When our real estate market “cycles” through a downturn, the result is often an increase in foreclosure rates among homeowners. Clearly, a foreclosure is a very sad and distressing event for the homeowner. Lenders also feel the pain and build up a portfolio of REO properties (real estate owned). Properties are often sold at auction as a result of foreclosure. Sophisticated real estate investors, however, view foreclosures in another entirely different light -- as an opportunity.

A thorough inspection is critical on foreclosed properties for several reasons. It is possible that the homeowner did not properly maintain the property as finances became strained. In some cases, an angered homeowner may cause both obvious and hidden damage to the property. It is not uncommon to see missing or damaged fixtures, appliances and components at a foreclosure property.

Lenders and the eventual homebuyers have an incentive to get a comprehensive home inspection. Some lenders may opt for a very simple pre-assessment that only serves to give them information about how to make the property “presentable” for a sale. This is not a full home inspection and cannot be relied upon for determining the actual property condition. In an auction setting, the buyer may only get the opportunity to hire a home inspector to give a limited assessment just before the auction. In this case, a follow-up comprehensive inspection is needed after the home is obtained.

It is often a challenge to get the utilities turned on before the inspection. Persistence is needed in dealing with the banks as you arrange for the inspection. Don’t give up and by all means have the home inspected. Who knows how many thousands of dollars it could take to repair an undiscovered defect.