Buying a Foreclosed Property

[TonyMandrique]

Hello everyone,

I am in the process of making an offer to a mixed-use foreclosed property with current tenants who are willing to stay. The location is fantastic but the building needs some TLC. I already consulted my real estate lawyer who cushioned me of buying it "As IS", plus, the fact that the previous owner has the right of first refusal. I am initially put inspection and financing conditions in the draft offer.

My concerns are:
1 - I do know the rental income, but, I don`t have any ideas of the operating costs. I only know the amount of property tax with one tenant paying hydro during summer and heat. Can anyone suggest a reasonable estimate of operating expenses?
2 - I also don`t have any ideas if there are tenants` deposits held by the previous owner and how to get them once I owned the property. My realtor is finding it difficult to get information from the bank. Is there a better way of handling this?
3 - Is the previous owner has the right to pull out any chattel properties from the building?
4 - I don`t know if there are liens and encumbrances to the property. How can I best handle this?

Your immediate comments or suggestions are much appreciated. Thanks a lot.

 

[ShannonMurree]

-the bank will not give any representation or warranties
- the bank will not warranty or guarantee the chattels and fixtures will remain on the property. they will be all stroked out of the offer. If they`re there on closing, great. They could have the right to remove and sell to try to recoup any costs. Someone could tell you verbally, "don`t worry, they`ll most likely stay", you have no way of going back on that...it`s a risk
-power of sale means the property manager has already secured the property on behalf of the lawyer/bank. yes, the owner can still come back right up to the day of closing and pay off the outstanding balance AND all penalties and fees. (may or may not happen...no guarantee)
-contact the utility companies yourself and see if you can get a history
-go to the land registry office and see if there are liens. There`s an Execution searcha and is a charge per name
-i have my clients put the rent deposit in the offer and ask for credit. Be prepared for this to be stroked out and your potential liability.
-have the tenant sign a tenant acknowledgement form (make part of your offer). No one can even estimate a cost of operating expenses because it`s property by property basis and varies on everyone`s use, etc.


Power of sales, though can be beneficial are a huge risk. Count on your lawyer and Realtor to help you the best they can and do your due diligence during the conditional period...or even before you make the offer actually.