A buyers market for housing?

We've been in the shopping market for purchasing a new home for numerous reasons. (The house was getting small, the jobs changed, change of scene, you get the point.) The incentives were the icing on the cake. The current house had been owned for more than five years qualifying for the tax credit incentive. We were also led to believe that there are thousands of foreclosed homes just waiting to be bought up. With all these incentives it was highly publicized that it truly was a 'buyer's market'. With all this momentum pulling us in the direction of moving, we decided to make the leap.

The first loop we jumped through was with the mortgage lender. The bottom line here was that in order to qualify to purchase a home we had to sell our existing one. In our minds we felt that this would be the easiest part. Not only had we kept the place up but we had done some major renovations to it as well. Two listing agents later, we were able to sell our house in exactly one week. This was the easiest part of this whole transaction so far. The buyer came in, liked what he saw and made us an offer. We got more than the first Realtor even wanted to list it for. As an added bonus the buyer was paying cash. Nothing to do on this end but sign the papers.

In this time frame while all this was taking place we found a house we really liked. It was one of those whims of fate that brought us there. We wanted a three bedroom house and only did our searches based on this. Our Realtor found a newer listing with an office area that she thought could be converted into a bedroom. The location was right and because it had been foreclosed on it fell into our price range.  We made an offer that was an attempt on our part to start some negotiating. No response. We came back a little higher and finally someone spoke. We hadn't really come down in price that much but it was still a good buy. The house was being sold 'as is' and all of this was contingent upon a home inspection.

This is where we left the reality and crossed over into the outer limits.

The home inspector quoted us an amount to inspect the house. He explained in detail everything that would be looked at and how he would give us a report on the house. Arrangements were to be made to have the electricity and water turned on so he could check everything properly. The Realty agents handling the house came forward with a proposal to replace the existing furnace. Within a week a new furnace was sitting in the basement. This was quite a turn away from the 'as is' we were told originally. The inspector came afterward and made some observations about the foundation and such but felt everything else was in good shape. After writing him the check we realized there was one thing he didn't check. The plumbing. No one from the city had turned on the water. A picture was included in our nice report from the inspector showing a bright orange sticker, left by the weatherization team, saying that the pipes may be broken and leaking had occurred.

This is not only a major issue in terms on the functionality of the house but no lender would ever agree to sign this off with this major flaw. This was a month ago. We're still waiting for something to happen. We would have had this fixed ourselves by now but we can't touch the property because it is not ours. Three bids have been submitted to them and still nothing has been done. Our house is closing at the end of the month and we now face the prospect of becoming renters yet again.

I thought banks wanted to get these houses off their books? Is this really a buyer's market? A buyer's market in which you are at the mercy of all the stipulations of laws and rules that left common sense behind. We've put earnest money down and we could walk away. Here are the things that stop that train of thought: 1) We really like the house. 2) We've signed a purchase agreement that guarantees us the tax credit. 3) Aside from the obvious pipe leakage, the property is in good shape. 4) Did I mention that we really like the house?

It's all very frustrating and time consuming. We feel that maybe the bank felt that they had invested too much money into it already to make it sell-able and loath the thought of spending even more. We could walk away and get our earnest money back but so much would be lost. If another buyer comes along won't they be in the same boat all over again? I know there's a lot of foreclosed homes. Maybe its just too overwhelming to have them knit picked apart this way. That makes these houses only available to buyers who have cash and are willing to buy them 'as is'. I tend to think of these people as investors. Our home that sold for cash will become a rental property. People who are not investors and don't flip homes for an investment opportunity cannot take advantage of existing foreclosed homes. So who really benefits from the housing bust? Will the tide of foreclosed homes ever diminish or will they just sit empty forever?