Profile picture for rosehill1

a brand new house is owned by bank b'cos the builder went bust. any advice for buyer to lookout?

  • January 23 2010 - Kirkland
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Answers (11)

We are seeing quite a few bank-owned new construction homes hit the market. Recently a Bothell bank-owned community has begun offering a builder's warranty because the bank has partnered with another builder who is willing to provide warranty work for these homes. Be sure to ask if a warranty will be provided, and if so, get it in writing.
  • August 17 2010
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All good answers, you might also want to look into the following things; Are there liens from unpaid contractors? Look closer at things under the home, I've seen situations where the builder didn't hook up the dryer vent and moist air was doing damage under the home. Look close at the furnace and replace the filter as they are often clogged with building dust.
Also, you might want to consider purchasing a home warranty when you close on the home. They're not very expensive and can pay off in the end.
  • July 02 2010
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I suppose we can't say it enough...have an INSPECTION.  You, as the buyer, will need to be extra vigilant with this home and will need to make sure your agent writes a contract that will give you every opportunity to get out of the contract if you find that the home does not meet your expectations.  The bank will offer no warranties, neither will the builder.  So, you will not have the normal protections typical to new construction found in the Seller's Disclosure or the builder's 1 year warranty.
Good Luck!
  • June 06 2010
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Profile picture for real estate mike
Rich has great info. Visit the county building code/inspections office and see where the building stands in regards to permits and failed/passed inspections. best of luck
  • June 05 2010
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You got good advice.  The only thing I wanted to add is that in my experience with this, how long the house has been vacant is a large factor with the condition of the house.  If it appears to have been vacant a long time, be sure to tell your inspector that.  My inspector pays extra attention to certain things when he is inspecting an REO home.  I recently had a client walk away from one because of the damage that you could not "see." Turns out the house had been vacant for 18-24 months.
  • June 05 2010
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Profile picture for Erik Noyd. Broker
Approach the purchase as though you have a non-caring seller who is oblivious to all conditions with the home.  Make no assumptions as to completeness of the home or proper construction technique.  None of this is to say that the home won't be fine, but many buyers assume new means "good".  Watch for and expect the seller (bank) to modify any standard purchase contract.  Take none of that lightly.  If your buyer's agent is not versed on what the changes mean, then consult an attorney.  While a few hundred dollars in attorney's fees now might seem somewhat expensive "insurance", it might seem quite cheap if you are faced with "post closing" issues effecting title, leins, construction defects, etc.  Best of luck and always choose your support in the process carefully.
  • April 04 2010
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Profile picture for SoCal Engr
Be extra vigilent about getting the house checked out. Just because it is new and meets local code, doesn't mean it was built well - especially considering that the builder may have been cost-cutting as they started running out of funds. Get your own home inspector.

Unfortunately, drywall and paint can hide a multitude of shortcuts.
  • March 31 2010
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Profile picture for DaveAndersson
Depending on the type of financing you are planning on using, there may be restrictions with new construction. FHA for example requires certain home warranties from the builder, soil treatment for termites, etc. With the builder out of the picture, the seller (bank) may not want to deal with these things. Make sure you keep your loan officer aware of these potential issues.
  • March 30 2010
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You will be buying a house "without warranty".  Most new homes have a "builders walk thru" to orient the buyer and make sure all the details were finished correctly. Without the warranty, you need a great inspector, and an agent that understands the title and laws that affect the transfer of the property.
  Banks will not readily repair or "finish" items off a regular builders punchlist, like trim repairs, paint blemishes, grout or tile cosmetic problems, but they will make the house serviceable. All systems will work, the doors will lock, the lights are wired correctly, mostly the safety and liability issues. You will need to know how to address the other items with the bank, and both your agent and the banks agent will have to make that happen. 
  Finally, check your title, and possibly pay for a higher standard, so that any mechanics liens, or property encroachments are reviewed and insured for YOU, not just your lender. As business people, builders have to quit paying bills at some point, and the sub contractors will be all over the title to get paid.
   Good Luck. I work for those builders too. They don't want to leave you with a bad home, but they are powerless when the banks wont pay the bills for the vendors. 
  • March 30 2010
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If the home is in a PUD make sure that there is no pending litgation. also, check with the neighbors about defective issues
  • January 23 2010
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Be sure to use a Buyer's Agent to look out for your interests (Bank pays the commission).  When writing the Purchase Agreement, make sure your Buyer's Agent includes a contingency for you to obtain a home inspection that meets your approval.  With a bankrupt builder, you won't know what shrtcuts the builder took or important items missed in construction, unless you have the report of a reputable home inspector.

  • January 23 2010
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