I’m interested in submitting cash offers on REO properties, and I would like some advice on inspections. Do you perform an inspection prior to submitting an offer, make your offer contingent upon inspection, or buy properties without a formal inspection?
I know putting in too many contingencies will get my offers overlooked, but it seems extremely risky to buy a property without knowing what needs to be fixed. I have reservations about performing an inspection prior to submitting an offer since most offers aren’t accepted. I’ve heard a lot of different advice, so I’d like to hear from people who have had success with offers getting accepted.
When I go look at REO properties, I inspect them myself and document what they need. If I’m unsure of something, I’ll have someone else come look at that particular item. If it looks like the numbers will work, I’ll put in an offer.
I always buy as-is so it’s on me to figure out what’s wrong with the property since I’m accepting it in that condition.
Thanks for the comments. Do you have any advice for costly things to look out for that aren’t intuitive? Do you test for lead paint and asbestos yourself? I’ve read lead paint needs to be disclosed by the seller, but I’m not sure if the laws are different for REO properties.
No. The rules are still the same. The seller (bank) still has to sign a lead based paint disclosure form that states whether it exists and if there are any reports pertaining to it or not. LBP is one of those things best left alone. If you test for it and it’s present, then you have to disclose the reports from there on out - to every tenant you put in there and when you sell. If you’re going to repaint everything, don’t worry about it. Encapsulating, or painting over, the lead based paint is a way to take care of the problem.
I don’t test for asbestos. Some of our houses have asbestos siding. I love those. The siding is extremely durable and holds paint well.
Central HVAC systems can be costly to replace so it’s nice to know if they’re good or not (or just have enough room in the deal so you can replace them if needed). Some REO’s will be in such a condition that you can’t even put power to the house to test the systems anyway.
You should be able to pretty much tell if the roof needs replacing or not. Those things and squishy floors are some of the bigger problems that would cost a lot. If the house is on a crawl space you can get under it and see if there’s rot or termite damage.