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...