[quote=SD Realtor]Buying REO properties can be frustrating.
Just to clarify a few things….
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I am just going to critique Sd’s critique because I have control issues that my shrink has yet to address.
[quote=SD Realtor]
“Closing shall take place on or before 09/05/08 or within five (5) calendar days of final loan approval by the lender, whichever is earlier.”
So I don’t mean to play the devils advocate but why is that to early or impossible? We are not yet at August 1 correct? Also the 5 days is after your final loan approval. Generally once your loan is approved lenders can send the loan docs to escrow for signature. I am just confused why you think this is impossible? Again, I am not trying to be biased but I guess I am not sure why this seems to be impossible, perhaps I am missing something.
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Dead on.
I think the confusion here is that you think final loan approval is when that worthless letter gets drafted at the time of the offer.
That is not correct.
Final loan approval is when the underwriters (those are the bean counters who live in a hermetically sealed bubble) review the numbers and either deny, change, or bless the loan. Following that, they draw the loan docs, send them to escrow and then we have a signing party (followed by funding and recording).
Typically that happens within 5 days of closing.
If I have misunderstood your perception I apologize. It appeared to be where you were going.
[quote=SD Realtor]
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As far as the Alabama stuff goes there is no need to remove it from the contract because by definition of the location where you are buying it will not apply.
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Again, dead on.
These addendums (or is that addenda?) are written by dyslexic gnomes in Macon Georgia (which is widely accepted by experts as the future hellmouth from which Satan will call his minions). They don’t care if they have a paragraph or 2 that does not apply. In reality, this addendum (I have dealt with dozens at this point) is the final word on the contract. Not having a buyer agent on this transaction was probably a mistake on your part. Getting past this, you really need to go over every section here. The most important parts are:
When do the time frames begin?
This means, when do we agree that the clock starts ticking? It is really a very important question to get answered.
What is the period for inspection?
That is the period that allows you to review info regarding the property. The last one I reviewed for a client had 3 different inspection periods listed, IN THE SAME PARAGRAPH!!!! This mattered because the escrow forgot to order condo docs. Without reviewing those, the buyer could not make an informed decision regarding the relative benefit of buying the property.
What is the period for lending contingencies?
This is really the most important time period. Any buyer can sabotage their own loan or otherwise cause their lending contingency to kick in. If I decide, as a buyer that I really suddenly hate the property after the inspection period, I could always claim that the loan had some issue or cost that I could not bear (as long as it was within the lending contingency period).
Finally, is contingency removal active or passive?
This is important because it determines when your deposit is actually in jeopardy. It used to be that the contingency period (whichever contingency it was) ended in the date specified in the contract. This meant that you could point at the calendar and (assuming you knew what date the clock started) know what date those contingency periods ended. You knew when the point of no return was. These days, most contracts are written so that contingency removal must be active. That date on the calendar (usually 17 days after acceptance)is not absolute. It just means that the seller can demand that you remove contingencies or can cancel escrow (which would mean a refund of deposit). You need to clarify which of these is the case. The escrow or listing agent can clarify this for you. Another unsolicited tip: ask in an email and get your answer in writing.
[quote=SD Realtor]
Your contradictory example also kind of escapes me. I guess I see no contradiction here. Basically the contract is saying if YOU the buyer requests an extension to close escrow on a date that is later then the originally agreed upon date, you will agree to pay a penalty. This is not saying you pay if the SELLER requests the extension only the buyer.
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Seriously, this SD realtor is not as dumb as I expected.
While I do not think people with ‘realtor’ in their blog handle should be taken seriously, he is dead on yet again. You should have gotten an agent or (if you have lots of disposable income) an attorney. This extension only applies if you delay. Likely there is no penalty to anyone if the seller delays,.
[quote=SD Realtor]
Look, EVERYTHING is negotiable but being negotiable also means that either party has the LEGAL RIGHT to say NO. Just as you have the LEGAL RIGHT to ask for whatever you want to.
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Thats the really tough part of negotiating.
You are negotiating with professional negotiators and attorneys. They have a better idea of where they can draw lines and not be flexible.
[quote=SD Realtor]
There is ABSOLUTELY nothing in this REO purchase that you have put forth that seems out of the ordinary to me. Let me ask you this, are you getting the property at a good price compared to comps? REO purchases are EXTREMELY one sided. Every now and then you can indeed get a lender to negotiate in good faith. Sometimes this can happen. Yet more often then not what you have stated above is pretty much the case. It is frustrating and it is VERY unsettling. Also know that when you purchase the REO there will be an absolute liability release you will sign. You can find 10 dead bodies covered with toxic mold under the floorboards and there is absolutely no liability that the lender will carry. Your pipes can burst and flood out the entire home the day after you moved in because of crappy polybutelene plumbing and there is no liability.
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Here I have to disagree with speaker (who hereafter shall be known as ‘Lesser Yoda’). It is the generally policy of the REO contract to claim ignorance and exemption from disclosure. This is because the seller has never lived in the property. This means that the onus of disclosure is really all on the buyer to inspect (and this is where I think Lesser Yoda understates the issue). Doing a very serious inspection is really of paramount importance. In an effort to protect the buyers I work with, I have taken to paying for clients’ inspections. It is more expensive but it helps me sleep at night.
[quote=SD Realtor]
Again, I am not trying to scare you out of the home, just trying to accomodate you to the norms with purchasing REOs. By the same token NONE of this is something you are obligated to undertake. If your broker and loan agent are urging you not to sign, then don’t sign, it is not worth the stress.
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Listen to lesser yoda.
Think about whether the better purchase price is worth the stress. It might or might not be.
I just had a client buy for 33% under the last comp (which I also closed). It was a horrible experience for her but saved her tens of thousands. See my recent post about this for more info (http://piggington.com/what_do_you_think_the_winning_bid_will_be).
[quote=SD Realtor]
I think that lower prices will indeed happen. I don’t think that the conditions attached to REO properties will change though.
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The dyslexic attorney gnomes need money. It really is not a feature that I expect will go away soon.
