it with "Seller has no knowledge of the condition of the property" and some won't. I know you are only trying to buy that 1 house, but the asset manager that you are dealing with probably has hundreds of files on his/her desk and it is not practical for them to fill out disclosures just to say that they don't know anything.

As far as utilities, some of mine will turn them on for inspections and some won't. Some will allow the buyers to have them turned on at the buyer's expense, but if they de-winterize, they must pay to re-winterize it also.

The banks are taking a big enough of a hit already.You should already have an acceptance contract with an inspection contingency before spending the money on inspections and an appraisal.

You have to remember most buyers buy 1 home every 5 years or so.Most banks sell hundreds to thousands of properties int hat same time. This isn't there first rodeo and they have things down to a science to minimize there losses and increase there gains.

If the bank does something a certain way there is a reason for it beleive me.

Thanks for the replies. Of course, I was referring to doing the inspections AFTER an accepted offer, during the normal inspection period. I am told by another agent locally that I could ask the bank if we can turn on the utilities for inspection at our expense, and they might agree. But, after all, they still own the house at that point, so they don't have to agree to it.

As to the banks "having things down to a science"... this house I'm looking at has a refrigerator with food that's been there probably since the bank obtained it in August. Rest of the house is filthy, too. I went to the listing agent's website, and she markets her services to banks by making a point of her meticulous attention to detail. I wonder if she ever went inside the property at all. If it was my listing, I would make sure there was nothing rotting inside the house, then check it once a week to make sure things were OK.

I just had an inspection done in a foreclosure. The bank had an inspection form in their package which we both signed. Once we were ready for the inspection we faxed them the form & they turn on the utilities for a couple of days. Then once we are done we fax the form back w/the date the inspection took place & they cancel the utilities.

While it is my understanding that the majority of bank owned homes are in relatively good condition, I would prefer to have the power on while my inspector did his job.

If the bank or listing agent won't turn on the utilities, then you can call up the utilities and have them turned on yourself for the inspection. If you could get a commission worth several thousand dollars, it might be worth it to pay for a few days of electricity, water and gas, until your inspectors are done with the property.

To facilitate the Sale, I often pay for some of these incidentals out-of-pocket as they arise, and if the Sale occurs (and I remember) I get them all put on the HUD and get reimbursed at Closing. No one has ever objected when we're sitting at the Closing Table.

Either you want the house or you dont.

Right either you want the house or you dont. Most people dont and they will do anything to try find an inspection gone wrong. Also if you want the house you an always use them to get some money off.

For properties that don't have the utilities turned on, the best bet is to assume nothing works and that all the systems will, at best require repair if not complete replacement. This a given with REOs and is the main reason why they are sold as-is and are priced so low.

My wife and I list and sell a lot of REOs and haven't really seen this problem. Some asset managers require them turned on by the listing agent - the house shows better if you aren't walking around in the dark (...oops.. I should say sometimes it shows better).

If they are not already on, we've never run across an asset manager that wouldn't give permission to have the utilities turned on temporarily once a contract was executed. It's almost always at the buyer's expense, and in some cases the buyer is required to pay for re-winterization, but they don't have a problem if the buyer agrees to that.

I can't speak for other states, but in Texas the usual seller's disclosure is a non-issue for REOs - they are exempt. The seller is still required to do a lead paint disclosure, and to disclose any information they do have about property condition - they just don't have to do the traditional seller's disclosure form.



(DISCLAIMER) Of course, it's more than possible I don't have a clue what I'm talking about...

Everyone here is going on the assumption that banks are conducting themselves in an "honorable" manner, they're not. If they're not willing to turn the utilities on then they're not willing to sell the house.

I don't understand how some of this seems reasonable to people. Sure, the banks have taken a large hit, they're also largely, not solely, responsible for the economic crisis we are in.

Pass on it, they know something that they have a duty to disclose but know if they do it will hurt their chances of selling the property. Not worth your time.

I disagree - Banks do not have a duty to disclose what they most likely have no way of knowing.

REO doesn't even have a legal duty to disclose in many places.

As for the power issue - if there is a short somewhere in the house and it burns down as a result of not being thoroughly and expertly inspected before the electric company sets the meter - are you willing and able to pay for the damages and liabilities it could create?

You want a home at a huge discount but without any risks - good deal if you can get it.

Given the current housing market and the number of foreclosures while the banks do not necessarily have an obligation to disclose what they most likely do not know, I believe they have an obligation to find out.

REO doesn't have a legal duty to disclose in the State of Missouri. However, do you think that given the state of the economy maybe they SHOULD take steps to find out and disclose as necessary?

While I understand your comments about the power issue, why, exactly, do you think it should be the purchaser's responsibility to be willing and able to pay for any damages that turning the power on could create. Maybe, the banks have an obligation to have the house, "thoroughly and expertly inspected before the electric company sets the meter".

Let's remember folks, possession is 9/10ths of the law. The banks are the ones that made the decision to lend money to people they shouldn't have, and they made money off the transaction. While it may not have been their greed alone that has landed us in the current housing crisis, they are certainly a major contributor. Now you want to let them off the hook by saying it's not their responsibility, it's on the purchaser? When exactly do you plan on holding them accountable for their actions? I vote that we do so right now!

Please accept my apologies for being so blunt. But as a taxpayer, these people got bailed out, or are in the process of being bailed out, for their poor business decisions. I am going to pay for it, my children are going to pay for it, and my grandchildren are going to pay for it. Responsible banks don't have many foreclosures on their hands, why? Because they conducted themselves rationally and responsibly.

If the bank can't be bothered to turn the utilities on, it's not worth dealing with them!

No apology needed - I disagree with you. I see it as there are many facets that had to take place to get to where we are now - the banks did.t do it by themselves.

Look - it is real easy - if you want something done a particular bank isn't willing to do for you - move on to the bank that will.

Right now there and many people losing their jobs who were well qualified for their mortgages and will soon be losing their homes as well - don't be looking at the banks as the scape goat for all the problems - the individuals have an equal or greater part in it.

Here our banks issue "special" vs. "general warranty deeds", meaning, they will not warrant the REO house or provide a filled out property disclosure.
Our purchase contract also advises the buyer of performing their "due diligence" as far as physical and title inspections of the property and tells the buyer if condition is a concern, to have utilities turned on at their expense.

No seller, an individual or bank is required to do anything to accomodate a buyer, and if the buyer wants assurances from either, they better continue renting or stick to looking at non-REO's.

I didn't have the plumbing turned on for my personal inspection of an REO, and it has plagued me a bit since moving in.

I would always play hardball with the bank, and make sure it's written into the PA that they pay for the utilities being turned on. It's not your fault they made a bad choice to lend money before.

Huh??? You better get permission from the listing agent to have them turned on! You are NOT authorized to do ANYTHING with seller's consent. If the seller won't grant permission to have utilities turned on to allow for you to adequately perform Inspections prior to contingency removal, then I would tell the listing agent/seller that this deal isn't going to happen. Who in their right mind would remove Inspection Contingencies without utilities on unless you are buying the property for land value only?

Fortunately, all my REO assignments have required me to get utilities turned on for Inspections. When I respresent buyers, the listing agent also gets them turned on. If I couldn't have utilities on for an inspection, it's real simple... find another property! For those of you finding this a problem, I would write in the offer that "all utilities to be turned on for buyer to perform Home Inspection".

Buyer beware is the only thing you need to remember. Regardless of disclosures or not you can't assume anything is 100% accurate. PacificBreeze you are dead on right!

As a home inspector I go through this a lot with bank owned property. First, in Minnesota the banks are not required to disclose, right? Second, I would not want to turn anything on in these houses that have had the heat turned off over a winter or two. I am a specialist in foreclosure inspections and see problems all the time that a bank or property management company would not recognize. Many home inspectors don't know how to spot these problems. I was just in a house that this realtor took an offer on from a previous client and then the deal fell through. She said there wasn't anything wrong with the house according to the other private inspector and the truth in housing inspector and showed me the report when I was through. Well the foundation was shoved out because it was once unheated through last winter. The floor joists in the center of the house were almost off of the foundation wall and ready to collapse. Terrible...and costly, but it all could have been prevented if the heat had been left on. Someone should wise up the banks or get this info to the right people.

I know this thread is old. But let me correct a lot of people here. REO and relocation is my specialty. I can tell you all 99% of the time the banks are willing to turn on power and electric for a buyer’s inspection. In fact 90% of the time it’s the listing agent’s responsibility to have them turned on. The only exception to that is gas. Too many homes in the past had too many issues. Like the polite lights not started correctly etc. So except for gas most likely it’s the listing agent fighting you about electric and water not the seller. Many agents try to list reo properties and don’t know the expenses involved. Most of the time the listing agent has to pay all the bills and get paid back. Now getting paid back is not an issue it waiting the 2-6 months for the check. So the listing agent just may not have the financial means to front the deposits. Most of you all don’t know the financial investments to do reos. I personally need an operation account in excess of $40,000. It’s not just electric and power, its lawn care, trash outs, sales cleans, HOA/condo, back taxes, etc. Some of you all say well it’s only a $100 deposit. Well if you have several properties in inventory that can actually be in the thousands. If you do the amount of properties I do it was better to just put up a bond. Look at any one time I can have on average $2500 outstanding per property waiting on being paid back. And I have over 100 properties in my inventory.
Look I am not bragging or complaining just stating the facts here. The average realtor just does not have the resources to properly service a reo. And if they have say 5 reo listings they are just strapped and don’t have the deposit money. So they try and get the selling agent to get the buyer to do. Is it right no but it is very common.

So my input here is it most likely is not the seller but the listing agent

Alan,

I wish I was inspecting in Florida. Here in Minnesota it's like pulling teeth to get the house ready for an inspection. Even the VA would not turn the water on until after closing so the buyer offered to pay and they still would not do it.