Other homeowners who have tried to buy foreclosures in their neighborhoods have faced other costly surprises.
A homebuyer in Taylorsville, Utah, lost the chance to buy a dilapidated foreclosure in his neighborhood because the bank wouldn't negotiate on needed repairs, said Darnell DeBrule, an employee at Deseret First Credit Union of Salt Lake City. The buyer was DeBrule's client.
DeBrule said the buyer "feared an investor would purchase the property as-is and have little-to-no concern regarding its effect on the neighborhood as a whole," so the buyer offered to pay the full asking price for the foreclosure, as well as an inspection. That's when things went south.
The inspection found the home to be badly contaminated with hazardous chemicals used to make the street drug, methamphetamine. When the buyer suggested splitting the cost of rehabilitating the home, the bank shut down the deal, DeBrule said.
The bank said it was "not putting in a dime" and now would only accept a cash offer, DeBrule recalled. That meant the buyer, who was planning on taking out a mortgage to buy the home, could no longer afford it. And it left the door open for a cash-rich investor to swoop in and snap it up.Banks mostly prefer offers from investors anyway, said Marty Boardman, chief financial officer of Rising Sun Capital Group, a home investor based in Nevada. That's because they have deeper pockets and are more capable of paying in cash -- and cash deals, which carry fewer contingencies, are more likely to close, he said. Their competitive advantage can be frustrating to homeowners like DeBrule's client, since "investors don't necessarily care about neighborhood vitality," said Douglas Robinson, a spokesman for NeighborWorks America, which rehabs foreclosures and sells or rents them to low-income Americans. Along with stiff competition from investors, those who want to buy foreclosures in their neighborhoods sometimes encounter another -- surprising -- hurdle: just finding a home's true owner.