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MONDAY MORNING MESSENGER

Message Prepared For Home Inspectors and Especially for Members of the

American Institute of Inspectors®

September 27, 1999

GOOOOOD MORNING, A.I.I.™

It's a great day here in Northern Utah. Today's MMM is comprised mainly of information geared directly for the HUD foreclosure home buyer. It will become part of the CLIENT section of my web site. As you read the information please keep in mind that it is meant to open the eyes of the visionary starry eyed HUD homebuyer, and was not authored for Home Inspectors. After reading the information I will gladly welcome your feedback...... What other points should be addressed to remove any and all doubt as to the necessity of having a home inspection performed? I hope that you enjoy today's MMM.

HUD FORECLOSURES

Are you a first time home buyer looking for an inexpensive way to get into a property??? Many shoppers are swayed towards the purchase of a HUD foreclosure property because of the lower sales price. In doing so, buyers are usually searching for a "Jewel in the Rough." HUD is very good at making the discovery of the jewel nearly impossible. HUD makes sure that the home's utilities are shut down and they tend to apply the pressure of buyer's greed to the transaction..... "If you don't buy it, we don't care..... Somebody else will" HUD says.

Friday, September 24th, brought my inspection travels to a supposedly wonderful HUD home. The younger couple buying the home had already placed $1,000 earnest money down to secure the home. If the home could be brought up to "Good" condition, the home would probably sell for $115,000 to $125,000. (My best guess). Two years ago the home sold for $105,000 and from what the neighbors say, it was then occupied by 14 people who did nothing good to the home. My client's big plans included doing a cosmetic facelift of paint and carpeting. Plumbing fixtures would also be upgraded along with the stove and the refrigerator. Other than that, they felt that they were set to go.

I received the phone call to schedule the inspection and remembered the last time I spoke with these same clients. They had used me a while back to inspect their last possible "Jewel in the Rough" home. The previous inspection left them continuing their search. This time around they described the list of what they felt that the home needed. HUD helps with this assessment by laying a document on the counter of the home that gives the necessary financial allotment to make what HUD deems as the needed repairs. Anything beyond this list is deemed a Buyer's Upgrade for cosmetic reasons. HUD claims that they want to provide a habitable home for their buyers....... Yet at the same time they make it very difficult to fully determine the extent of the home's challenges before closing on the home. From my perspective, HUD appears to be trying to get a home sold "As Is" for as much as they can and as quick as they can....... I could be very wrong in my opinion, but this situation adds strong support to my claim.

AGENT'S HUD INSPECTION REQUEST

Let me digress a minute and share another phone call I received last week. The real estate agent on the line was looking to get an inspection scheduled for her parents. Her parents had found a HUD foreclosure home and they wondered how extensive the repairs would be. When I asked how they were going to get the utilities on for my evaluation, the Agent daughter didn't have a clue. A management company was responsible for the care of the property while it sold. The agent said that she would call the company and ask what the procedure was to get the utilities turned ON. The agent called back a day later and said that her parents had decided not to have an inspection performed. The main reason...... the company would not allow the utilities to be turned on for an inspection. In fact, she said that the "Red Tape" for the transaction was so involved that her parents just decided to go ahead and gamble on the home. (whether HUD-imposed or mandated by the separate entity, I don't know) They were sure everything would be in basic working order... Big Mistake!!!!... (in my humble opinion).

I have been asked why I don't like to perform foreclosure inspections if the utilities are off. The reason is simple... The liability is just too high. It is difficult to evaluate the home's mechanical systems when there is no Gas, Water, or Electricity present. I am a good Home Inspector, but when I am looking at a home that has been vacant for 6 months and has been around since 1936, it is very difficult to tell if the leak stains I see are current or are 3 decades old. Every sink drain and faucet has leak stains under them when they are over 50 years of age. After closing on the home, there is nobody who wants to step up to the financial obligation . When the buyers realize that they are in way over their heads, they seldom take their lumps sitting down. Instead, they are prone to sue everybody involved with their purchase..... I try to stay clear of lawsuits.

Homebuyers of "As Is" HUD foreclosure homes need to set aside the "Dreamy-Eyed, Superficial Evaluation" and become very logical and open-eyed in their evaluation. The next step is to hire a Home Inspector. You need to consider the Inspector's experience and the thoroughness and detail of the inspection report. A good Home Inspector will have the communication skills necessary to convey the conditions of the home in a language that the buyer will clearly understand. Stay away from the "Feel Good Gloss-over" type of Home Inspector. These types of inspectors won't do you any favors in this case. You need the hard, cold facts.

Make sure that you see a sample report of whatever inspection firms that you are considering.

Is the report thorough?
Does the Inspector use complete sentences? (or illegible chicken scratch)
Can you tell exactly which items were inspected?
Does the Inspector accurately report the conditions or are the extent of the conditions downplayed?

Some Home Inspection reports are so vague that the Buyer can't clearly understand the full extent of the issues reported within. Other reports are done in footnote style that require you to refer to a large, 200+ page Homeowners manual for clarification. Which type of report would you prefer?? My gut feeling is that you want the most accurate, straight-shooting report. You will want a report that is easy to understand and is not biased. A good Inspector will tell the truth and won't downplay or overplay the conditions encountered. Finding an Inspector who fits these requirements is a "Jewel" in itself.

Let Michael Leavitt & Co be the straight-shooting, detailed and accurate Inspection Firm to perform your Home Inspection!!!

BACK TO THE YOUNG, FIRST-TIME BUYERS

On the phone, the young couple told me that they were certain that this latest home fit their needs. They said.... "Michael, there is nothing that you are going to find that is going to keep us from buying this home." They went on to share that they were purchasing the home for $80,000 plus the mandatory $4,500 that HUD had deemed needed for the habitable repairs. They felt that even if they put in $20,000 at their own pace in the next year or two they would still have a great deal. This sounded like a well thought-out plan....... It reminded me of Luke 14 in the New Testament where Jesus said.....

"For which of you, intending to build a tower, sitteth not down first, and counteth the cost, whether he have sufficient to finish it?

Lest happily, after he hath laid the foundation, and is not able to finish it, all that behold it begin to mock him.

Saying, This man began to build, and was not able to finish.

Or what king going to make war against another king, sitteth not down first, and consulteth whether he be able with ten thousand to meet him that cometh against him with twenty thousand?"

The advice given by Jesus almost two thousand years ago is just as valid today...... HUD foreclosure buyers need to fully count the cost. Those that are most prone to mock a buyer of a "Money Pit" are the relatives. Mom & Dad are usually extremely critical.... Their advice to keep looking is usually not listened to by the younger couples because "Mom & Dad just don't understand." Even though Mom & Dad may be right, sometimes it is the Home Inspector's opinion that is listened to.

SampleHUD.pdf - I encourage you to download the following PDF version of the actual report. The names and addresses have been changed, but everything else is exactly as it was drafted for my clients. Click on the SampleHUD.pdf link to download the report.

This young couple heeded my advice and probably broke every HUD protocol and had the utilities turned on. Turning the utilities on set them back another $100, but after learning the truth about the mechanical systems it was the second best $100 they ever spent...... The first best $100 was the put towards a portion of my inspection fee!

I showed up for the inspection and my heart sank for my clients. Right off the bat it was obvious that there was more than a cosmetic upgrade involved. Every room and every system needed repairs. There were few redeeming values of this home. I thought that I had finally found something positive when I discovered the 1992 installation of the heater. Then I turned the heater on and was overpowered by the stench of urine coming from the heater registers... My heart sank even deeper...I knew that meant a needed new duct system... Very expensive??? ....Yes!!!

As the Sample HUD report clearly identifies, the home was in far greater need of repairs than just carpet and paint. If this was the home that you were set to purchase, would you be glad that you had it inspected?

Will you have your future home inspected??? ABSOLUTELY!!!

LAST WEEK'S QUESTIONS

I am still waiting for your feedback on the GFCI testing questions posed last week. I have received a few responses, but felt it best to hold them back until more of you have a chance to reply........ Click here to return to last week's MMM.