In life, they say, you get what you pay for. So if you’re considering the purchase of a bank-owned property, don’t be blinded by the rock-bottom price: Chances are that residence is going to need some repairs and upgrades, which is why enlisting the services of a professional home inspector is essential, say the experts.

Foreclosed homes offer fantastic bargains for both investors and owner occupants, says Bob Bellack, chairman of Zetabid, Los Angeles, a network for real-estate auctions.

There are, however, some risks involved with purchasing a foreclosed property right now. In some markets, for example, “prices may have further to fall, although the hardest hit regions are starting to show signs that prices have bottomed,” Bellack says. “That’s particularly true for properties below $100,000.”

In addition to price, unknown or unforeseen repair costs are potential risks, and “that’s why it’s very important to do a thorough home inspection [of the property] using an experienced local professional,” says Bellack.

Any foreclosed home should be carefully inspected, says Francis A. Uzzi, an attorney in Montvale, N.J., “It is prudent to hire a certified or licensed home inspector because they are trained to evaluate the entire premises, including everything from minor imperfections to major latent structural defects that may otherwise be overlooked.”

Bellack says that because the former owner of the foreclosed property was unable to afford the mortgage payments, “routine maintenance my have lapsed. Additionally, repairs that should have been done may have never occurred,” he says.

When a house is in foreclosure, banks can be exempt from providing paperwork and disclosure statements, says Jason Lopez, vice president of sales and managing broker with RealEstate.com, Charlotte, NJ. “So it’s crucial to have a professional home inspection from a certified company. In fact, when a buyer opts out of a professional home inspection, they must sign a waiver stating that this was their decision—assuming all liability.”

You can get a referral to a reputable home inspector through the National Association of Home Inspectors or your state’s real-estate inspection association, says Lopez. It’s also smart to ask your real-estate agent for an expert they would suggest and do some comparison shopping.

Bellack recommends hiring a local inspector who understands the problems associated with a particular area. “In the west, it may be foundation cracks due to earth movement. In areas with heavy rain or fog, it may be mold or dry rot,” he says.

Your biggest causes for pause on a foreclosed home that an inspector may uncover are roof decay/deterioration, mold, water seepage, code violations, and structures or additions built without permits, says Bellack. But the inspector you hire should not only evaluate defects and items in need of repair, Uzzi says, but also the remaining life expectancy of major home components, including the HVAC, plumbing and electrical systems.

“A home inspector should also pay close attention to current or prior conditions on the property that may expose the potential buyer to liability or major remediation expenses,” says Uzzi, “such as underground storage tanks, oil leaks, infestation from wood-destroying insects, mold contamination and elevated levels of radon gas.”

If any of these or other issues are discovered, “it may be a sign that this is not a property worth purchasing,” says Lopez. “However, you can negotiate with the bank as a last resort – either asking for a credit for any repairs needed or asking them to make the repairs.”

Aside from physical defects, it’s also essential to look for financial defects in the form of unrecorded liens, which “can pop up at closing and make the legal and financial burden too great to close on the purchase,” says Kraig R. Kast of Atherton Trust Co., Redwood Shores, Calif.

While home inspectors don’t provide information on liens or judgments against properties, your title insurance company can. Ask them for a preliminary title report, says Lopez. Look for red flags such as delinquent property taxes and, if it’s a condo or other property with a homeowners association, unpaid HOA fees. If these are in arrears, be sure that the bank will bring them current before or at closing, Lopez says.

“Buying bank-owned properties is a terrific way to achieve the dream of home ownership,” says Bellack. “But there is no substitute for doing your homework. Visit enough properties to understand current market prices. Understand your budget. And always have an inspection done by a professional who is well respected in the real-estate community.”

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