Yesterday I wrote about how the new short sale addendum protects buyers from waiting forever for the house they made an offer on to get approved. Later in the day it made me wish we had something similar to that for bank-owned homes. The unfortunate truth with bank owned homes is that the buyers are almost always relying on every inspection in the book they can think of and then just plain luck.
Here are the three most important things however that buyers need to watch for when it comes to bank-owned homes:
1. Timelines always get mangled unless they are in the bank's favor - I remember being frustrated with short sales in the past because the lender would come back with an approval that was good for fifteen days. Most escrows take 30 days. However, this last weekend I wrote an offer for a bank-owned, foreclosed home for a client. The offer was more than fair - it was full price, cash and the buyer was paying for half the escrow costs. It has now been ten days and we hear the same thing from the listing agent - "Nothing yet." Today the message changed to "We have another offer, over asking. Bank will pick one soon." Just how soon?!?!? Message to banks and the listing agents that represent them: when you get what you're asking for have the wherewithal to accept it and move on!
2. RESPA goes out the door - The Real Estate Settlement Procedures Act protects buyers from having to accept a title company that the sellers want, especially if the buyer is paying for half the title costs, amongst other things. Banks will almost always have a title company they want to use and more often than not it will say so in the addendum they require the buyer to sign. Usually this doesn't bother too many buyers, but I thought I would mention it here because it always sticks out at me.
3. Banks are exempt from the Transfer Disclosure Statement - This makes sense since the bank has never really been inside the house. Chances are they don't know what's wrong with it. However, it does leave the buyer with a lot of questions that can be resolved only with numerous inspections.
Bank-owned homes are the cheapest homes on the market. Agreed. The discounts on these homes are the biggest you can get anywhere. Sure. But buyers should be aware of the potential problems and liability they assume by buying one of these homes.
Wednesday, January 30, 2008
REO Buyers: Three Things to Watch For
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2 comments:
Actually as long as the seller's paying for owner's title (the usual thing in Sac County), HUD's on record as saying they won't enforce section 9 of RESPA:
http://www.sacramento-home.com/real-estate-events/2007/respa-the-real-estate-superfluous-procedures-act_884.html
And just to clarify, the agents' statutory duty to disclose is still there. Ideally both agents are using CAR's form AVID for that -- on our side it's required. As of now I'm still allowing the other side to use TDS if that's what they're used to.
Purva just ran accross your blog. You made good points that I am seeing as well in working with bank owned property. It sounds like some of the banks are so backed up they are asking for a sixty day escrow. It will be interesting to see where this all goes.
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