Foreclosure Pittsburgh area, inspections? title search? mold?

Question

HI !

Considering making an offer on a foreclosure in New Kensington area of Pittsburgh. This is not an auction, it’s on the MLS, owned by Freddy Mac. The house is in pretty decent shape, I have an agent/appraiser/investor helping me.  In her experience she usually makes an offer with no contingency’s when buying a foreclosure. This is my first property and I’m not comfortable with no inspection. I have a few questions about and would appreciate any feedback

Do you usually get a home inspection when buying a foreclosure, or do you skip it because utilities are turned off etc.

I talked to my bank guy and he recommended having a title search before even making an offer? Is this necessary in this situation?

There’s knob and tube along with updated electrical panels. I have someone to do the electrical work but they’re not licensed. After the work is done can I have An electrical inspection done?

There is mold in the basement near a crawlspace on the ceiling which I want to have tested. If the bank won’t allow utilities to be turned on would it be a good idea to make an offer contingent on mold inspection? Since there’s no way to ballpark cost of mold remediation.

The inside of the house needs mostly paint and flooring, a little makeover in kitchen and bath. maybe a new furnace and probably some plumbing repairs since its a foreclosure.

It’s in a nice neighborhood listed at 37k similar homes nearby (same street) have sold recently for around $100k. Also it’s a 4br/1.5 bath, should rent for at least $900. Oh yeah, its not a flip. Also its a cash offer, hoping to be all in at 50-60k

Thank you for any input!

Alex Deacon · Answer

@Laura Srocki You dont need to do a title search before making an offer on an MLS listed Freddie Mac property. That will be part of the agreement where the seller has to give you free and clear marketable title. I dont do inspections but I have 25 years experience and buy 30-40 homes a year. If this is your first I would suggest having an inspection. I see no problem with having someone not licensed do smaller insignificant work as long as its done properly. Sometimes I will have my electrician do the same for me as you had mentioned. If its a major health and or safety item with potential liability you may want to stick with a professional from start to finish. From what I know about New Ken it sounds like all in 50k - 60k is too high for that area. It may be in an outlying part of the neighborhood where values are better but be careful that you are using more than one comparable sale to substantiate your value. Also how long are those property taking to sell?

Jim K. · Answer

@Laura Srocki

1. I don't know your contractor. I don't know how much he knows about fixing houses. I don't know how old the place is, but I know it's pretty old to have knob-and-tube, maybe pre-1920. That puts us in an iffy spot, especially concerning the sewer line. Are there big old trees in the front yard? Another danger sign.

I do know how much I know about residential construction, and it took me quite some time to get to where I needed to be. Added to that it's a government REO. There's a good chance it's going to have something significantly wrong with it. It's going to cost you maybe, at most, $300 to take along a trained and certified home inspector.

Ask your guy how he feels about it. If he's confident that he can spot everything there is to spot, roof and gutters,  foundation, electrical, plumbing, exterior siding, vermin infestation, interior walls and finish. and you're confident that you can trust his word for it, then do it. But be prepared for him to be wrong and for this to perhaps test your working relationship down the line. Things like that happen. There is a real element of risk in making a no-inspection contingency offer.

If you are determined to do this, inspector or no, you can rent a sewer scope from a place like Sunbelt here in Pittsburgh and run it through the sewer line from the house to the street. It will cost you about $200. This may not be at all easy in an older house with few or no cleanouts in the soil stack(s). Make sure your guy knows how to do that.

2. The title part will be exactly like when you buy a regular house.

3. The inspector will most likely not even ask who did the work.

4. The mold is a non-issue. Read up on it everywhere you can, preferably in books by long-established reputable publishers and government/public health sites rather than personal pages off the interwebs or self-published books. Here is the CDC's page on mold cleanup: https://www.cdc.gov/mold/cleanup.htm.

There has been mold growing in houses as long as there have been houses. Pay close attention to the disparities between what people who have something to gain by scaring you about mold say and what those who don't say. Mold's most enthusiastic amateur dangermongers are typically homeowners or investors who have been sold on expensive mold remediation schemes. Because they drank the Kool Aid, they try to force it on everyone else in order not to feel like marks.

Take lots of pictures, Laura. Come back from your look-see and share them with us.

Good luck!

Eddie Werner · Answer

I agree with @Alex Deacon, New Ken home prices are normally not as high as you mentioned unless your in a specific neighborhood that supports that price.  I would also recommend pulling more comps to make sure your solid on your after repair value price.  If this is your first house you should get an inspection.  Most of these homes are sold AS-IS which means they just won't fix anything you find, but you can have all the inspections you want to gather all pertinent information so you can make an informed buying decision.

I would also recommend joining the Pittsburgh Real Estate Investors Facebook page.  I would link up with other local New Ken investors to run the property by them to see what they think.  I am not active in that area but I know some people in the group are and could be of help to you before you close.

Jim K. · Answer

@Laura Srocki

This is not a foreclosure, then, no matter how Freddie Mac acquired the property. This is a government REO.

1. I don't pay inspectors to do  home inspections on properties I put offers on anymore. However, I thoroughly recommend them to anyone who isn't in the business of fixing houses. Here's a way to get what you need on the cheap: in lieu of a full home inspection with a report, you can call up a home inspector and ask him to do a walk-through with you without writing up a report or giving you a warranty. This significantly reduces his costs, time investment, and risk, so he should charge you less. You don't need that report or the warranty for an offer. You just need to do a walkthrough with a good generalist.

2. The bank guy is trained to always recommend a title search. Freddie Mac owns the house. They are responsible for selling it to you with a clean title. They did not buy the house without having the title search done and getting title insurance on the property. When you close, you will have a title search done and pay for title insurance. Really, this is a non-issue.

3. You can get an electrical inspection at any time for any reason. The inspector will come out and make sure nothing incredibly stupid has been done to the panel(s). He's not going to check any wiring replacements throughout the property. I do not know the electrician licensing standards of Westmoreland County but I doubt it's going to matter out there.

4. Mold is a non-issue for me when buying a house. I have never paid for mold remediation and never will unless some law forces me. I take care of it myself. It's not that tough. Mold is vastly overhyped.

5. Again, I very much recommend you check the house out with a walkthrough accompanied by a home inspector as described above.

Remember, you are putting in an offer on a distressed property. That means there's something wrong with the property. You have to be prepared to hear something you don't want to hear. Good luck, Laura!

Eddie Werner · Answer

@Laura Srocki If you have a local active investor helping you and they approved the deal then sounds like you are making a good decision!

Charlie MacPherson · Answer

@Laura Srocki A thought about your knob & tube.  If you use an unlicensed person to replace that wiring, you might run into problems if you don't disclose that fact when you list it for sale - especially if you're asked directly by the buyer, or if your state requires something like our "Seller's Statement of Property Condition".

The other thing I look for in homes of that age is cedar post lally columns.  These shrink slowly over many decades, causing floors above them to tilt.  If they've been replaced by adjustable steel columns, those will fail many appraisals.  Proper columns are steel filled with cement.  The adjustables are hollow and will collapse much sooner in a house fire.

Keith Lewis · Answer

Not sure about Pennsylvania, but in Michigan if you have unlicensed work done by other than yourself your chances of having it red tagged and the need to have it done over by a licensed contractor is pretty good. Suggest your "friend" associate himself with a licensed contractor and do the work under his company. That way you have two eyes looking over the work and the proper permits pulled.

Jeremy Overmyer · Answer

I am looking to buy property in Pittsburgh, but live out of state. I drove by that property, but my friends who live there told me to stay away from New Kensington. If your competent mentor is saying it is a good deal it probably is. I passed it up because my local friends (not in real estate) told me to, so its likely that most people are doing the same. However if everyone is not buying fix ups in the area it may take longer to sell it later in that area. (Just my thoughts, I am really just starting out in real estate, I own 1 rental in Arizona and do not know this area very well.)

For the offer I would go low and work your way up, and if they lowered the price then I would think you have a better bargaining position since they are trying to get rid of it.

I hope it works out for you! (Getting started is stressful and you always feel like you are missing something.)

Laura Srocki · Answer

i have a follow up question, maybe i should start a new thread but here goes. This house has been sitting for 250 days according to redfin. Also it's been listed and relisted off and on since 2012. Is this just a bad sign? i guess it went under contract in july and then came back on the market a couple weeks ago. So i'm wondering can this be a good deal if no one has bought it and it was contingent in july and now its back and they dropped the price from 42k to 38k.

Also if your making a cash offer on a foreclosure and you want an inspection is it a good idea to make a lower offer even though they just dropped the price again?

Laura Srocki · Answer

@Charlie MacPherson

hi, and thank you for your feedback. there are updated electric panels but we also saw knob and tube and would like to get rid of it. even if i use the unlicensed guy i would want it inspected as well..

I'm not flipping this but i might want to sell it someday. And being a rental i want everything to be done properly.

thanks for the tip about the columns, i'll add that to my list when we see it again.

Foreclosure Pittsburgh area, inspections? title search? mold?

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