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Beware of the Bank's Non-Disclosures!!!!

By
Real Estate Broker/Owner with Tutas Towne Realty, Inc and Garden Views Realty, LLC BK607690

Florida Foreclosures 407-873-2747

Hi folks. Lately I have been selling quite a few REOs (banked owned) property. As you know if you deal in these properties the sellers (banks) always offer them for sell in "As Is" condition. No biggie since most of my Buyers are experienced Investors.

"As Is" in Florida means As Is with right to inspect. This means the Buyer normally has 7-10 days to have the property inspected after a contract has been accepted and signed by all parties. If during this inspection the Buyer finds structural or mechanical issues that they weren't made aware of during negotiations the Buyer can cancel the contract and get their deposit back.

In Florida, a Seller is obligated by law to disclose to a potential Buyer any material defects that the Buyer cannot readily see that affect the value of the property. Banks, no matter what they think, are NOT exempt from this disclosure.

Recently I have been negotiating for a Buyer to purchase a REO property. The property is only 2 years old and has never been lived in. After several counters the Bank has finally accepted our price BUT they want to close in 2 days (impossible) and they will not let the Buyer inspect the property. Can you say RED FLAG!!!!

Anyway, here is the Email I sent to the listing agent:

Hi XXXXX,   I have just left a message  for the buyer. I'm pretty certain he can close the first week in March but I have asked him for a definitive date. The corporate name on the contract is correct.

We will not purchase the property without an inspection period. So the lender just needs to get over that ridiculous request. That property has been sitting vacant for too long and it is very possible that central heat and air are frozen. Also the lighting in the kitchen is all coming out of the ceiling. The buyer is willing to accept "as is" assuming there are no major structural/mechanical issues uncovered during the inspection period.

The seller's unwillingness to let us have the property inspected tells me they are aware of an issue and are hiding it. They either want to sell or they don't. No inspection is a deal killer for almost all buyers. Anyway as soon as I hear back from my buyer I will let you know his response. Thanks for your efforts.
*****************************************************************************

Within minutes I received this:

FYI  This homes has a skylight that leaked (flooded from the skylight in the kitchen. It effected all the walls, floors inside area in kitchen, laundry room, living and dinning room area.  The mold has accumulated & there was a terrible blackening of the molding & area around the skylight & fixtures and it began to smell.  I had Solivita do the entire kitchen, ceiling,walls, floors etc to fix it & do the right job. The electrical outlets, wires etc were all replaced & fixed.

As of right now that home has been put back correctly & no charge to the bank or to the owner.  I worked very hard to get this home redone.  You know how builders can be. Since the home was never occupied nobody was aware of its condition.
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Folks, that email was sent to the current agent from the previous agent!!!

The lesson here is to NEVER accept a contract where the Seller will not allow an inspection. It is obvious to me that this Seller was fully aware of these issues. As most banks do, they feel they are exempt from laws that were put in place to protect the public.

It would have been very easy for me to persuade the Buyer to go through with this transaction. It's a brand new house......what could possibly be wrong? Well how about extensive BLACK MOLD!!!

Watch yourself out there.....the Banks may very well be jeopardizing your lively hood. What say you?

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Comments(39)

Jeff Dowler, CRS
eXp Realty of California, Inc. - Carlsbad, CA
The Southern California Relocation Dude

BB - Well THAT was certainly a red flag, wasn't it. A 2 year vacant home immediately would concern me.  PRetty shocking especially given what you learned as a result of your forcefule letter. I cannot imagine a buyer not having an inspection, even more so in this case.

Jeff

Feb 20, 2009 11:53 AM
Sharon Simms
Coastal Properties Group International - Christie's International - Saint Petersburg, FL
St. Petersburg FL - CRS CIPS CLHMS RSPS

BB - absolutely right! I haven't encountered a bank that wouldn't allow an inspection, even though the sale is "as is". That would be a red flag in front of a bull - meaning, run the other way.

Feb 20, 2009 11:55 AM
Carol Smith
Casmi Photography - Mebane, NC

IMO the banks are acting in a criminally negligent fashion when they will not allow an inspection.  If your buyer is highly allergic to the mold or other 'stuff' that me be residing in the walls and halls of the home in question, are they going to be responsible for his/her medical care after being exposed when they open the door of that home? 

As is is one thing.  Being a hard head is another.

Feb 20, 2009 01:24 PM
Eileen Hsu
Douglas Elliman Real Estate - Manhattan, NY
LICENSED REAL ESTATE SALESPERSON

BB - Hello there!  Well the real kicker here is... shouldn't they have disclose those mold and leaking information prior to YOUR email to them? What happened if you did not email and request inspection period?! WOW.

Feb 20, 2009 03:30 PM
Kris Wales
Keller Williams Realty - Lakeside Market Center - Macomb, MI
Real Estate Blog & Homes for Sale search site, Macomb County MI

Bryant, this doesn't surprise me at all.  (I've seen too much of it)  

What I would like to see is a class action lawsuit against these banks/asset managers AND a requirement for each home to have an inspection prior to it hitting the market with full disclosures attached to multitude of addendums that our buyers have to sign.  (Or better yet, having the disclosures in hand while viewing the homes.)

 

 

 

Feb 20, 2009 08:19 PM
"The Lovely Wife" The One And Only TLW.
President-Tutas Towne Realty, Inc. - Kissimmee, FL

Am I correct that what the bank did is Fraud and they are governed by the same laws we are?

TLW...ROAR!

Feb 20, 2009 10:29 PM
Maggie Dokic /Indialantic | 321-252-8696
Magdalena Dokic - Indialantic, FL
Selling the beach in Florida's space coast

If it quacks like a duck, walks like a duck..etc.  As Is with right to inspect.  No inspection? No deal.  Keep looking out for your clients Triple B!

Feb 20, 2009 11:25 PM
Rob Arnold
Sand Dollar Realty Group, Inc. - Altamonte Springs, FL
Metro Orlando Full Service - Investor Friendly & F

Another thing is to verify with code enforcement about impending liens or violations as part of the due diligence.  I've seen several REO properties with all types of code violations where the lender knew or should have known of pending code hearings yet did not disclose them to potential buyers.  If the the lien isn't recorded prior to closing, the only way I buyer can know is by contacting code enforcement.  The lender is supposed to diclose this info by law, but good luck collecting from them after the fact.

Feb 21, 2009 01:26 AM
Heather Fitzgerald
REALTY WORLD-Harbert Company, Inc. - Greenwood, IN
REALTOR Greenwood Indiana Real Estate

I have never heard of a bank not allowing time for an inspection either.  Way to protect the client!

Feb 21, 2009 03:33 AM
Dan Homan
Coldwell Banker Ellison Realty, Inc - Ocala, FL

In FL disclosure of items that materially affect the value of a property are required to be disclosed.  Banks have long claimed ecemption from this and the courts have held that they are under federal regulation.  On the other hand a listing agent has a license to consider, and even a non rep is required to disclose known issues.  Everyone wants to list REO's, but, this is a case where the listing could cost the listing agent their license, if they did not research the property history, previous listings, dificulties, etc..  Can you imagine the liability for the listing agent for not knowing about or disclosing the roof leak, and a buyer who purchased the home without inspection discovered balck mold?

You did the right thing for your buyers.  I hope they realize the great service you did for them, by not pushing the deal through for a quick paycheck.

Feb 21, 2009 05:29 AM
Debbie Summers
Charles Rutenberg Realty - New Smyrna Beach, FL

Was the listing agent a Transaction Broker?  I'm sorry but, there are agents out there who know exactly what they are doing.  I once showed an REO property  that was covered in black mold inside.  I called the listing agent and asked why none of the photos showed the problem and why there was no note in the listing.  His reply, I can't say that it's mold... I'm not a mold inspector.  NEXT!

Feb 21, 2009 07:38 AM
Allison Stewart
St.Cloud Homes - Saint Cloud, FL
St. Cloud Fl Realtor, Osceola County Real Estate 407-616-9904

Mold in Florida is a serious problem and a potential health risk.  Inspections are a must for any buyer.  You are correct that the banks MUST conform with the laws in place to protect the public,

"If they won't inspect  simply reject" is my motto!

Feb 21, 2009 09:37 PM
Elizabeth Weintraub Sacramento Broker
Elizabeth Anne Weintraub, Broker - Sacramento, CA
Put 40 years of experience to work for you

I've encountered those situations as well. Typically, they go like this. The listing agent tells me if the bank accepts the offer, the deposit will be nonrefundable. It doesn't mean we can't inspect the property, but it does mean if we find something horrible during the home inspection and decide to cancel, the buyer won't get the deposit back.

So, I wait until I get verbal acceptance from the bank. Then I send a home inspector out to the home immediately to meet with the buyer. By the time they get finished, we then have the accepted contract in our hands, generally demanding a cashier's check within 24 hours and signed receipt. But we're prepared by then.

sacramento short sale agent elizabeth weintraub

Feb 22, 2009 02:49 AM
Patricia Kennedy
RLAH@properties - Washington, DC
Home in the Capital

Broker Bryant, you are so right!  Buyers must know what "as is" is to make an informed decision.

Feb 22, 2009 12:43 PM
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time

OK so tomorrow we are going back over to have another look now that we know what to look for. My buyer is very knowledgeable so is not too concerned with the mold as long as it has been taken care of. Avatar is a pretty big builder so chances are they repaired it properly. We are now trying to get reports from the repairs.

I sent this email to the listing agent:

I am meeting  the buyer at the property Monday morning. Needless to say we are very concerned that this mold issue was withheld from us. This is certainly a major defect that affects the value of the property and by law needed to be disclosed by either the seller or the agent if they had the knowledge, as you did.   But having said that, the buyer is still interested in the property. Do you have any of the repair documentation from Avatar that you can provide us?

I received this one back:

No, no disclosure for bank owned property as seller never occupied. Previous agent said all repairs were complete and there are no issues. As I requested prior, please have the buyer obtain a professional home inspection to confirm. Thanks!

I feel like I'm dreaming!!!!! I guess the fact that she knew and didn't disclose doesn't concern her.YIKES!!!!!

Elizabeth we would have done exactly that except there are no utilities on at the property for us to be able to inspect.

Feb 22, 2009 12:51 PM
Fran Gatti
RE/MAX Integrity - Medford, OR
Managing Principal Broker - RE/MAX Integrity

Yeow, one more thing.  So far my dealings with REO's have been pretty straight up.  I will be on the look-out for a seller who trys to shorten or cut-out all together the inspection period.  Thanks.

 

Feb 22, 2009 04:09 PM
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time

OK so here's my update. My buyer has this property under contract. He waived the inspection contingency!!! We did a lot of home work and took a ladder over there so the buyer could stick his head up in the attic. Turns out my buyer is....are you ready......an expert and licensed mold remediator in Canada!!!!! Go figure.

Feb 24, 2009 08:27 AM
Debi Ernst
St. Charles County, Missouri - Prudential Alliance Realtors - O'Fallon, MO
GRI, e-PRO, Broker/Sales Associate

Bryant - I'm glad that your buyer is an expert on mold!  I hope it all works out for you!  :)

Feb 24, 2009 08:34 AM
Tara Campbell
RE/MAX Family - Harker Heights, TX
Broker/Owner, GRI, CDPE

Bryant...definately good info!  I always tell my agents that there is a reason for everything!  Dont just assume that what is being said is the "real deal"  Good post!

Feb 25, 2009 11:09 PM
Troy Erickson AZ Realtor (602) 295-6807
HomeSmart - Chandler, AZ
Your Chandler, Ahwatukee, and East Valley Realtor

Bryant, I see homes listed all the time that say "NO SPDS (Seller Property Disclosure Statement) PROVIDED" for various reasons.  Usually, the seller never occupied the home, or the home was never lived in.  Many of these homes are bank owned.  The seller is saying that they don't know anything about the home, and can't tell you anything about the home.  I find that more often than not, the seller knows something!  I would always suggest/recommend that my buyer get an inspection, and have never had a bank say the buyer couldn't.  Anyway, glad it worked out in your situation.

Feb 26, 2009 06:14 PM