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Fixing Up A Foreclosure
A Hiccup
Published on March 20, 2012 by guest author: Adam Rust

Adam Rust is purchasing a foreclosed house and fixing it up for renters. This blog post is part of a series about that process.

We were quietly surveying the scores of legal books on the shelves of the meeting room when my lawyer came in. He was late, and when he sat down he threw several folders stuffed with all kinds of papers on to the table.

“I cannot imagine how these guys can get away with working like this,” he said. “Here we are, thirty minutes to closing, and they need me to have you sign two new disclosure forms. And, until you do that, they won’t give me the closing documents. And until they do that, the bank won’t give you any money.”

HUD wants my signature on a document that says that I knowingly turned the water on. I can agree with their point, but the problem is timing. If they wanted to put a new contingency into the deal, it needed to happen on Friday.

I knew that things were in play after the leaking water heater ruined a carpet and the ceiling in the house. The realtor said that I would be on the hook for it. But now that it seems like we are not going to close, I see a potential fight over the water. My lawyer is mad about that, too.

“As-is is the operating word here,” he says. “I get that. But ‘as-is’ means you have a right to know what the ‘is’ is. If you can’t turn on the water, then how you can utilize your right?”

My lawyer is too concerned about rights to deal with an entity like the Department of Housing and Urban Development. It is sad to say, but one of the costs of getting a good deal on a house is that you don’t get the same privileges as someone who is paying sticker price.

“Well, either way, you can’t close today.”

* * *

The first thing I realize when I unlock the house is that the wet carpet is making the whole house smell like mildew. It was warm over the weekend. With the rotten ceiling and the stinky carpet, far fewer people are going to buy this home. All of this raises an interesting possibility. If I cancel my bid, what is the chance that I could come back and buy the home at a far lower price? It’s a huge risk, because I am likely to have to bear some of the costs for this water damage if I don’t buy the home.

One thing is bothering me. Buying a new water heater is more expensive than buying new pipes. The HUD disclosure  suggested that the entire cost of fixing the water system is $550. We have a friend who works on these things. He says there is no way to judge the cost of fixing a system without having the gas, electric, and water working, but that it might cost “four or five thousand dollars.”

To be continued ...

Adam Rust lives is a father and husband who lives in Durham, N.C. He also blogs at www.Banktalk.org

Previous Posts By This Author: A Snag in the Buying Process

The Challenge of Dealing with Section 8, Part 1 and Part II

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