Disclosures From the Seller
Although you have toured the property, looked at the walls and ceiling, turned on the faucets and played with the light switches, you have not lived in it. The seller has years of knowledge about his or her home and there may be some things you want to find out about as quickly as possible. For this reason, you will require certain disclosures as part of your offer. Basically, you want the seller to disclose any adverse conditions that may have a substantial impact on your decision to purchase the home. This would include any problems with the house, whether the property is in a flood zone, a noise zone, or any other kind of hazardous area. If you have an agent representing you, this is almost automatic, but many states do not require individuals selling their own home to provide you with this information. Often they do not require banks selling foreclosed property to provide these disclosures, either. Obtaining these types of disclosures should always be a part of your offer and time is of the essence.
Bank Owned Homes – A bank owned home may also be referred to as an REO. REO stands for Real Estate Owned (by banks). A bank owned home is a home where the owner stopped making their payments and the bank has foreclosed or taken back the property. The bank typically lists the home for sale with a local real estate professional. Bank owned homes generally sell for less than normal home sales as they are sold in “as is” condition meaning no repairs will be made. Contact us for more information.
Short Sale – A short sale or pre-foreclosure is when the home owner owes more money to the mortgage company than the home is worth. If the owner can no longer afford the payments due to a reduction in income or other issues then they can try to negotiate with the mortgage company to take an amount less than owed. If the mortgage company will not agree then the the mortgage company will foreclose on the property. The mortgage company may agree to a short sale because it is cheaper than a foreclosure. The advantage to the home owner is the negative impact to their credit is shorter – two to three years versus seven to ten years. There may be tax and other implications the owner needs to consider. The owner should consult with their accountant, attorney and credit counselor before pursuing a short sale.
Buyers may be interested in buying a short sale property because the price may be significantly lower than a regular sale or a bank owned property. The disadvantage of a short sale is it may take many months to receive a response from the mortgage company. Typically the owner has stopped making the payments so the home may go into foreclosure before the mortgage company responds. Consult with your real estate professional for more details on how short sales work.
Condition of the Property
The last thing you want when you assume possession of your new home is to find it in a total mess. Therefore, you should make it clear in your offer that certain minimum standards are required. If you do not, you might find out the seller or neighbors have begun using the back yard as a trash dump, or something worse – and you would not be able to do anything about it. Some of the requirements you might want to include in your offer are that the roof does not leak, the appliances work, the plumbing does not leak, that there are no broken or cracked windows, the yard has been kept up, and any debris has been cleared away.
Inspections You Should Require
Besides appraisal and the termite inspection, you should also have a professional go through the house and seek out potential problems. Of course, you will have inspected the home, but you are not used to looking at some things that a professional will find. Even if they are not things the seller is expected to repair, at least you will have foreknowledge of any potential problems. The seller will want this inspection performed quickly, so that you can approve the results and move forward with the purchase. Once you receive the inspection, you will want to allow yourself sufficient time to review and approve the report. If you do not approve the report, you may negotiate with the sellers on which repairs should be performed and who should pay for those repairs. Otherwise, you can cancel the purchase without penalty, provided you have included timetables in your offer. Allow a maximum of ten days to receive the report and two days to review it.
Final Walk-Through Inspection
Before closing, you will want to revisit the property to ensure it is in the condition you have required in your offer, and to inspect that any required repairs have been performed. You should do this no sooner than two days before you intend to close. Make sure this right to do a final inspection is included in your offer to purchase the home. Note that HUD homes will not make any repairs even if the property has been damaged after your offer was accepted.