The Myth that Banks don't have to discose on REO sales

By
Education & Training with Real Estate Expert Witness Support

If you ask most agents this question,  they will normally say that the bank has no duty to disclose.  And,  it is no uncommon that Banks and the listing agent will tell you the same thing.  They are partially correct but the exception,  can be a really big problem.

It is correct that there is a presumption that banks do not have any information about the property because they never lived there but there are two situations where this is not true.

  1. First,  when the listing agent and bank asset manager first listed the property,  there may have been some discussions about property condition.  Also,  there may have actually been inspections or repair work done prior to the listing.
  2. Secondly,  a lot of these REO sales fall apart.  If you are the 2nd Buyer,  you need to find out if the first buyer did any inspections or the agent made any disclosures.

In both these cases,  the Bank is legally liable to make this information available to the Buyer.  In addition,  if your state has a requirement that the agent make a visual inspection of the property,  an REO sale does not relieve the Listing and Buyers agent from making a Visual Inspection of the property.

As I have said in prior posts,  INSPECT, INSPECT, INSPECT.

Posted by

______________________________________________________________________________________________________

Guy Berry

Email - guy@guyberry.com

Visit my Website  

Connect on Facebook

 

 

Comments (2)

Carol Zingone
Berkshire Hathaway Home Services Florida Network Realty - Jacksonville Beach, FL
Global Realtor in Jax Beach, FL - ABR, CRS, CIPS

Guy, I could not agree more. A recent foreclosure sale I had, I had the city turn on the utilities for 3 days so we could at least check lights, water, etc.  It was not a formal inspection per se, however, it did give us the chance to check the operating systems. Too many times buyers are tempted to skip this step and you really don't know what you are getting into without the inspection.

Dec 11, 2008 10:16 PM
John Palmisano
Keller Williams Properties Weston, FL - Weston, FL

So guy, what you are saying is that a bank may have had an inspection done on the property, they need to disclose what they have found by law? I assume it is no different than an "Arms Length Transaction," with a regular seller. Thank you for your time and knowledge.

Jan 18, 2009 07:47 AM