Monday, July 30, 2012

Tips for Buying a Foreclosed Home on Minnesota Acreage

Though prices are starting to edge upward in the Minneapolis/St Paul metro area, current prices on acreage properties in the north and east metro are still extremely attractive. Throughout Anoka County, Chisago County and northern Washington County there many homes on large and small acreage that are quite affordable. However, buying a foreclosure is different than buying a  home from a more traditional seller. The biggest difference when buying a bank-owned property is that buyers almost always required to waive their right to a seller’s disclosure. This actually does make sense since no one at the bank actually lived at the home and can properly complete the disclosure. In fact, it is doubtful that anyone at the bank has ever set foot on the property or even the state of Minnesota for that matter. So when buying a foreclosure on acreage, what other things need to be considered to protect yourself and do your due diligence?

**Ask for a Compliance Test for the Septic System.
Most rural homes have a private septic system to handle sewage and waste water. Not all systems are created equal. They are designed for the specific property and size of the home. Even a new septic system can fail if not properly maintained. How do you know if the septic system is working? Ask the bank to have a third party inspect the system and  supply a report of compliance. This MUST be written into your purchase agreement as a contingency of purchase. (i.e. Sale is contingent on the buyer reviewing a current compliance certification for the septic system.) Some banks will not do this test, so be prepared to pay for a compliance test yourself or assume the cost associated with any potential septic failure in the future.

If you have never lived on a home with a septic system, it is important to educate yourself on how to best maintain your system. Additional information on Septic Systems.

**Well Disclosure is Mandated by State Law
In Minnesota, well disclosure is mandated by state law as a part of the Ground Water Protection Act. A seller, yes even a bank, must provide information on the location and status of all wells on a property at the time of sale. If this information is known and not provided, the buyer has 6 years in which to file a claim against the seller.

If you chose to waive your rights to disclosures when buying a foreclosure AS-IS and it is a large acreage parcel of land, it is a good idea to visit the MN Dept of Health webpage on Finding Abandoned Wells prior to purchase. Abandoned wells can be very expensive to seal properly. Improper sealing is not only illegal, it can be detrimental to the ground water. 

**Are there any underground fuel tanks?

Often people looking at acreage for the first time will have questions about the huge propane fuel tank located near the home. These tanks are usually only seen in the city at gas stations where homeowners fill their small propane tanks for the weekend BBQ. In the country, the large tanks are in many backyards as the source of fuel to heat the home and run appliances.

But what if there is no visible tank?  Could there be an underground fuel tank somewhere on the property?

Don’t immediately assume the home is heated with natural gas. Homes on large acreage are rarely heated with natural gas as the cost of bringing the gas line to the home can be cost prohibitive. Check for underground fuel tanks. Even if there is a propane tank visible, there could be still be an old fuel tank on the property either above or underground. While this is a required disclosure by a traditional seller, a bank will not know whether there is an underground tank or not. The removal of underground fuel storage tanks can be expensive and dangerous. The removal procedure is regulated by the Minnesota State Fire Marshal as well as the Minnesota Pollution Control Agency.  

**Check the Trees! 

Buying a home AS-IS also applies to the landscaping. If there are dead trees on the property, it would be a good idea to assess them to see if they died due to a disease. Many times the value of the acreage is in the mature trees surrounding the home but there are several diseases and parasites that can wipe out acreage landscaping. The big three to be concerned with in Minnesota are oak wilt, Dutch elm and the Emerald Ash Borer.

Copyright 2012