The conclusion of required disclosures for an REO seller (bank owned properties).

1. Smoke Detectors. The seller of a single-family dwelling must deliver to the buyer a written statement of compliance with the smoke detector law (Cal. Health & Safety 13113.8(b).
2. Water Heater Bracing. The seller of any real property containing a water heater must certify in writing to the buyer that the existing residential water heater is properly braced, anchored, or strapped. (Cal. Health & Safety Code 19211)

As stated before, REO sellers must provide certain disclosures to the buyer that is mandated by California law. Unfortunately many Reo sellers believe that are exempt from all disclosures. It will be up to the buyer to either demand these disclosures or not. If they don’t they probably should seek advice from an Attorney qualified to give real estate legal advice on what it may mean to them.

See San Diego REO: Part 4 

See California Real Estate forms (PDF)

In the prior post, San Diego REO Part: 3, it was stated that a REO seller (bank owned) must provide certain disclosures to the buyer. They are not exempt from these disclosures. The following is a list of those disclosures:

1. Advisability of Title insurance notice. If title insurance will not be issued to the buyer, a notice of the advisability of title insurance must be provided in a separate document to the buyer. (Cal. Civ. Code 1057.6.
2. Condominium or other common interest development documents. The seller of a condominium or separate interest in a common interest development must be provided the governing documents and other items to a buyer. (Cal Civ. Code 1368(a).
3. Flood Insurance for Disaster Relief Assistance. If federal disaster relief assistance conditioned upon obtaining flood insurance has been provided for a property, the seller must disclose the requirement of obtaining flood insurance to the buyer in writing. (42 U.S.C. 5154a)
4. Lead-Based Paint Hazards Disclosure. Under federal law, a seller of residential property built before 1978 must generally disclose lead-based paint hazards. (42 U.S.C. 4852d and 40 C.F.R. 745.107
5. Material Facts. A seller is required to disclose and known material facts affecting the value and desirability of the property.
6. Megan’s Law Disclosure. A seller must generally disclose the availability of a database of registered sex offenders in at least 8-point type font. (Cal. Civ. Code 2079.10a).
7. Meth lab Clean Up Order. A seller must disclose in writing to a buyer a pending order issued by a local health officer prohibiting the use or occupancy of a property contaminated by meth lab activity. (Cal. Health & Safety Code 25400.28)

The conclusion of the list will continue in the next post. It is always recommended that buyers and sellers seek legal advice from attorney qualified in real estate matters.

See San Diego REO: Part 3

See California Real Estate Forms (PDF)

When a buyer purchases an REO Property (Bank Owned), there are disclosures that the seller (REO seller), must make to the buyer. These disclosures are legally required and are mandated by California law. Unfortunately many REO sellers believe they are exempt from any disclosures. They take the position that they have never lived in the property and are not required to provide disclosures. Don’t forget there are many REO sellers that are not familiar with California law. There are many disclosures that do not have to provide, but there are many they do. The buyer is caught in a difficult position. If they demand that the REO seller provide these required disclosures, they may loose the sale. In other words the REO seller just says we are not going to provide them. The buyer is then left in the situation of risking purchasing the property without the required  disclosures. They can probably also just cancel the sale. But remember the REO lender will most likely will have already provided an addendum to the purchase agreement and in that addendum they my state they are not providing any disclosures. If that addendum is executed by the buyer, then it is a part of the contract. A buyer will most likely have a short period of time to do their due diligence (inspections etc.) and then they will be required by the purchase contract to release all contingencies. Once all contingencies are removed, the buyer’s deposit is subject to the liquidated damages paragraph in the purchase agreement. So the buyer better be sure they can live with the absence of those required disclosures. Once all contingencies are removed and the buyer tries to cancel the contract, they may be subject to loosing their deposit to the seller. I am not a lawyer and cannot give legal advice, but the buyer needs to be aware of this situation and seek legal advice from a real estate attorney if they so desire. Future blog posts will provide an advisory to potential buyers of what disclosures are mandated by California law that are provided by REO sellers.

See San Diego REO: Part 2 

See California Real Estate Forms (PDF)

Most buyers may think that a lender is anxious to get rid of an REO as fast as they can, and they do. However they are not going to give it away and they will do everything they can to minimize their loss due to foreclosure. If a buyer has had the experience of purchasing property in the past, they will find purchasing an REO a very different experience. In essence what a lender is saying is “we are selling this property at this price, in an “as is” condition, we have never lived in the property, we don’t know anything about the property so there is nothing to disclose about the property. Last but not least they want the sale on their terms. Generally this is the way the process works: 1) the buyer’s agent will send an offer to the lender’s agent. 2) The buyer’s agent will most likely receive an addendum to the buyer’s offer, prepared by the lender (seller) which will state additional terms under which they will sell the property. 3) The buyer’s agent may also receive from the listing agent that the property has received multiple offers. They ask the buyer to make a “final and best offer”. The buyer has the option of increasing their offer price or leaving it the same. The addendums the buyer receives from the seller are documents that most agents have to be careful not to give legal advice. In some cases a buyer may have to seek the advice of a real estate attorney. Many buyers though are comfortable with these addendums and don’t seek an attorney’s advice. There will be more to come in part 3.

See San Diego REO: Part 1

See California Real Estate Forms

An REO stands for Real Estate owned. It means the lender that held the note or notes on the property has foreclosed and now they are trying to sell the property. Many buyers believe that purchasing an REO is a great bargain, and it may be. However this type of property is not for every buyer. In almost all cases the property will be vacant and one should expect the property to be in need of care to down right in shambles. The buyer may be getting a good bargain on the purchase price, but in most cases they will also need a few thousand to several thousands to bring the property back to life. In most cases these are not move-in homes. But if a buyer loves the neighborhood, has a keen eye and has the ability to look through the clutter, then REOs may be right for you. The neighbors will love you for taking a run-down home and bringing it back to life. One good thing about purchasing an REO is that they are easier in most cases than buying a short sale home. But just like the short sales, a buyer should expect the unexpected. This is California, but many of these lenders are from all over the country. In most cases they don’t have a clue about California law and really don’t want to learn. When you make an offer, don’t expect a response for maybe up to a week. And when you do get a response that your offer has been accepted, it will be verbal. Normally you would expect the purchase offer back with the seller signatures. But don’t expect it. You will get it, but you have to have a little faith. So once you get the verbal, you need to start your inspections, contact your lender and make sure the appraisal is ordered. In most cases the lender will understand why you have not given them a fully executed contract. They have been through this before. You will get it and so will they. There will be a lot more to come on REOs.

See California Real Estate Forms