Repo Purchase Disclosures Explained

Westcoe Realtors, Riverside California…We have chronicled many times in this blog the frustrating procedure a buyer must endure these days when purchasing a bank owned property….the multiple offers, the overbidding, the lousy communication, etc.  However, we have never told you what happens once the Real Estate Gods smile upon you and your offer is accepted.  We cannot cover it all at one time, so today, we will simply prepare you for some of the disclosures the bank will require you to sign.

First, there is the “As-Is Disclosure”.  This is the mother of all disclosures, for the bottom line here is that the bank is telling you they take absolutely no responsibility for the condition of the home…that is all on you.  You can have the home inspected by whomever you want, but in the end, whatever issues your inspection discovers are going to be yours to fix.  Sometimes, depending upon the nature of the specific items shown in the inspection report, you can get the lender to so some…I repeat some…of the repairs.  But in most cases, they will simply tell you NO. 

Why?  Because they sold the home to you at a price well below what they could have gotten if they fixed the home up, because they have already lost tens if not hundreds of thousands of dollars on the home, because the decisions are really made by someone at a desk 5 states away who could care less about what you need, and because if you don’t sign this disclosure, one of the other 20 people whose offers were rejected in favor of yours will.  This sounds incredible cold, but such is the way of the foreclosure world when they have what you and 20 other people want.

The second disclosure you will find in your paperwork is the Mold Disclosure Form.  In this document, the lender is telling you that they have no idea if this home ever had a water leak, but if it did, there may be mold and it is your problem, not theirs.  You can’t really blame them for this, because they have never seen the home, do not know of any of the history of the home, and this is a total “Cover their a– form” in case your child develops a third eye after 5 years of mold exposure that they knew nothing about.  This why you should have a home inspection…so a professional can look at the home for you. 

As a note, you can ask your insurance agent for a CLUE report, which will at least tell you if any of the previous owners have ever filed a water related claim.  In almost all cases, if a claim has been filed, then that means that the problem was solved to the insurance company’s satisfaction…which is what the insurance company would require just before they cancelled the previous owners insurance.  But at least the problem would have been dealt with.

There is also a new disclosure form that is making the rounds…it is called a Drywall Disclosure…and this has to do with the recent revelations and claims regarding drywall that was manufactured in China and shipped to the states for use in new construction.  The bottom line here is that it appears some (much, most?) of the drywall made in China during the housing boom and used in various parts of the States now is alleged to create fumes, vapors, etc. that can lead to a rash of health problems.  So far, most of the use seems to be in the East and South, but who knows?  This is all a fairly new phenomena in our industry, but since the bank who owns your repo may be doing business all over the United States, then this form is one you will need to sign.  Check with your inspector for how one knows if the drywall is from China or not.

The above represent the major disclosure issues in most foreclosure properties, but each lender can add some more, depending on their mood, and current lawsuit status.  Some lenders are not as picky as others, but you will never know until you get into escrow.

In the end, you as a buyer always have the right to refuse to sign any of these disclosures…but understand that the bank will then cancel your contract and sell the home to someone else.  With regard to these and any other disclosures required by the banks, they are non-negotiable on this issue.  Sign them, or they will move on.  You cannot reason with them, or negotiate them away…it is the banks way, or the highway, and no amount of conversation will change this policy by the banks.  The bank will make sure that when you purchase your repo home, that you cannot come back and sue them for any part of it’s condition.

No one wants you to purchase a home unaware…but for now, we all have to play by the banks rules, or they will take their ball (repo) and go home…and no will get to play at all.

 Take care, and as always, let us know if there is any real estate issue you would like to see addressed in this blog.