Monday, September 30, 2013

As-Is Contracts and Buying a Sarasota Foreclosure

Some current customers of mine have an accepted offer on a bank owned foreclosure.

All foreclosure contracts are as-is with right to inspect, meaning the buyer is accepting the property in it's current condition at the time of the offer.  The buyer has the right to have a home inspection to discover any potential hidden defects, not readily visible to the buyer, that may affect the value of the property or may cause the buyer to spend more money than planned on repairs.

Most as-is contracts specifically state how much money a bank will spend on repairs.  This number is usually $0.00.  This was the case with the contract for these buyers.

I discovered water damage in the home due to an apparent roof leak, while performing a service to the buyers by taking a video walk-through of the property and providing detailed pictures of the interior and exterior.  I discovered this damage during the inspection period negotiated in the contract.

At this point in the purchase process, the buyer has some options:

1) Withdraw their offer to purchase, since the bank has already specified in writing they will make no repairs, or;
2) Get estimates for repair of the damage, and re-negotiate a purchase price with the bank.  In this case, we would have to extend the inspection period to allow time to get the appropriate repair estimates, or;
3) Wait for the mortgage lender to appraise the property, with the water damage, and see if the appraised value is less than the purchase price.  The bank may agree to a lower price price, or the buyers can withdraw their offer based on their inability to get a mortgage due to the appraisal.

Part of my service to out of town buyers is being their eyes and ears, especially during the escrow period.

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