Ever tried to buy a bank-owned home lately? Itâ€™s becoming less of a
pleasant experience each day. Many buyers enter the foreclosure market
disillusioned because what they find is absolute risk. Hereâ€™s how it
works. The homebuyer hires a real estate agent who presents an AAR offer
to the listing agent hired to sell the bank-owned property. Before the
offer even gets submitted, the description on the MLS property listing
demands that the buyer submits an â€œAS-ISâ€ offer and completes dozens of
pre-qualifying questions. The buyer canâ€™t even select his or her own
title company anymore. If youâ€™ve made it past this point, youâ€™ll love
what comes next. REO agents make it very clear that the bank â€œwill not
perform ANY repairsâ€. Although they simply say thatâ€™s not true, itâ€™s a
very difficult endeavor to say the least. One way to approach this as a
buyer is to bring your inspector or contractor in at the beginning â€“
before you write the offer. If youâ€™re able to live with the numerous
issues found in the foreclosure property your looking at, simply adjust
this into your offer price. Yes, itâ€™s true â€“ you will most likely have
an inspection period, but you signed the as-is addendum, remember?
Negotiating with asset managers after the inspection period wonâ€™t go so
well. There are occasions where the buyer has leverage because of the
type of financing they use, but that usually covers a list of items that
MUST be present and working as per the FHA inspection.
As I work more and more with Freddy Mac and Fannie Mae, itâ€™s becoming
clear that buyers and their agents are taking on too much risk. Talk to
any Real Estate Attorney and heâ€™ll tell you that nothing in the 18-page
REO Addendum is in your favor. Does your agent go over the addendums
with you or are they just looking to get the house under contract and
deal with it later? Does your agent even explain the bankâ€™s addendum to
you? They should. Itâ€™s common knowledge that an addendum will override
any previous written and verbal agreements made in the original offer.
Read these addendums closely. Yes, you! Your agent isnâ€™t trained to work
with REO forms in school. Your agent was trained to use the Arizona
Association of Realtors forms. Many addendums protect only the Seller
and limit their liability in case of any future misunderstandings. Most
importantly, they change the terms of the original offer. Always seek
legal guidance before assuming the REO addendum is harmless.
Many addendums from Fannie Mae and other lenders/servicers/investors
and so on disregard the original terms of the offer completely. There
needs to be some kind of regulation to these practices. Bank-owned
properties are far from precious, they have lots of problems. Many of
these problems are rarely addressed and if they are, itâ€™s not out of
kindness. Buyers need to understand what theyâ€™re getting themselves into
when they buy a foreclosed home. Whether itâ€™s a home thatâ€™s been vacant
for the last 30 months or a home with serious material latent defects,
writing the offer price that takes future repairs into account
ultimately determines whether we have a sale or not.
As an agent, I want my homebuyers to live in a home they love with as
little risk as possible, but my buyers have to understand that the
rules to buying are constantly being changed by the lenders â€“ and often
for the worst. If youâ€™d like to discuss buying a foreclosed or
bank-owned property further, please feel free to contact me via email at
email@example.com or call Troy Elston at 602-740-1035.
Troy Elston, West USA Realty is a licensed Realtor in Arizona and a
member of the Phoenix Association of Realtors, Arizona Association of
Realtors and the National Association of Realtors.