As a building inspector and contractor, I have to tell you to be wary of any foreclosed home that was recently rehabbed and put back on the market. It may look nice, but you need to be suspicious of what you can’t see. I have seen this situation from various points-of-view. If you are in the market for a new-to-you home, let me explain why you need to be fully informed. Everyone is well aware that the housing market has been a mess and it is in the process of working through its problems. As with any market there are people out there willing to do anything to make a dollar- and this market is ripe for the picking.
The banks have been left with significant backlogs of properties they must sell. Foreclosed homes are being sold at a loss by banks. How much money do you think the banks are interested in investing in a property that will sell for a loss? It is routine for banks to sell properties “as-is”, with no warranty or any guarantees- it is truly Buyer Beware. Furthermore, I have seen banks require legal waivers before anyone can enter the property due to the conditions inside. Everything from mold to structural issues are disclosed and a waiver of your rights must be signed. The banks don’t want to get sued because someone enters the house they are selling and ends up ill due to the mold growth or because a floor falls in. It is evident that the banks are unwilling to take care of the inventories of homes they are responsible for.
The bank then sells their inventory to the highest bidder. Bidders range from potential home buyers to investors with the intent of fixing the home and selling it. The problem here is overly optimistic investors or unscrupulous ones- the end result is the same. In either case, the repair budget is less than the cost of repairs; some needed repairs are concealed or performed incorrectly. What happens is the end purchaser of the home has likely purchased concealed defects- defects not visible to even the most talented home inspectors.
I have experienced this first hand as a municipal building inspector and as a contractor who bids on these homes. As a contractor I have actively bid on numerous homes that have been in foreclosure. Foreclosed homes come to market and are available to owner-occupied purchasers first, then to investors. Investors often only have 24-48 hours to get a bid in. Then the highest bidder is typically awarded the home. The more experience you have as a contractor- or in my case an inspector and contractor, the better you are able to assess the amount of work that needs to be performed. The better you are at properly assessing the amount of work required, the lower your bid is- which lowers the likeliness of you winning the competitive bid. The high bidder commences work and begins to understand why he was the high bidder and ethics are strained and the project is compromised. I have experienced this first hand numerous times.
As a building inspector, I see investors routinely attempt to rehab homes without obtaining permits- it is clear they do not want any oversight. Investors want to fix only the things they have budgeted for, and even less than that if they can get away with it. Routinely we see walls concealed with mold within them; structures modified improperly; repair performed poorly at best. The list is endless- and it’s all done in the spirit of getting away with as much as they can to make more money. As a building inspector, my enforcement tool box is limited; as a contractor, I know what should have been accounted for in the bid process.
As a municipal inspector let me explain some of the limitations we experience. Local governments need these properties occupied. The quality of the work being done is not truly a concern of theirs- local governments need the property tax dollars from every home. Communities need more families shopping locally, bringing in more sales tax dollars; the villages need the properties to be maintained so they don’t have to continually chase the banks and lien the properties just in an effort to maintain them while they are unoccupied. The resources local governments have to put towards maintaining uninhabited properties is astounding. That said, when local governments find people performing work without permits, often there is no penalty because those in charge of local governments need that home occupied. The next progression of that kind of thinking is lax enforcement of the codes. Not only are the investors often incompetent contractors, they are given unusual leeway by the building enforcement departments because they are technically homeowners. The higher-ups in your local building departments are in direct contact with mayors & village administrators and the message from them is ‘get the homes occupied’. Getting the home renovated correctly is not on the list of priorities- to the extent that inspectors are routinely chastised for enforcing code. In addition, codes don’t address the full extent of problems unoccupied homes can experience, including mold remediation and lead abatement. So many homes have significant mold problems and the field inspectors have zero leverage to legally make the contractors fix mold properly. Old homes that fall within new federal guidelines for lead abatement lack any type of enforcement. Often inspectors use the power of influence to get some amount of mold remediation or lead abatement completed, but if the owner refuses to repair problems, there is little that can be done. Structurally, we have more leverage to get things done correctly but often rules are bent because ‘it is a homeowner doing the work, if they want to live in a home that is compromised, so be it.’ Buyers, beware.
In my opinion, the intent of the building & community development departments is to maintain minimum zoning and building requirements in a community wide effort to maintain property values through proper distribution of different use groups within a village as well as guaranteeing a minimum expectation for the quality of construction.. Relaxed code and zoning enforcement affects the value of all homes in the community. The quality of the enforcement and ethically challenged contractors over the last decade has increased the fall in the value of properties nationwide. Building departments were stressed and oversight was lax during the housing boom due to inspectors being overworked, now, building departments are willfully told to relax enforcement. You need to be diligent of any home built or rehabbed in the last 10 years. I encourage you to find a very talented home inspector when buying homes and only use top notch ethical contractors when having work performed on your home. You are on your own because no one has a vested interest in your project being done correctly- except YOU!
Brian Fragassi is the owner of CodePro, Inc. performing Construction and Contracting services in McHenry and Northern Kane Counties. CodePro, Inc. may be found on the web at: http://www.code-pro.net