Newbie REO Questions

Background:

We have an accepted offer on a REO property (very large well known lender owns the property). We are not planning to fliping the house; my family loves the property (if we can buy it and repair it below market it’s just icing). The contract is “as is / where is”.

We’ve done the inspections and have estimates on what it will take to bring the property up to code. Inspections done: structural, foundation, roof, AC, septic and pest (no major structural or foundation issues). However there is some mold in an area with a small roof leak.

Questions:

Is the seller (bank) required to disclose any known defects on this property? (I’d like to know if we caught everything).

After inspections is there a standard process for adjusting the price to accommodate discovered problems.

I have concerns that the listing agent (for the bank) does not have my best interest in mind, if I have access to the REO asset manager should I/could I communicate directly?

Any other tips or suggestions…

Thanks

Bill are you a broker,agent,or just a BUYER??

Your right the listing agent does NOT represent you and works for the bank. NO you will not be able to circumvent the REO broker on the property. This is why if you call the AM will redirect you to the listing brokers office. The REO broker has a listing agreement in place that cannot be worked around. For the bank and broker you are just one buyer but they do many deals together and would not ruin that relationship for one buyer.

Since the bank has NEVER lived in the property they do not know it's condition nor have they usually performed any home inspections. In this case usually you are buying as-is whereis and the bank will not make concessions although sometimes they will to hold the deal together.

Hope it helps.

I’m just a buyer.

Agreed, under normal circumstances the REO asset manager would not communicate directly. I guess the question is there any contractual/legal reason precluding the asset manager from communicating directly?

Also, this bank (although a different division) is looking to carry the paper and I know that they have done a prior appraisal with a check list of things they wanted fixed (the deal fell through). Are they obligated to disclose what they already know?

Thank you for your thoughts,

"Agreed, under normal circumstances the REO asset manager would not communicate directly. I guess the question is there any contractual/legal reason precluding the asset manager from communicating directly?"

Yes it's called the REO broker listing agreement and it spells out protocol for sumbmission of offers and contact medium for the broker whether that be e-mail,verbal offers,online sumbittance etc.



It's kind of like changing things on our mls's. If regular people became involved it would make the process more complex and screwed up. The asset manager is dealing with hundreds of files on there desk and do not have time to answer QUESTIONS and EDUCATE buyers.This is why there is an REO agent to handle contact and relay information to the buyers is they ar enot represented by an broker on there side.


"Also, this bank (although a different division) is looking to carry the paper and I know that they have done a prior appraisal with a check list of things they wanted fixed (the deal fell through). Are they obligated to disclose what they already know?"

It's impossible to know the specifics of what you are saying. It sounds like the last deal fell apart because the bank did not want to cover the repairs.If the buyer had an inspection performed and never gave that inspection to the bank then they do not know about it and the buyer just asked for credits.This happens with buyers doing FHA loans and sometimes the banks will do repairs and other times they won't.


Look up material and latent defects.

OK, I agree that things would get very messy if the general public tried to get involved at this level. However, what if the listing broker doesn’t play nice with buyer’s agent (my agent) and has a vested interest us not closing the deal (double ended deal waiting in the wings). How can I be sure that what I’m asking for is being conveyed to the bank?

It’s only by a stoke of luck our offer was accepted, the property was being directed elsewhere.

Without getting into the details, I also know for certain the underwriters at this bank (different division of the owning entity) have put a list items that need to be fixed before they will carry the paper. If they are aware enough of the details to require escrow funds held for the fix, are they required to disclose these items to the new prospective buyer?

Thanks,

regarding the mold problem. The bank is not required to do disclosures, however if the listing agent is aware of a problem or past problem, he must disclose it to you. I had an reo listing that i remediated a mold issue so I had to disclose it to the buyer, not the bank.

This may answer your questions.

The listing broker does NOT represent you at all. This is why you have a buyer's agent.

You may NOT deal directly with the AM or the listing agent. You must go through your agent.

Most REO banks will require you to sign and notarize a disclosure waiver. They will then NOT be obligated to disclose anything, since you waive your rights. Banks have never lived in the property, so their knowledge about the property is very little.

Banks WILL sometimes make repairs or give you a credit to make repairs after close of escrow. The time period to ask for this is your due diligence period (inspection period). You would need to write an addendum asking for certain repairs, especially if your lender is requiring them.

Hope this helps.