real estate

Should you buy a home that's been vacant?

As-is home purchase can be risky

Some banks have procedures in place that allow prospective buyers to turn on the utilities, but the buyer may be required to pay a deposit to the utility company and put his or her own name on the account, even though he or she doesn't own the vacant home. That inconvenience may prompt some buyers to forgo parts of the home inspection that can't be performed unless the utilities are on.

That can be risky because unanticipated repairs can cost thousands or even tens of thousands of dollars, and the buyer typically will have no recourse to the bank. That means the buyer will be stuck with whatever problems the house has.

"Buyers are attracted to a house because it's discounted from what it sold for a number of years ago and they are hoping to get a bargain. They don't always understand that sometimes the problems make up the difference between the cost of the house and what they are getting for a discount," Tamny says.

Vacancy may affect homeowners insurance

Homebuyers also should know that insurance companies may decline to issue a homeowners insurance policy until the agent looks at the vacant home, according to Dick Luedke, a spokesman at State Farm in Bloomington, Ill. The agent's once-over isn't the same as a professional home inspection, but can mean extra expense if the home is in poor condition.

"If the home is uninsurable, we wouldn't write the policy. If the problems just increase the risk of the potential of a future claim, then that might increase the premium," Luedke says.

A homeowners insurance policy also may require a vacancy endorsement, again at an extra charge, if the home will continue to be vacant for more than 30 days after the sale. If the vacancy is due to major repairs, a dwelling-under-construction rider may be necessary as well.

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