Another example of REO lunacy, about which I’ve written before.
Our first time home buyer is being required to sign a document containing the following clauses. She must sign before the bank that owns the house will even look at her offer, which is one among many offers they received. These are the most heinous of the terms they’re demanding:
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Earnest money must be at least 1.50% of the purchase price or $2,500, whichever is greater.
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Once Seller accepts Offer, Buyers’ earnest money is non-refundable for any reason.
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Buyer has “twenty-one (14) days from the date of Seller’s acceptance of Offer to” obtain final loan approval. (my comment – Welcome to the Homer Simpson School of Contract Law, Doh! 21? 14? Ah, who cares?)
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Buyer “agrees that any & all home inspections shall be made prior to contract acceptance”
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By signing [the document] Buyer agrees that she has either (1) completed all inspections and removes any inspection contingency and/or (2) waives inspections and removes any inspection contingency.”
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Any access to the Property is prohibited unless accompanied by the Seller or Seller’s Agent.
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Seller will not pay any real estate transfer, stamp or recording taxes/fees.
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Seller will not pay for a Home Warranty.
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“Buyer must pay Seller a $325 title clearance and document processing fee at time of closing…”
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“Financing is not a contingency to this contract.” (my comment – if it’s not a contingency, why do you care whether Buyer takes 14 or 21 days to obtain final written loan approval?!?! If Buyer doesn’t get the loan, they either pay cash or forfeit the earnest money.)
This? Ought to be illegal.
Huntington National Bank owns the home in question. Avoid them or hire an attorney to review their contracts before you sign them.
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Needless to say, our client rescinded her offer in writing, immediately. I included my own little note:
Dear Sirs,
I suggest you may have better luck getting a signature on this document if you approach the village idiot. Many of them are in Washington, D.C. at this time. Best of luck,
Heather Barr
Heather Barr is a Realtor. She's a chow hound, a gym rat, and the only political junkie in the USA who can actually keep her political views to herself. Instead, she focuses on educating her clients about the often-confusing world of residential real estate.
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Going through the “purchasing an REO property” process right now and will be back to add to this post as the series of misfortunate events continue to unfold (which will be followed by plenty of legal filings, complaints and the like). Will look forward to you experts input as we move forward with it. You all will be drop-jaw shocked at the crap we went through. Want a little teaser: How about being a very highly-qualified buyer… yet still being required to meet two pages (over 30 line items in all) “conditions”. Oh wait.. want one even better? How about the property has no flooring in the Living Room. We knew that at first look and were thrilled as were willing to pay for our OWN flooring after close (wanted either designed and stained concrete or hardwood). Wanna know what they came up with that one? Mortgage company said “Nope. The Loan Investor is requiring flooring. Oh, but we won’t pay for it. Oh.. and you’re not allowed in the house to put it in even if you are willing to pay for it”. Requesting to leave it “as is” since we wanted stained concrete/hardwood, their response was: “No, you MUST have carpeting”. EXCUSE ME???? Hmm.. lemme see, if I was purchasing one of these $5million dollar homes, I’ll bet not a word-one would have come about the flooring my “stuffy ass” would have wanted. BUT NO… we got some schmuck REQUIRING I put carpeting in! REALLY??? Hmmm… borders on practice in fair lending (possibly based on familial status and/or unreasonable lending rquirements) discrimination if you ask me. As I said, will be back later for more tasty treats you folks will enjoy as this unfolds. In the mean time, I now have to go buy an appliance to keep the LENDER’s new CARPET vacuumed. It’s on baby… it’s on.
Thanks for raising the alarm about this. I always read those addendums and spell out the risk to my buyers (comparing the bank addendums to the provisions we have in our amazing AAR contract - the contrast is startling) and over half of them opt not to even look at bank-owned homes after the risk are actually explained to them. Notwithstanding the ridiculous terms of the banks addendums, the buyer is depositing earnest money and paying for inspections on a ‘good faith’ verbal agreement from the bank. ["good faith' and bank...isn't that an oxymoron?] Thanks again for raising the bar of our profession.
Heather,
I’ve seen some ridiculous bank addenda too, however, this BY FAR takes the cake. We’ve had some where entire sections aren’t even legal in the state of Virginia.
Keep up the good work - sounds like you do a great job protecting your clients!
Laura
Perfect. Just wait until the next foreclosure wave hits… maybe that’s why they have prepared such sinister language. I’m sure they all had a big laugh when they added “earnest money is non-refundable for any reason” thinking most people are too stupid to understand the consequences.
That lag time between verbal acceptance and bank signature (10 bank days) has been enough time for my clients to have a home inspection and make a final decision to turn tail and run or not. So, I have seen this too from other banks…
wow…I can’t believe my eyes! I’ve never seen a bank addendum THAT harsh before. What’s the next step? ONLY cash offers, no appraisal contingency, close in 5 days, no inspection period?
This is criminal.
How many people just sign away on things like this, without ever reading it?
THe answer I fear, is a lot.
This post hit me on so many levels, ranging from “April Fools” to “read the contract”. Your client is fortunate to have you for an agent.
John, thanks to you I found Heather’s post. You are the second person to tell me how good the Industry Partners Conference was. Next year!
Here’s a new qualification when choosing a real estate agent in this crazy REO / short sale market;
“Do you feel confident this real estate agent can understand a 10-page bank addendum written in legalese, explain it to you clearly and advise you about your options?”
I was at the Industry Partners Conference on Tuesday and bank addendums were a big topic. We all know the AAR contract inside and out but now the bank addendums pretty much wipe out everything but page one of the AAR contract form… and even a lot of page one is change by the bank addendums.
The title people said a lot of problems are caused by Realtors who don’t read or don’t understand the bank addendums they have their clients sign.
Having a good Realtor is far, far more important now than ever. Well done, Heather! And thanks for posting.
And we wonder how this all happened….someone please save these people from themselves. They’ll be the first ones on the front steps of the White House looking for relief when they’re sitting on 5,000 vacant properties in 2011.
Un. Freaking. Believable.