REO Disclosure Requirements

[Jason Kaufman]

In the inspection period of a REO and this thing has run all over it! I have had professional inspections and quotes for pest, foundation, roof, and mold. My plan is to renegotiate a lower price or walk. This house has been under contract at least three times and each time the investor has walked. So here is my question. The listing agent representing the bank and the bank itself has to know about all the issues with the property. Isn't someone in the chain required to disclose all the damage. I got it that they are trying to sell a house but the listing agent has certain ethical requirements ...right? I

[Shaun Reilly]

Originally posted by Sam Leon:

banks don't know the conditions and don't care to know the conditions of the property.

You as the buyer assume the risks. You are going to sign a whole bunch of REO addendum saying you acknowledged the bank not knowing anything about the property and any disclosures you might have you bear the responsibility to verify accuracy.

I had a FNMA property last year. Had contract executed, and my attorney couldn't get the attorney on their end to send us the title commitment and hud-1 to review up to the day of the closing. I was out money for inspection, survey, HOA application, HOA govern doc order, and other fees.

On the day of the closing they called my attorney and said oops can't close, your client's revealed an error in the legal description currently filed, which turned out to be a typo in the legal going back many many owners. They said it cannot legally close, they have to contact previous owners to get them to sign something. They weren't able to locate previous owners, so they had to reforeclose. Amazing huh?

I wasted close to $1000 for nothing.

But six months later the property got listed again. I contacted them and they said they would honor my original contract it I wanted. On I said provided that I can do a walk through of the property at that time to make sure it hasn't changed.

I went to the property with my agent it was on supra. Property was dark no electric no water. Smelled musky. You can imagine what happens in south Florida when AC is turned off and the bathroom fixture trap seal dried up for six months.

I saw termite droppings and wings. I also saw one wall "bowed". Kitchen cabinets along that wall bulged enough to visually appeared crooked. After some investigation by myself it turned out the other side of that wall has an outside wall light fixture and it was busted and knocked loose, rains every day in the summer here, water got inside the electrical box and leaked down the conduit to the junction box, from there the inside wall, cabinets, window frame...and my concern was mold. I got a mold company out, tested positive for black mold very high concentration. They gave me a $10000 quote for mold remediation, that does not include fixing and replacing the kitchen walls.

I told the listing agent we found high conc of black mold. She said "oh no we can't legally sell homes with black mold. Can u send me a copy of the report?" I said sure.

Meanwhile I told my agent, let's propose to FNMA two options. One, to extend the contract same terms but until they fixed the mold issue. Or two, they hire they own mold test company to verify my results and we work out some reasonable credit, forget about the termites I will tent it.

When my agent contacted them to propose what I instructed, their agent's turned 180 degrees. First, contract terms stay as is, no fix, no test, no delay, no anything. Take it or leave it. Second, do not send in mold test report, don't want it, can't read it, if I have already sent it they will not open it. Conditions of property is as is.

I got so fed up I cancelled.

sorry for being long winded here but here you can see even in this extreme case where the defect is documented, verified, and caused by their own negligence (if they paid the electric bills the AC would be running and the moisture penetration wouldn't have escalated into a toxic black mold issue) and I had a contract with them prior without the mold and termite issues, even then they didn't care.

Hope this helps.

Leave a copy of the report at the house with a "Read Me" sign by it.

It isn't like the listing agent will ever go there to take it away.