I closed on an REO/bank owned home last Friday. The loan officer for tbe buyer had some hurdles we had to clear, which didn't totally make sense, but that is for another day.
The appraisal process is similar to a standard transaction, as most of us know, but the addenda to the purchase and sale agreement are vastly different than a standard transaction.
Specifically, I write into all of my purchase and sale agreements, regardless of title status, that "all fixtures/appliances as affixed/installed to property when viewed at {insert specific date & time}". The intent is to manage the expectations of both sides: that what we see is what we get.
Not surprisingly, this was struck through in the executed purchase and sale, meaning, that stuff might be there after closing, or it might not.
The 13 page addendum, required by the REO listing broker, reiterates this position, as the seller (in this case Fannie Mae) is conveying the property in as-is condition, and makes no warranties about how the property will be delivered, as Fannie Mae has probably never even seen the property.
Which is fine, until you get to the appraisal point. If the property is being conveyed as is, with no guarantees of appliances/fixtures remaining, how does that affect the appraisal and the loan?
If, for example, the entire kitchen was to be removed prior to closing, but after appraisal, then the lender is at risk, as the property value is not what the appraisal stated it should be.
In the same example above, if the buyer was planning to use this as a primary residence, and now has to install a kitchen, they are also at risk.
The transaction might not close if the above example became an actuality, as even though the buyer signed the addendum, they now do not want the property. Yes, they will sacrifice their binder (in this case, $2000), however, that is far less than a new kitchen.
We closed, so this is more a topic of discussion. Has anyone had a hurdle like this in an REO transaction?
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