San Diego Housing Bubble News and Analysis

"Normal" or not, it's up to you whether you can stomach the terms. I can't think of any good reason to compress the contingency period if the escrow is the usual 30 days, so see if they will negotiate.

In my case (short sale closing tomorrow--am I a bad Pigg?), the seller's bank didn't want to do termite inspection or home warranty. My agent picked up the inspection and we are splitting the warranty cost.

The bank was also fairly emphatic about the closing date (30 day escrow, but not willing to do an extension for any reason), but there weren't any other unusual terms to the deal.

They picked services, naturally, and I think I got overcharged by a few hundred bucks by the escrow company--OTOH, the escrow guys said short sales are a PITA and claimed to have earned the $1k fee.

Good luck!

It doesn't seem to be that unusual. The banks want their money, fast. I think they're scared that market conditions will change overnight. And there are lots of flaky buyers out there.

I ran across one where the bank wanted a five-day inspection period, 15-day escrow, and a 3 percent deposit. It was a beautiful home at a fair price, but I'm glad I passed on it. (Even if my agent wanted to throttle me.)

In comparison your terms don't seem to be all that bad.

REO banks sellers do not want to take your deposit and miss the contract. Their best interest is to push you to close the escrow as soon as possible.

In my case, the bank's addendum orginally required 30 days of escrow, but it was extended to 45 days initiated by the bank because of "California mortgage deal". The bank paid for termite inspection (less than $100 as I saw the receipt in the closing doc) and the result turned out to be clean.

captcha the addendum you have brought up is on par with others I have seen. You also did not mention if they were going to pay for a termite clearance. I have seen some that would not even do that, and they only gave a 10 day contingency period. Assume also they will not pay for repairs as well, you can try to ask for them, you never know. Also there is more then likely a penalty if you do not close on time for 100 bucks a day or something like that. Finally they will ask for a release of liability from mold, pests, acts of god, and pretty much anything and everything the planet can dish out.

However, yes this is all pretty normal.

Congratulations! Enjoy your new home, drboom! :)

Thanks, CAR. It has been a long time coming.

Just to keep my Pigg credentials intact, let me say for the record that I will induce vomiting if I hear one more person say "it's a great time to buy". I'm convinced that most of my 20% down payment "equity" will evaporate over the next couple of years.

The "take it or leave it" sales terms the OP and I have to put up with are a real treat, too. In my case, the house is in relatively good shape but there is an unbelieveable amount of crap in the yard, the workshop, under the house (wine bottles, yay), in the attic (crazy aunt? haven't looked closely), etc. This is the first resale for this house (built 1952), so stuff has piled up for decades. I'll be working my tail off for the next few weeks just to get it ready for us to move in.

But as I drink my coffee and wait for the County Recorder to do their thing, I gotta say I've been this excited about very few things in my life. My kids (3yo and 1yo) will finally escape apartment prison, I'll finally have a proper office/shop, and my wife and I can finally stop making improvements to other people's property.

Sorry about hijacking the thread; we will now return to our regularly scheduled Tales of REO Extortion starring Vincent Price as the evil Asset Manager.

Yeah.
I have seen them with a 7 day passive (where the contingencies are removed once a date passes) removal and an extra $300 "filing fee" for the buyer.

Inspect the hell out of it immediately and get the appraisal and loan work up done immediately.

Within a week you should hopefully be just marking time.

Thank you all.

Sdrealtor, you are correct - the bank does not pay for termite inspection or remediation, if one is needed.

And it does have $100/day penalty.

Well, at least it is not an elaborate conspiracy to take my deposit money :)

If you agreed to buy a home from me today, in this economy, with this level of market manipulation, REO inventory, and this level of foreclosures in the pipleline....I'd want you to close ASAP. As in "what would it take to get you into this house today" kinda FAST!

The reason you can't see the "why" is probably related to why you are buying at all.

Think about getting a home warranty because of the age of the house and its appliances, unless they have been upgraded.

Just saw an REO addendum from a major servicer with this clause:

"AT ANY TIME AFTER THE EXECUTION BY SELLER OF EITHER THE CONTRACT OR THE ADDENDUM, SELLER SHALL HAVE THE UNLIMITED RIGHT, AND AT ITS COMPLETE DISCRETION, TO ELECT TO DEEM THE SALES CONTRACT AND/OR ADDENDUM BETWEEN BUYER AND SELLER NULL AND VOID AND NOT CLOSE THE TRANSACTION FOR ANY REASON AND THE PARTIES SHALL BE RESTORED TO THEIR ORIGINAL POSITIONS AS IF THE CONTRACT AND ADDENDUM NEVER EXISTED. SHOULD SELLER EXERCISE ITS DECISION TO NULLIFY THE CONTRACT AND/OR ADDENDUM, THEN SELLER SHALL RETURN THE DEPOSIT, AS DEFINED IN PARAGRAPH B(5) TO BUYER. HOWEVER, IT IS SELLER’S SOLE DECISION AS TO WHETHER OR NOT IT WILL REIMBURSE BUYER FOR ANY COSTS AS DEFINED IN PARAGRAPH B(6) OR OTHERWISE."

Translation: Heads I win, tails you lose.

This is so inequitable I wonder if it's legally enforceable.

I have a client that is a tenured Law School professor who is buying a property. I once gave him a CW REO addendum to read and it almost killed him. He said it was the worst written most one-sided document he had ever seen and that there is no way he could ever sign something like that.

The addendum also asks the buyer to waive the right to sue for specific performance ... but if it happened to me you bet I'd sue in small claims for liquidated damages!

Frequently banks will remediate mold and will cover section 1 termite to a capped limit of specific dollars. In reference to the addendums, of course they are totally one sided and banks generally will lose any court battle but not have to pay any damages as the precedent is that they have already lost a significant amount of capital on the property already.

sdr law students must be fun clients!

Funny but last I checked with all these evil addendums that the banks have, nobody was holding a gun to any buyers saying that they must buy the home.

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Furthermore the bank has never set foot in the home, they have no idea about the condition of the property, they have not really even seen the property and are relying on others to send them pictures and reports. In my opinion it would be pretty stupid for them not to have addendums and releases of liabilities such as they do now. I see nothing wrong with any of the addendums brought up in any of these posts to be honest.

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Try to remember, you don't have to buy the home guys.

This is so inequitable I wonder if it's legally enforceable.

I think anyone who wants to buy an REO is obviously weighing the risk of buying an "As Is" property with all the "Defects" in order to get a good deal. (Some times 30% off). So, it is essentially a "Venture Capital" operation. You buy a 600K property for 400K with a small chance of having a surprise $50K repair.

30% off what?

I rejected a counter when they sent me an "acceptance" but with an addendum stuffed with non-specified penalties for exceeding escrow time in addition to $100/day, corporate right to cancel at any time, contingency restrictions etc.

Regarding the "subject to corporate approval" clause, shouldn't they decide whether they really want to sell the property before entering into a contract?

This is Banker's Asset Management. They can eat pound sand as far as I'm concerned. This is the crap we are still putting up with from the banks. F*** us on the way up and F*** us on the way down.

The property is still sitting now for several weeks so my bid must have been on the high side. They weren't willing to amend their addendum. I'll be curious to see what they get for that dog.

Hi Piggs,
On a foreclosure which requires reairs what could one ask the RE Agt to kick in on a % of sale. He reps both sides. Buyer and seller. And yes, these docs are what I saw.

Did you even read what I posted?

I was talking about an addendum that gave the servicer the right to void a signed contract at any time before closing, with no guarantee that the buyer would be reimbursed for costs incurred.

Only a bank or a servicer would consider that clause to be fair :)

And anyone who thinks that REOs are going for 30% off true market value ... must've bought in 2005 :)

Sorry, I was not clear. My argument is REO's are obviously one sided contracts and have to be recognized for what they are. Hence, it only makes sense if you get at least 30% advantage over a more equitable contract. My main argument was the value of "As Is" with "defects" clause. That should be considered like buying a used car with no warranties compared to a new car.

Sorry for the sharp response bsrsharma, I was a bit frazzled earlier :)

Not that I think there's much of a difference ... most sellers these days have no assets to sue over.

The contracts are what they are if you want the house. The price I am paying is not 30% off in this world. I just like the house. I am not paying wholesale for it because it got bid up. I was just hoping to get some opinions on what % I could ask the agent to kick in for repairs. I really appreciate any helpful comments.

What do you think is your advantage (as measured in % discount from a similar non-REO transaction) to compensate for the risk in buying an "As Is" property with fewer contingencies? I think REOs are primarily profitable to those who pay cash and close with few (or no) contingencies. I think it is a transaction where the bank wants fast and certain payment for yielding on price. If they don't yield well on price, it is no deal for a buyer.