Banks always have the buyer's sign seller addendums. To protect the Bank/Seller, they always have the Buyer's sign addendums in addition to a standard purchase agreement. Mind you, the addendums are drafted in such a way to protect the interest of the Bank and not the Buyer, so you must thoroughly read the contract and make sure that you understand the terms and conditions. Each time I sell a foreclosed property I spend at least a couple hours reading these addendums so that I can explain the terms to my Buyer clients and answer any questions that they may have. It is extremely important to know what you are signing as most Banks will have clauses. The following are clauses that can be included on the Seller Addendums:
•1. Per Diem charges. Banks will require that a buyer pay per diem charges between $50.00-$150.00 per day for everyday that the transaction stays open beyond the close of escrow date indicated on their addendum. I always write in a later date on the contract to ensure that plenty of time is allotted so that we close prior to the date indicated on the addendum.
•2. Shorten Inspection Contingency Periods. In California, the standard contingency period for inspection is 14 days. Banks will try and shorten the period for this contingency to 5-7 days. In addition, they have the start of the inspection contingency period to begin on the date of the addendum. In my opinion this is pointless because the Buyer and Seller have yet to come to an agreement. In addition the offer is almost always subject to senior management or investor approval. Which simply put, means that you do not have a deal until both signatures are on the contract. I would never suggest that my Buyer's sink $400-600 on inspections when the Bank hasn't accepted the offer (unless it's an extremely good deal and the condition of the property is questionable up front). To avoid this I write in the contract that contingency periods will begin the day after Buyer receives a copy of the executed contract signed by both Buyer and Seller.
There are others clauses that I have seen, but these are two most common ones that exist in most Bank addendums. The main point is that you must thoroughly read the contract, ask questions, and if in doubt, have a Real Estate attorney review the contract if you feel uncomfortable with the terms and conditions. Foreclosures and/or REO's are complex transactions that can be unpredictable at times. Banks and their Asset Managers have strict guidelines they must adhere to and often hire escrow companies that are overwhelmed with files, so expect some challenges along the road. However, with the right real estate agent and with some risk management, purchasing a foreclosed property can reap you rewards in the form of instant equity at the close of escrow.
Written by Mark Gonzales Copyright 2008
Mark Gonzales is a Realtor for RE/MAX On The Boulevard, one of the Top 100 brokerage firms in the country. He possesses a Bachelor's of Science in Business Administration with a Concentration in Real Estate from California State University, Northridge and is considered to be an innovator in marketing homes. For permission to repost this blog please send an e-mail with 'REQUEST TO REPOST BLOG" in subject line to markgonzales100@yahoo.com.
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