Hello Everyone,
Happy 4th of July Weekend. I hope things are going well for all of you and I can say, at least we are starting to get a little moisture in to Arizona and boy do we need it. It might make for a bit of a soggy 4th but I don't think anyone will complain. We have all been doing the Rain Dance for the past month or so.
On to the subject at hand: Bank Addendums. I'm sure you all are selling REO's I seriously doubt any of us would be in this business long if we didn't. But I have to say I am getting really tired of how much they have in common with mousetraps. They are filled with subtleties that can trap your Buyers and cost them money.
Case in point, I had a deal going with a certain Bank who shall remain unnamed that was so full of mouse traps that even an Attorney missed one very important one. This one happened to be under the Buyer Inspection section. You see, it actually conflicted with itself in a way that could have cost a buyer a significant amount of Earnest Money.
The gist of this was that the Bank allowed the client 7 days to complete an inspection. There were 3 additional days allowed for the Buyer to notice the seller of disapproved items. On day 7 the buyer submitted to the seller a disapproved item that was quite significant. It involved the square footage of the home and the cost per square foot would have been significantly higher because the square footage was much less than was originally represented at the time the buyer made the offer.
As a result of this discovery the Buyer presented to the Seller a Disapproved Item on the Buyer's Inspection Notice and on an Addendum requesting that the seller reduce the price to a comparable per square foot price for the square footage on the property as it truly was. This was all done well within the bounds set by the addendum. All sounds okay right? Wrong.
In the same section under the buyer inspection of this Bank Addendum there was another paragraph that stated that if the buyer did not cancel by the 10th day from the date of acceptance the buyer's earnest money might be at risk. Still sounds okay right? Wrong! The problem was there was nothing in the Addendum that said the seller had to respond to the Buyer's request for repairs/compensation before the 10th day, or ever for that matter, and that is exactly what happened. The seller did not respond within the 10 days and if the buyer had waited for a response and the seller said No, the buyer would have been in a position of either moving forward at whatever terms the Bank set down, even if they wanted the price on the original offer, or risk his earnest money if he canceled. In this case the Earnest Money amount was significant!
It is my belief that the Bank intentionally did not answer in that 10 days and their intent was to wait until after that 10 days had passed, deny the buyer the adjustment to force the buyer to either close at the original price or forfiet his earnest money. Good or Bad, the buyer decided to cancel on the 10th day to prevent the Bank from claiming his earnest money. The buyer was out the cost of the inspection, he did not get the house he wanted to buy, but at least he would not lose his earnest money.
This is the kind of thing that makes me really angry when dealing with the Banks on Foreclosures. There is no requirement anywhere that they comply with the laws of the States in which they do business and the Buyers have absolutely no protection what-so-ever. They are often caught in the position of doing exactly what the Bank wants of they lose! Not just the house they want to buy but sometimes a significant amount of money that they put up to show their seriousness about buying the property. They are forced to deal with the Bank's, in their pocket, Title Companies who in Arizona have the final decision making responsibility if there is a question about the Earnest Money and who it rightfully belongs to on a failed transaction. The States take no position on this one way or the other because they might lose the support of the huge Bank Lobby in most States.
This is what I am referring to by Mouse Traps. The banks see the consumer as being foolish as a mouse and they use houses as the bait. They know that most consumers would not see the subtle traps they have set for them and to be truthful, as Real Estate Professionals some of them are so subtle even we don't always spot them when we are working with our Buyers on an offer. I'm not even convinced the agents who are handling the REO's know all the subtle traps inside these addendums because they vary so much and they are buried so deep in legaleze many times that they are not readily visible. As I mentioned at the beginning, in this case the Buyer had an Attorney review the document and while they caught many things, this particular trap was not one of them.
So what do we do? We can't not sell the Foreclosures because they are still dominating the market. I am a Real Estate Agent, not an Attorney, yet in Arizona because I have the right under our State Constitution to act as one when writing contract and assisting Buyers and Sellers, I have the same responsibility to spot the traps that might ensnare my clients. I can recommend that the client see an Attorney but if they can't spot the traps what hope do I have of protecting myself as well as my client? I am not a newbie. I have seen and dealt with a lot of contracts in my 13 years of selling Real Estate, but in dealing with Banks I often find myself feeling like I don't know a thing and have no way to protect my clients from the treachery of these Banks. I risk my license and my livelihood every time I write an offer for a Buyer. It is pretty scary and I just am at a loss as to what to do about it.
Sandra Paulow, Associate Broker, GRI
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