Hazards Commonly Found in Foreclosed and REO Properties

Foreclosed and bank-owned (REO) properties often sit vacant for months, sometimes years. By the time a lender, asset manager, investor or buyer gets access, the property may hold hazards that aren't obvious from the curb. This guide covers common problems and how to approach them safely.

Why vacant properties deteriorate

Vacant properties lack the daily attention that catches leaks, pests and damage early. Utilities may be shut off, so sump pumps fail, pipes freeze and ventilation stops. Vacant properties also attract trespassers, squatters, scrappers and illegal activity.

Common hazards

Sharps and drug activity. Needles, paraphernalia and drug residue may be left by trespassers or former occupants. Some properties were used for drug manufacturing.

Human and animal waste. Squatters may use rooms as bathrooms when plumbing doesn't work; animals may nest and die inside.

Rodents, birds and bats. Rodent droppings can carry hantavirus; old accumulations of bird and bat droppings can harbor Histoplasma fungus.

Mold and water damage. Roof leaks, burst pipes and failed sump pumps cause water damage and mold.

Spoiled food in refrigerators and pantries.

Structural damage from water, fire, vandalism or scrapping of copper pipes and wiring.

Electrical hazards from damaged or stripped wiring.

Abandoned belongings and debris, sometimes including chemicals, fuel and hazardous waste.

Unreported deaths, occasionally.

Safety before entry

Don't go alone.
Wear sturdy footwear, gloves and long sleeves.
Use a flashlight; power may be off.
Watch for weak floors and stairs.
Don't touch needles, drugs or unknown containers.
Avoid disturbing droppings; use the CDC's wet cleaning methods or leave it to professionals.
Leave immediately if you smell gas, see signs of an active drug lab, or encounter people inside.

Inspection

A thorough inspection includes:

Roof, structure, foundation and water damage
Plumbing, electrical and HVAC systems
Moisture and mold
Pests and animal activity
Signs of drug activity, and testing where warranted
Debris, chemicals and hazardous materials
Code and safety violations

Cleanup sequence

Secure the property against further entry.
Remove sharps and hazardous items safely.
Remove debris and abandoned items, following applicable rules for personal property.
Address biohazards: waste, droppings, dead animals, decomposition.
Clean out refrigerators and spoiled food.
Address mold and water damage, drying the structure.
Test for drug residue if signs exist, and follow state rules for former labs.
Clean and deodorize.
Document everything with photos.

Lenders, servicers and asset managers

Lenders and servicers often have property preservation requirements, photo standards and bid approval processes. Biohazard conditions discovered during trash-outs should be documented and bid separately so they're handled properly rather than mixed with general debris.

Buyers and investors

Buyers of foreclosures and auction properties often have limited access before purchase. Factor potential hazards into budgets, and inspect and test as soon as possible. Check state meth lab registries where they exist.

A practical example

An investor buys a foreclosure at auction. Inspection finds a roof leak, mold in two rooms, rodent droppings in the kitchen, needles in a bedroom closet and a refrigerator full of spoiled food. Cleanup starts with securing the house and removing sharps, then wet-cleaning droppings, removing the refrigerator, remediating mold after the roof is repaired, and debris removal. A meth screening test comes back negative.

Protecting workers and contractors

Contractors, inspectors, appraisers and agents entering vacant properties should be told about known hazards before they arrive. Providing gloves, flashlights and clear instructions not to handle sharps or disturb droppings reduces risk. Professional cleanup should come before routine trades work in heavily affected properties.

Utilities and winterization

Restoring utilities in a vacant property can reveal leaks and electrical problems. Have a plumber and electrician check systems before turning them on fully. In cold climates, properties are often winterized; de-winterizing should be done carefully to avoid new water damage.

Frequently asked questions

Who is responsible for cleaning a foreclosure?

The owner after foreclosure, typically the lender or a new buyer.

What happens to items left behind?

State law and lender policies govern abandoned property; follow required procedures.

Should I test every foreclosure for meth?

Testing is wise when there are signs of drug activity or unknown history, especially in states with lab registries.

Is mold always present?

Not always, but water damage in vacant homes often leads to mold.

Can I live in a foreclosure while cleaning it?

Not until hazards are addressed and utilities are safe.

Do squatters' belongings have legal protection?

Rules vary; consult counsel before disposing of items.

Should I hire one company for everything?

A company that handles debris, biohazards and odor together can simplify coordination; specialized trades handle roofs, mold, plumbing and electrical.

How soon should cleanup start after purchase?

As soon as possible, to stop ongoing damage and reduce liability.

Is a vacant property a liability risk?

Yes; hazards can injure trespassers, workers or neighbors. Securing and cleaning reduce risk.

Key takeaways

Foreclosed and vacant properties commonly hold sharps, drug residue, human and animal waste, rodents, mold, spoiled food, structural and electrical damage, and debris. Enter carefully, inspect thoroughly, test where warranted, and clean in a safe sequence with documentation.

Sources

This guide is general information. It is not legal, medical, environmental or safety advice. Rules vary by state and locality. For a specific situation, consult the relevant agency or a qualified professional.