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SALT LAKE CITY — The number of people looking to buy homes in Utah is on the rise. People looking at buying a foreclosed home as a "fixer-upper" need to look out for some potential pitfalls.
If the house has termites, if the pipes leak, if it used to be a meth lab, all of these facts need to come out when one person is selling a home to another.
America West Financial Mortgage Specialist Lee Yates said, "When a homebuyer sells a house, they have to disclose any problems that the home has. It's called an owner/seller property condition disclosure."
Yates says if the seller is less than honest, the buyer can make the seller pay for any repairs that the home might need.
But when buying a foreclosed home, the buyer is dealing with the bank that owns the property and not the seller. Yates says banks don't have to follow the same disclosure laws. The buyer buys it "as is." So it could be falling apart, but the bank doesn't have to disclose that, and the buyer gets stuck with the bill.
When buying a foreclosed home ... banks don't have to follow the same disclosure laws. The buyer buys it "as is."
That's not to say buying a foreclosed home is always a bad idea. Yates says buyers can save a lot of money if they're willing to put in the work it takes to fix it up, which can be an extreme amount of work.
"When they foreclose on a property, the sellers don't have any real, vested interest in it, so they let the house go," he said. "The lawn dies. They could end up with some interior damage. The carpets can be extremely worn."
This is different than when a buyer wants to purchase a home through a short sale. In those kinds of sales, the seller owes more on the home than it's worth. Yates says these sellers are very motivated to keep the home in good condition.
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U.S. home prices jumped 3.8 percent in the 12 months ending in July, according to a private real estate data provider."They want to sell the home for the highest price that they can that will go toward paying the debt that they have on the home," Yates said.
But waiting to get the approval to buy a short-sale home can take a very long time. Yates says the banks have to approve every detail of the sale, like final price and closing costs.
"If you're dealing with a short sale, it usually takes three, four, five months for the sale to go through. If you're dealing with a foreclosure, it usually moves along pretty quickly," he said.
Yates says two-thirds of homes that are originally listed as short-sale homes go into foreclosure, partly because the banks are so slow to accept the sale.
