Why don't foreclosures have disclosures?

By
Real Estate Broker/Owner with Riverbend Realty, Cape Girardeau, MO 2004008944
Why don't foreclosures have disclosures?Hiding something

 The typical REO owner does not disclose anything, because doing so might infer that they know and have disclosed everything. Of course, they do not and cannot know everything about a house which they have not inhabited.

Any agent who shows an REO property should know that the property is being sold "Where is, As is" and should clearly warn a client of that fact and the implications.

Many of the questions that a buyer might have concern conditions that the seller does not actually know, such as broken water pipes. Most REO properties do not have utilities on when the bank finally takes possession, so the owner has no actual knowledge about the condition of plumbing.

When mold is present over a large area, often the REO company will require all who enter the property to sign a mold release--that's a pretty clear warning that a significant problem exists, eventhough the REO owner has not actually tested the discoloration.

Some other conditions are as visible to the buyer as they are to the property preservation vendor and listing agent, such as broken windows (which are often even boarded) and missing appliances. The most obvious message sent by the listing agent, in those cases, is the property condition. If the rating is "poor" or sometimes even "average," there are probably obvious repair issues. Most of the time when there are holes in the walls, for instance, the condition is rated as poor.

Latent defects that are not visible to the would-be buyer also are not usually known by the REO owner. Again, if the seller had filled out a disclosure, the buyer might very well assume that latent issues were disclosed. There simply is no reliable way for an absent owner to know all defects that a property might have.

Even the federal government recognizes the fact that an REO owner has limited knowledge of the property. Did you know, for instance, that REO properties are SPECIFICALLY EXEMPT from the federally-mandated lead based paint disclosure? I know that most REO owners go ahead and provide the form, but they don't actually have to do so. (Reference: HUD EPA Fact Sheet EPA-747-F-96-002)

The bottom line is that any agent who shows and any buyer who offers on an REO property must be prepared to schedule rigorous inspections.
 
PS: The obvious first answer to this question is that Missouri does not require ANY owner to actually fill out a disclosure.
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If you are looking for a foreclosure in Cape Girardeau, Perry, N. Scott, or Bollinger counties, I am the region's most experienced REO agent. As the area's ONLY Fannie Mae direct listing agent, I list more foreclosure properties than any other agent in this MLS. I am among the few local agents approved to both list and sell HUD properties. Give me a call if you are looking for help with the purchase of a foreclosure property.

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Tags:
buyer beware
reo disclosures
where is as is
disclosures and foreclosures
inspection of foreclosure properties

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Rainmaker
251,250
Joel Weihe
Realty World Alliance - Wichita, KS
Helping you to use your VA home loan benefits

I always say "it's a foreclosure, we don't know anything about it." And then explain buyer beware to them even thought they are allowed an inspection.

May 05, 2013 11:47 AM #1
Rainmaker
3,978,739
William Feela
WHISPERING PINES REALTY - North Branch, MN
Realtor, Whispering Pines Realty 651-674-5999 No.

Minnesota requires full disclosure, unless the buyer wants to wave it.

Banks will not sell unless the buyer waves the disclosres.

May 05, 2013 12:00 PM #2
Rainmaker
303,859
Liz Lockhart
Riverbend Realty, Cape Girardeau, MO - Cape Girardeau, MO
GRI, Cape Girardeau Real Estate

Joel~That's the truth, after all. If I happen to know something that is not readily observable (very rare), I do usually tell the showing agent. One of the things I do not report is rumor-mongering from a neighbor. Just because a neighbor says something, however, is not proof that the rumored condition exists.

May 05, 2013 01:29 PM #3
Rainmaker
303,859
Liz Lockhart
Riverbend Realty, Cape Girardeau, MO - Cape Girardeau, MO
GRI, Cape Girardeau Real Estate

William~Thanks. I did not know how it worked in "disclosure" states.

May 05, 2013 01:30 PM #4
Rainer
284,418
Steven Cook
No Longer Processing Mortgages. - Tacoma, WA

Liz -- that is interesting that MO is a non-disclosure state. I can hear the buyers saying, "Show me all parts of the house."    Thanks for a clarification on the non-disclosure by REO holders.   I have always wondered, in disclosure states, if they have to make any disclosures after the first couple potential buyers have backed out based on their inspections (if they forward the inspection reports as basis for cancelling purchase)? 

May 06, 2013 04:44 AM #5
Rainmaker
1,312,685
Nick T Pappas
Assoc. Broker/Broker ABR, CRS, SFR, e-Pro, @Homes Realty Group, @HomesBirmingham & Providence Property Mgmnt, LLC Hun... - Huntsville, AL
Madison & Huntsville Alabama Real Estate Resource

Liz, just as Bill mentioned there are a ton of disclosures or waivers that a buyer has to sign off on.  Foreclosures are definitely "as-is, where-is".  I thought Alabama was the only non-disclosure state...guess it doesn't matter when it comes to foreclosures.

Jul 11, 2013 09:03 AM #6
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Rainmaker
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Liz Lockhart

GRI, Cape Girardeau Real Estate
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