Bank Owned & Probate Properties: Buyer Beware!

I was chatting with one of my investor clients yesterday, as we are getting ready to close on the purchase of a Probate Sale, and our discussion centered on the unknown. In most property transfers, the seller(s), and seller's agent, are required to disclose material facts regarding the physical condition, and events that have taken place over the past three years. So, what happens when the owner or agent can't obtain that information, as is the case with probate and bank owned homes? You can't disclose what you don't know! The bank's Asset Manager never lived in the property, and the same may be true for the Executer/Administrator of a will, or living trust, which excludes either of them from disclosing, what may be, important details to a buyer. Additionally, these type of properties are typically sold 'as is', where no repairs or warranties are given from the selling side.

So, where does the burden fall? The burden falls squarely on the shoulders of the buyer, and buyer's agent. Now, in the case of my investor, it is known, and has been disclosed, that the owner did expire in the property, which is a material fact that may make some buyers queasy. Obviously, that bit of information didn't affect my investor's decision, and when he is done with the "top-down" remodel of this property, it won't matter to a lot of people. But, what about the pest report? Roof? Electrical? Plumbing? Foundation? If he were not a contractor, he'd have all these items inspected by a professional, reports would be generated, and the decision to continue with the purchase of the property would hinge on the results and recommendations within those reports. Costly? Yes. But, for the everyday buyer, potentially more costly not to! Now, I don't want anyone to think I am steering buyers away from these types of properties…nothing could be farther from the truth, due to the potential for incredible discounts. As a buyer, just be aware of the potential pitfalls, have a professional real estate agent, and reap the rewards this Sacramento Housing Market has to offer!

Best wishes,

Kyle Groves