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#456495 - 01/29/17 06:58 AM For Sale "AS IS"
rjlocal22 Offline
Member

Registered: 01/22/17
Posts: 18
Loc: Pennsylvania
I am about to purchase a HUD house for sale as is.
What does this really mean if if a buyer cannot see if the septic system needs repair or replacing or if there is a broken exterior water line? Can HUD be held responsible?
What makes this possible problem hard to solve is that the water has been turned off at the street and the plumbing has been winterized. Anyone have any experience in this situation?
The house is going cheap and I am hoping the mortgage company will advance more cash to fix either of them and apply the extra money to the mortgage.

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#456496 - 01/29/17 08:12 AM Re: For Sale "AS IS" [Re: rjlocal22]
Vermont Offline
Major Contributor

Registered: 04/12/08
Posts: 7743
Loc: Vermont's North-East Kingdom
Recognizing that it's winter in most of the KeyStone State, maybe the local HUD Office will take that into consideration . . . . ask.

Is the Power off, along with the Water (i.e. NO Heat) ?

When you say Septic System, that normally goes hand-in-hand with a Municipal Water System . . . . not always; but usually they come together. If it actually is a Septic System, it's almost impossible to check these with phosphorous dye while there's snow on the ground.

Ask if you can make your Offer contingent upon the results of any Building Inspection or specific tests that you'll perform at your own expense . . . . and you'll bear the cost of re-winterizing the systems. If not, then no competing bidders are at any greater advantage than you.

If you're willing to bear the cost of re-winterization, the real question will be whether HUD will allow you to encumber the property (take it off the market) while you conduct your investigation ?

Unfortunately, the cost of re-winterization may exceed the cost of your tests for functionality. Regardless, in a temperate climate, this won't be the 1st time that the subject has arisen for HUD . . . . so ask.

No, AS IS means if you buy it, you own it; so go in with your eyes as open as possible.
_________________________
Dale C. Hittle of GOLDEN RULE PROPERTIES in Glover, Vermont
Where We're Always Striving To Put Together "THE FAIR DEAL"

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#456499 - 01/29/17 10:50 AM Re: For Sale "AS IS" [Re: rjlocal22]
rjlocal22 Offline
Member

Registered: 01/22/17
Posts: 18
Loc: Pennsylvania
Thanks again.

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#456502 - 01/30/17 12:34 AM Re: For Sale "AS IS" [Re: rjlocal22]
JohnN Offline
Member

Registered: 11/21/13
Posts: 233
Loc: Minnesota
The key is to do as much due diligence as you can.
I'm currently working with a young buyer on a HUD house. The house had freeze damage and has several broken pipes. We have had 2 plumbing companies out giving us estimates that range from best case, fixing the 2 pipes, to worst case, total replumbing.
HUD can be difficult to work with and as an agent I want my client to have a clear picture of potential costs.

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#456593 - 02/11/17 04:17 AM Re: For Sale "AS IS" [Re: JohnN]
rjlocal22 Offline
Member

Registered: 01/22/17
Posts: 18
Loc: Pennsylvania
Thanks John,
But is it not ethical for HUD or any seller not to disclose problems that cannot be seen. What about a disclosure form to be signed by either? Would this protect a buyer?

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#456594 - 02/11/17 04:35 AM Re: For Sale "AS IS" [Re: rjlocal22]
Vermont Offline
Major Contributor

Registered: 04/12/08
Posts: 7743
Loc: Vermont's North-East Kingdom
Originally Posted By: rjlocal2
". . . is it not ethical for HUD or any seller not to disclose problems that cannot be seen. What about a disclosure form to be signed by either? Would this protect a buyer?

It's doubtful that anyone from HUD has done anything from afar beyond looking at a picture of the exterior of the building, let alone visit it; so can it really be within the realm of possibility that they'll make any representations about unknown characteristics that cannot even be seen by someone on-site . . . . like yourself ?

To relieve your consternation, you may have to seek out a "New House", where you could reasonably expect to receive a Builder's Warranty against defects in materials or workmanship for a few years. That would relieve your pre-purchase anxiety.

Buying a cheap Foreclosure really isn't going to be a very good fit for you.
_________________________
Dale C. Hittle of GOLDEN RULE PROPERTIES in Glover, Vermont
Where We're Always Striving To Put Together "THE FAIR DEAL"

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#456596 - 02/11/17 09:22 AM Re: For Sale "AS IS" [Re: rjlocal22]
rjlocal22 Offline
Member

Registered: 01/22/17
Posts: 18
Loc: Pennsylvania
Thanks,
I crossed off the house as I found out the septic tank was leaking. So who knows, the leech field may also be defective.
So I got three other houses I am looking into. Two of them are occupied and the other may be a foreclosure. All three appear to be well maintained.

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#456603 - 02/11/17 01:25 PM Re: For Sale "AS IS" [Re: rjlocal22]
VABroker Offline
Veteran Member

Registered: 11/02/10
Posts: 1042
Loc: Virginia
I've dealt immensely with HUD homes (unlike many agents who tell me they've sold many HUD homes, only to discover, upon investigation, that they had never sold one at all).

HUD homes ARE sold as-is. It is a 1 in a million chance that you would get a HUD asset manager agree for you to 'fix' something before closing if an appraiser or lender is requiring it. I've only ever seen one case where the FSM fixed a plumbing issue at the washer connection. If I recall, the water lines were said to be holding air pressure and they really weren't. I've only seen one case where the buyer was allowed to have a septic tank repaired before closing (but they had to show proof of payment to contractor first and sign a waiver of any rights or liens against the property if it didn't close).

Owner-occupant and investor buyers have an automatic 15-day home inspection period. The Field Service Manager is the one who tells you which utilities can or cannot be turned on for a home inspection. The Field Service Manager also does a basic, but, I'm not sure it could be called 'professional', inspection of the property to see if lights/outlets/appliances/mechanicals are functioning. I believe the only requirement for an HVAC is that the furnace fan runs as I've never encountered them testing for heat/cooling function. The water lines, they do an air pressure test and they want somewhere between 32-35 psi for 10-15 minutes. If they do not get that reading, they say the lines will not hold pressure. Sometimes it could be just a faucet line they left open. The waste lines - they run a gallon or two of water and if they don't see any leaks (that is, if they are looking (who knows?)), they report those lines are fine. I tell all buyers and agents to take their Property Condition Report (PCR) with a grain of salt b/c I don't know HOW accurate they really are. There have been homes that have absolutely no A/C (only baseboard heat and no ductwork) and I've seen them list that the exterior A/C unit is missing! Duh! Their 'cleaning' of the properties is a joke. Unless the bank did a bang-up job of cleaning, the FSM will just vaguely clean. If the buyer's home inspection shows a major problem with mechanicals or structure that the FSM did not find, an owner-occupant buyer 'may' be able to get the contract cancelled and their earnest deposit back; but, it must be a PROFESSIONAL home inspection, not your dad or Uncle Bob. Investors NEVER get their earnest deposit back.

Some properties are in pristine condition; others require some work; other require even more work.

Whether an owner-occupant or an investor, I would not eliminate HUD homes as some are a good deal - one just has to perform their due diligence thoroughly.

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#458331 - 07/01/17 08:37 AM Re: For Sale "AS IS" [Re: VABroker]
LoganRealty Offline
Member

Registered: 06/02/17
Posts: 32
Loc: Santa Monica, CA
[quote=VABroker]I would not eliminate HUD homes as some are a good deal - one just has to perform their due diligence thoroughly. [/quote]

Well said. If you are trying to flip a house, make sure you have the budget to cover "unforeseen" items. HUD sales are typically discounted because you take a higher risk with buying. Part and parcel. Plus, if you do take a hit, that loss is probably a tax deduction off your business.
_________________________
Santa Monica Realty by the Sea

Top Recommend: Use a dedicated GPS mileage tracker - not an app - to track your miles.

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#458337 - 07/02/17 02:40 PM Re: For Sale "AS IS" [Re: LoganRealty]
VABroker Offline
Veteran Member

Registered: 11/02/10
Posts: 1042
Loc: Virginia
Seeing how the original post was in January, well, I feel foolish answering that question; but, I did forget to say contracted buyers can have a PROFESSIONAL home inspection. That includes everything and anything. You just cannot do ANY damage to the property during your inspection.

A potential buyer can have a 'rough' inspection before bidding but no utilities can be turned on since you are NOT under a contract so it limits you; but, then most attics and crawlspaces are accessible (if you bring a ladder) and that particular listing broker/agent actually puts a padlock key in the lockbox so you can unlock the crawlspace door.

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