Photo by Greg Barnette / Record Searchlight

HomeTech Inspection Services home inspector Greg Williams looks over a house on Peaceful Ridge for a prospective buyer on Thursday.

Photo by Greg Barnette / Record Searchlight

HomeTech Inspection Services home inspector Greg Williams looks over a house on Peaceful Ridge for a prospective buyer on Thursday.

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Foreclosed homes have caught the attention of north state buyers.

Nearly a quarter of the Shasta County homes that resold in August - not including new construction - had been foreclosed on at some point in the prior 12 months, according to DataQuick Information Systems.

And that number could grow.

The Wall Street Journal reported last week that nearly one in six homeowners owe more on their mortgage than the home is worth, a statistic coming from Moody's Economy.com.

Last week, there were some 1,750 homes listed for sale by the Shasta Association of Realtors, and 7 percent were bank-owned - houses that failed to sell at a foreclosure auction. Even more telling is that of the 375 pending sales listed last week, 108 were bank-owned properties.

For many would-be buyers, the perception is that these distressed properties, especially ones that have been taken back by the bank, or REOs (real estate owned), are rock-bottom deals.

Not always, according to north state experts.

"Don't restrict your buying wants to just that (bank-repossessed homes)," said Greg Lloyd of the Real Estate Center in Redding and president of the Shasta Association of Realtors. "Understand, that when you look at an REO property, the bank calls the shots. ... Basically, what they're saying 'It's my way or the highway.' "

For example, bank-owned homes are typically sold "as is." REOs don't come with a transfer disclosure statement, which tells of defects that may be present in the home.

"When you have a bank-owned property, the bank doesn't have any idea there's a leaky faucet or a crack in the stucco," Cheryl Jones of Accurate Home Inspection said. "Without a TDS (transfer disclosure statement), it leaves the buyer pretty vulnerable because all houses have issues. So in this case, you can't really rely on the seller to tell you what the issues are."

In other words, get a home inspection.

"Even if you are a very savvy buyer, you need a third opinion (home inspection)," Redding real estate agent Skip Murphy of Coldwell Banker C&C Properties said.

But while banks might be less agreeable to concessions for the buyers, they're not inflexible.

Murphy said banks have agreed to do repairs on a house, or there have been deals in which the buyer negotiated the price down after pointing out defects.

"If there is a safety issue or code violation, they are extra reluctant to let it go by," Murphy said of the bank.

Lloyd agreed.

"Oftentimes the bank is more likely to correct those problems (safety issues) because they want to avoid future liability," Lloyd said.

Eric Smith of Keller Williams Realty in Redding said that if buyers don't like what the inspection discloses, they can call off the deal, ask for seller credits, or a price reduction to cover the cost of the repairs.

"Many banks will agree to cover the cost of any surprises found during the buyer's inspection," Smith said.

But Smith contends that for the truly discriminating home buyer, most REOs don't represent good buys because they are in disrepair, in less than desirable locations or don't represent the dream home the buyer wants.

"As an investment and a way to buy well below market value and build significant equity moving forward, they (bank-owned houses) represent tremendous opportunities," Smith said.

Jim Collins of Monarch Home Inspections said buyers need to be realistic.

"You just got to look at what you think you can handle, what you think you can repair and what you can't take care of," Collins said.

Home inspector Greg Williams, local chapter president of the California Real Estate Inspection Association, said he sees mostly cosmetic issues like holes in the walls, missing electrical and water fixtures, and missing doors when inspecting bank-owned properties.

"Those are all issues that can be observed by anyone walking through the house," said Williams, who owns HomeTech Inspection Services Inc.

But Williams also will come across a lack of seismic strapping around a water heater, missing or non-functional fire alarms, improper electrical connections, and plumbing leaks - items a typical buyer might not catch.

"When people are getting into foreclosure, they will just abandon the house, and sometimes take a lot of stuff with them," Collins of Monarch Home Inspections added.

Reporter David Benda can be reached at 225-8219 or at dbenda@redding.com.