I am trying to purchase an REO property, it is a Fannie Mae Homepath property.

The listing broker dictates that we use their special form, which is a standard Florida FAR/BAR AS-IS contract but with certain lines already filled in. The standard no warranty nothing included no knowledge of any condition of anything, which does not bother me.

However, on the riders/addenda/special clauses part of the contract is says:
"The seller's Addendum supersedes this Sale and Purchase Contract."

and my attorney advised me to cross it out because we have not seen such an addendum and have no idea what's on it. So how could anyone sign a contract that says anything in this contract would be null and void by something you haven't seen yet?

The listing broker says this addendum with it's terms will come back later from the bank if they decide to accept my offer and you will then have a chance to review and sign it or walk away with your deposit back.

My attorney says fine, then cross out this line and when the addendum comes back, have them add in that line to the contract then, but not now, signing the contract now without the addendum referenced in the contract is unacceptable. The listing broker says if you cross out this line the bank will not even look at the contract offer, take it or leave it. I do have an agent representing me and he said he has not seen such a addendum before, but why pay for an attorney if you are not going to listen to him.

So I think I am stuck with this technical procedural glitch. Is there anyway to navigate through this?

You will have to fill out the standard contract. If you win the bid, then the addendums will be issued. At that point you are not under contract until you sign the addendums. If you get the addms and don't like what it says, don't sign them and walk away.

First of all "this is not legal advice" I feel it is necessary to tell you that - this is reo listing agent advice. Do you want the house? If so - you are over thinking this. Sign the form - all bank addendums supercede the standard contract - they are asking that you acknowledge the fact that it does - not that you agree with the addendum you haven't seen - get the offer accepted - read the addendum - if you agree sign - if you don't walk. If you are stuck on this - you are about to be overwhelmed by the addendum - I have never - ever met an attorney that likes them - take it to him - get his advice - but I can tell you this - if you want the house - don't get stuck on the language. It is standard - CYA (cover your a*s)- and the bank wrote it so - yep it is in their favor - can you get around it - not if you want the house. Remember two things - you are not in contract until you sign the addendum- you simply have made an offer - and you have the right to do a home inspection and walk if the house is a POS. In my experience - no bank addendum can be changed in anyway - when buyer's and their attorney's start "striking" out language - it gets rejected. Listing agent is not trying to sell you down the river - he is just telling you the truth. Bank's house - bank's rules. Again - so not legal advice.

Actually, the listing broker can send you a blank addendum for you to review. It's not like the FNMA addendum is any secret in the REO world. And, yes, the addendum always supersedes the contract. And, no, you can not change the addendum.

Fannie is evil. I actually fired them as they would change contracts and addendum after the buyer had signed which put me in some pretty bad situations. No wonder they are in such trouble. I would sign anything until I see the addendum, and DON'T put any money into escrow until you have seen ALL of the executed addendums. I agree with your attorney on this one.

Well, we left the addendum clause in, but I added one line at the end that says "Seller shall provide to Buyer the completed seller's Addendum simultaneously with Seller's approval of this Contract. This Contract is not final until Buyer signs the completed seller's Addendum." which is I believe the intent but not explicitly stated in the special clause. I hope that does not cause any problems. One hour after we submitted the offer, my agent came back with the multiple offer notification telling us that there are multiple offers and asking us to either (a) Withdraw our offer (b) revise our offer or (c) Keep the same offer and sign this acknowledgment. I checked to keep the same offer.

At this point, I guess I am waiting for the bank to counter or to accept/decline or they may counter everyone?

This is typical for the REO contracts. Your attorney is right, but banks do not care.They will not change the contract especially for you,moreover the asset manger or the listing agent are not the persons that are authorized to change the contract. If you like the house sign the contract. Not legal advice.

Their counter was highest and best. Generally they will accept or counter the offer in their best interest or reject all. If your offer is the best, so be it, if another offer is more attractive, that will be the offer negotiated.

S.O.P.

I'm more concerned that your agent has never seen this type of addendum before. They clearly don't deal with REOs as an agent on either side and never asked anyone else about it.

Right on. What Victor said.

As an REO agent and a buyer of REO properties, I am astounded at some of the language in these REO addendums. I am waiting for one to say, that the bank will have the right access the buyers bank account for any reason up to 14 days after closing.

I went to the wall with BOA in the last 2 weeks as a buyer. Closing with my atty. as my closing agent (and getting a title policy from his provider) is very traditional and extremely lawful in VA. BOA has a nasty addendum nixing that, indicating seller will provide a closing attorney, or title company, and also will provide a title policy. I changed their addendum and BOA signed it.

As a listing agent I will tell you that NEVER happens. I was suprised. Only thing I can say is go with your gut and trust YOUR agent and YOUR atty. to give you good advice.

Does anyone else have to include "Pursuant to section 28 of the real estate purchase addendum, this contract is subject to all terms set forth in the real estate purchase addendum". Im tired of typing that out. Selling agents can never remember to include that on the state contract.

Yes it is typical for addendums to supersede the state contract. It's part of buying an reo.

The contract we were dictated to use by the listing agent says "The Seller's Addendum supersedes this Sale and Purchase Contract. Full earnest money deposit shall be held by Seller's Closing agent, The deposit shall be placed within escrow agent within 24 hours of seller's acceptance! All earnest money deposits must be in the form of a cashier's check, money order or check from broker's escrow account. NO EXCEPTIONS!!! No other parties in this transaction may require spousal signature, failure of buyer's spouse to sign or execute documents is not a contingency of this contract."

To which I added two lines.
"Seller shall provide to Buyer the completed seller's Addendum simultaneously with Seller's approval of this Contract. This Contract is not final until Buyer signs the completed seller's Addendum."

Now the waiting game.

I put down till June 25 5pm as the acceptance deadline. My agent says the bank is going to do whatever they want to do, they might come back in a few days or they may stay silent for weeks, they are not going to pay any attention to my acceptance deadline.

So, if on June 26 they decided that my offer is worth countering or accepting, will they say oh the deadline is passed this contract is no good, let's look at another one that is still alive?

You do realize that you are banging your head against the proverbial wall, right?

JB - again - you are over thinking this. Banks do not care about what your deadline is on your offer. If you are highest and best - you win. The listing agent will come back and tell you if you are highest and best - and if you are send you the addendum. As far as the language you added - they'll ignore that too. The only thing that matters and starts timelines ticking is the seller's signature on the bank addendum. You will get the addendum first - then the listing agent sends it to them for signature. Upon delivery of seller's signatures to you - at least here - you are in contract and have to spit up the earn $. And I agree with NtxB - doesn't your forehead hurt?

LOL, I am just trying to balance the fine line between following SOP but at the same time protect myself, which is hard to do in these deals.

If I am NOT the highest bidder, will I get a decline or the bank just leave me waiting? Or I guess this may be different from bank to bank, locale to locale?

Don't you have an inspection period / option period written into the offer? What do you stand to lose if you just concede on any of your sticking points? If you don't like the addendum, don't sign. If you do sign and deliver the earnest money in certified funds, you can still get it back if you terminate during that inspection period. I'm not seeing huge risks here unless I missed something.

I recommend you re-frame your thinking from "highest bidder" to "highest and best." ALL terms are relevant, not just the purchase price. It isn't always the highest offer that is accepted. Cash usually beats financing and some sellers will accept a lower purchase price to offset any risk associated with the outcome of the loan. Quicker closing dates carry a higher priority and some sellers will accept slightly less to close more quickly. Don't fall into the trap of thinking that the highest bid wins.

You won't dictate the seller's timeline. Neither will your agent or the listing agent or your attorney or your Aunt that is a teller at the corner location for the bank that owns the property. They will respond when they respond. I represented a buyer that I knew had submitted the highest and best offer, that buyer's offer was going "up the chain" for approval and she flipped when there was no formal response within two weeks and withdrew her offer. She was >this close< to a $150,000 to $200,000 in equity on a so-so property in a SUPER HOT area where the dirt was appreciating enough to buy a small car during her waiting period. <shrug> Her emotions were out of control and there was no talking any sense into her.

It's the listing agent that is responsible for communicating when offers are not accepted. They usually won't cut anyone loose until fully ratified contracts are in place. If the listing agent isn't diligent about their work, you may not be notified. But most REO agents are pretty diligent and will let you know. They'll also probably hold your offer IN CASE something happens and the offer that was accepted fails to close. That happens more frequently that listing agents would like and its so much quicker to scramble the previous offers to see who's still interested.

I think the bottom line is that patience is the name of the game when buying REOs.

Yes, there is an inspection clause I can pay for an inspection and walk away with my deposit back for any reason so I am protected. I am not that concerned since this is SOP.

What the issue is my lawyer is saying yes, this is how it typically works. However, the contract itself has verbage that says there is another addendum that supersedes it which you haven't seen what's written on it, and yes, the contract is not final until you sign the addendum, but as an attorney, he has to advise me that the contract as a standalone thing, and by me putting a signature on it, it could be argued that I am agreeing to terms of the addendum which does not exist yet, and that's a bad thing legally speaking, theoretically.

Anyways, I am waiting now to hear what happens. It has been 5 days, no news. My agent said this may not be a bad thing. It could be that it's sitting on someone desk and they haven't read it, or it could mean it has a real chance, or it could mean they want to wait a fixed period of time to see how many offers they have to choose from. At least they have not decline it. My agent says she had a few REO where the price is not realistic she heard back within 24 hours with a decline.

We always call the agent that had the offer accepted to make sure their buyer still wants it. Then we call all of the other agents who put in offers to advise prior to putting it pending in MLS.

The big unknown for you here is that some asset managers have over 500 assets and are consumed with offers and emails and require additional time to respond. The biggest unknown is if a mortgage insurance company is involve.

If there is an MI company involved they have to sign off on an offer prior to acceptance because they are going to have to write a big check. The MI companies take at least a week and usually two weeks to respond.

Take a deep breath and wait. If you are supposed to get this home you will. If you are not supposed to get it you have something better coming.

FYI sellers rep (the asset manager) is the last to sign the addendum and it still requires seller approval.

Good Luck to you.

Reading thru all of these responses I can see that the general theme is correct, 1. There is no "Deal" until the contract and the Addendum are executed by both the buyer and the seller. (PERIOD).The banks addendum is pretty much a CYA (Cover your Asset) addendum that spells out terms and condition along with how the title will be conveyed, and the fact that the “Seller” has not occupied the property and has no knowledge of its condition etc.. Speaking from experience as a former asset manager here are some points to ponder.
1. As Grampa mentioned some Asset Managers (AM) have 500+ properties that they are dealing with at any given time, please explain to the buyer that the AM is not on the other side of the fax just waiting for their offer to come thru.
2. Again something that Grampa (smart guy) mentioned if there is an MI company (sometimes a few) MI companies involved the all must review the deal and sign off on it. This is one of the many reasons short sales take so long.
3. One of the main reasons that banks have an addendum and refuse to scratch out or allow anything added to an addendum, imaging if you were that AM having to review each contract and trying to understand what the repercussions of what somebody added to the addendum means. It helps when all you need to do is scan each page. Reviewing 10-20 contracts at any given time took a lot of time just to make sure that nothing was crossed out or added; in which case the addendum was rejected and the buyer was given one more shot to get it right.
4. Last but not least. bottom line the bank wants to sell the property, they are not looking to bend anyone over, if they end up in a contract dispute, with a buyer, that is going to tie up the property, and that is the last thing they want to do and will do; most Asset Manager will release the deal and move on if the reason is legit.

About two weeks ago, I asked for advise from this forum about a REO home I decided to pursue. I had some issues with the contract verbages and my lawyer wanted me to make some changes...anyway that's not important now. My agent called me today and informed me that she talked to the listing broker and he informed her that the bank accepted another offer and there is now a signed contract.

Needless to say I am disappointed. My agent said my offer is very strong and the only thing that could be is there is another offer that is a full cash offer it could beat mine. Well, it is what it is and let's move on.

Three hours later the person who pre-qualified my mortgage for that house called, and I told him the bank accepted someone's else's offer. He said he knew...which was strange...because how did he know? I asked him how, he told me he knew some of the people who worked at the listing broker's office. Which reminded me how I found him, when I visited the house with my agent, it was on a lock box but inside the home was a stack of cards of this person, he worked for a lender who is under the Homepath program. So I took one card and called him.

He then said "Let me give you a piece of advice, we are in Miami, things don't work the same here, most foreclosed homes that are sold, they are sold to buyers who deals with the listing agent directly, with no go between, you had a very strong offer, who knows what happened". I asked him whether he is saying the bank never even looked at my offer. He said "I am not saying that in this particular case this happened, because I don't know, but I am saying you are solid financially and I want you to find a home and lend you some money, but if you are looking for foreclosed homes, having a buyer's agent will affect your chance, the listing agents don't always do what they are supposed to do, I know in many cases the bank only got to see the second best offer...just something to keep in mind".

Now I am upset. I don't know if this is true, but I can't believe this may be going on.

Doesn't surprise me. Two months ago I was about to make an offer on a short sale property and the listing agent told me the seller wants a side deal, he wants $30,000 cash in exchange for the pool patio furniture (which may be worth $5) or else he won't sign the contract to forward to the bank. I told him this is highway robbery and he said this is the way things are in Miami.

Sounds cynical doesn't it?

It really depends on the agent. I know several of the large REO listers around here and most of them are upstanding individuals. One of them had a buyer's agent who represented a pair of buyers on one of my REOs. When those buyer's found out it was in multiples, they had the "partner" come to me and tried to get me to tell them what the highest offer was.....after all I could get both sides.

I informed the buyer's agent of the situation but asked him to keep quiet. If his buyer's won he would get paid. The buyer's did end up getting the home but they didn't understand agency very well, I represented the seller's best interests. They "paid" for it and I sent the buyer's agent his full commission for the buyer's through a referral agreement. I trusted them before that but I have no doubts about them now.

But the real question is, if that agent is going to be dishonest about presenting offers then what else are they not going to tell you about the deal, terms, or the home itself?

Sometimes, it's best just to pass.

Just because you didn't get the house, doesn't mean the listing agent was up to no good. You said your lawyer was trying to change verbiage on the contract. The banks have already paid lawyers to write those, they are not interested in having your lawyer try to make changes. That puts the seller in a lot of liability.

My suggestion is to have your lawyer butt out. If you find a house you like, bid your max and hope for the best. There are a lot of people buying houses with cash. I'm willing to bet there are some who are probably interested in the same homes you are. Cash is king in the reo world.

Yes, THAT is important now! You were not even in the running if you changed the seller's paperwork.

The only thing that beat you out COULD have been contract verbiage that meets the REO seller's specifics!

The reason buyers with buyers' agents sometimes lose out is that the buyers' agent may try to monkey with the seller paperwork--kind of like the lawyer wanting to make some changes. REO listing agents know how the process works. Some buyers' agents do, too. Find one who does. And find a different HomePath lender. This guy sounds like he knew too much about your offer to have been an outsider. I wonder if he just happens to be the lender for the winning bidder.

I know that when buyers start fussing about the addendums prior to having the offer accepted/seeing the addendum sends out a red flag. Seeing the added wording in the offer may have sent a message. My AM's will ususally tell me to move on to a less timid buyer who will move forward with the transaction in a multiple offer situation. Just a thought.

I can tell you that if a buyer's agent starts trying to change addendums or add language - it is a red flag. As for an attorney and them wanting to change things - I just love that - I have had an attorney for a client many times and I have had to tell every single one - your gonna mess this up if you do that.
Cash is king - I had an AM pass right over a financed offer that was $10,000 higher - and ask the cash one to go up by $2,000 - they did and I informed the other agents that another offer was accepted. The house would have gone FHA but I guess the AM just didn't want to mess with it - cash and close.
As for dishonest agents - yep - they are out there. Do they not present offers - sure - do they make sure their buyer looks awesome so they can win the bidding war - sure. Did it happen in your case - maybe but the only thing you can do at this point is guess. I never represent buyers on my listings for just that reason. I do not want anyone out their guessing - not my buyer - even my buyer's agents try and get the top offer price out of me - I know these guys very well - friends of mine - and I do not tell. Secondly - I was just reading one of my broker manuals and it said that listing agents can not represent buyers - huh - maybe that is the wave of the future. Sad really.

That is one of the reasons we refer out 95+% of our buyer leads. We have gotten as many as 20 offers in 4 days on a property that had a $3,000 bonus to selling agent. We had a buyer who ended up with the second best offer. Your honest or your not plain and simple.

However, of the other 18 who did not get it probably had 1 or 2 buyers or their agents thought something was not quite right just because they did not get the property. "How could it be possible that they did not make the best offer." I think they take it personally that they were not smart enough, good enough, etc.

Cash is king, conventional is second and with FHA the Asset Manager crosses their fingers and hope it closes. And right now with no Flood insurance available (if it is in a flood zone) you are not going to be able to close anyway.

Most of the answers in this and your other posting have a common theme; Don't touch the addendum! Your attorney and your agent were trying to protect you. In this case they protected you right out of a house. Second item. Highest and BEST. Closing date, type of financing, inspection contingencies exert as much if not more than price. In house vs "out house" offers are treated the same in my office. If another agent is getting half the commission, it doesn't much matter to me who it is....half the money is someone elses. I personally don't work with buyers since I don't have the time or inclination to practice "Wheel Estate". One advantage some buyer agents working in REO intensive offices have is a track record of understanding the difference between conventional and REO sales. I give classes to agents outlining how to present offers that will fulfill the requirements of the REO seller. Regarding the comments of the loan officer....Way off base. Supposition, conjecture and assumption have their place in fantasy land, not in Real Estate. It isn't always some sinister plot when another agents offer gets accepted. I'd lay this failure squarely on the door step of counsel and your agent. It's quite obvious to me that they have minimal, if any, experience in REO conveyances.

Please know that our licenses are worth millions of dollars over the course of our careers. To not present an offer is to put the license at risk. Why would anybody do that over ONE commission? It's stupid, and actually insulting when buyers, agents, loan officers, etc. suggest that that happens. 99% of the time, they are completely wrong and their offer just wasn't accepted by the seller.

When buyers start playing with the addenda, I always tell the seller. It's a huge red flag, and you were warned about it. Plus, you also put a deadline into your offer. By the time the AM looked at the offer, the deadline had probably passed (or was near). I don't think you have anybody to point the finger at but yourself.

The banks rule our world. We are at their mercy, and you lost out. Sure you were just protecting yourself, but they don't care. Period.

You killed it by changing the contract. If you came to me to write the offer and wanted to make changes I'd say thanks, but no thanks. I've sold enough REOs to know making changes doesn't fly.

Your attorney gets paid by the hour.They have to (FIND THINGS) to justify the fee.

AM's sometimes are handling over a hundred properties.Do you think they have time to deal with contract changes? If you won't take it AS-IS tons of other buyers are begging for the chance to.

As for not representing buyers if you are a listing broker you do not have to represent a buyer to do a deal.In Georgia I check I represent the seller and not the buyer and fill in the forms.Buyers usually don't care as long as they get their price on the offer.

For getting an offer accepted I am sure many brokers/agents give weight to double ending the commission.Many of these REO listers are small timers getting a few straggler REO's here and there.After the broker split and the Am's taking a fee I am sure motivation is high to double end it.

I use this strategy on some REO's when I bid and give them all the commission. It does make a difference sometime.I don't go by ethics and what should happen but about real world and what will improve my chances of landing the deal.

Something I just remembered that I did not put into the last post is that some of our AM companies reduce the sell side commission if we double side it. Another reason we send Buyer leads out.

Also, No Lawyer as ever been beaten up for a deal they killed. Only for the ones that they let happen that went badly after the fact.

We have some Asset Managers who have 500+ properties. Just take a deep breath and move on to the next one. There is a saying in Real Estate. "Better to know it is dead on Tuesday than Friday".

Move on to the next one and the best of luck to you. (with the current trend in RE with all of the factors that are in play you may get a much better deal bacause this one fell through.) "This or better".

I'm having some similar problems to JB and your comments have been extremely helpful. I can see it is mostly CYA. But here's my big worry:

The addendum states that the buyer should be aware that there is a possibility the prior owner might exercise right of redemption.

This troubles me -- what can I do? Am I at significant risk? I'm in NM.

Thanks in advance.

Also, a second question on the addendum. The listing agent says I have 24 hours. How strict is this? It would mean I would not even have the time to get an attorney to review it. But then, based on the comments above, that seems pointless.

Find out what the redemption period in your state - it will at least make you feel better - or not if it hasn't expired.