Why we won’t be involved with the sale or purchase of bank-owned properties.
(Our actual restriction is against “special addenda”, but they are most commonly required when dealing with bank owned real estate, REOs, and foreclosures.)

The job of a real estate agent is to represent the best interests of their client during a proposed real estate transaction. Normally, that transaction begins with an offer that, once agreed to by both parties, becomes a contract. A contract spells out the obligation that each party has to perform, and it has a few escape clauses should one party or the other encounter unacceptable or unresolvable conditions. Like what? Well, the Seller might want out if the Buyer doesn’t provide proof of their financial ability to complete the purchase within the time frame listed in the contract. The Buyer may find problems during the inspections and appraisal that the two sides can’t resolve. In the end, if each party performs according to their obligations under the contract, the OTHER party cannot simply change their mind. It’s a CONTRACT–a bilateral obligation to perform.
Not so with REOs! Most foreclosures have “special addenda” that change the rules. A common one is that the buyer is charged a penalty–around $100 per day–if the closing is delayed…even if it is beyond the control of the buyer. Another is that the seller has no obligation to disclose defects in the property, even if they are fully aware that the home has MAJOR problems. The addenda make it the responsibility of the BUYER to somehow find the defects and object to them before the inspection period runs out. Also, should the buyer discover, after closing, that the seller committed FRAUD in convincing the buyer to buy, the buyer has usually expressly waived any right of recourse. In short, these addenda require the Buyer to surrender most or all of their normal consumer-protection rights. But that’s not the worst…

REOs have a neat little clause which states that if the SELLER (bank or mortgage holder) decides not to go through with the sale for ANY reason, the only thing they have to do is give the buyer’s earnest deposit back to them. That means that even though the Buyer may have paid well over $1,000 for inspections, an appraisal, and non-refundable deposits for moving-related expenses, the Seller can simply change their mind with no penalty at all. With that clause, they have effectively changed the agreement from a bilateral obligation–where BOTH parties are bound to the agreement–to a UNILATERAL OBLIGATION TO BUY, where ONLY YOU are bound to the agreement. They can walk away at any time without a penalty! That, my friends, is not a contract!

Why do the big banks put these one-sided addenda in their agreements? Because the real estate community is so desperate for the business that they don’t dare object! They don’t want to risk losing the commissions that come from the foreclosure sales. If you read carefully, you will also find that the real estate companies and agents are also expressly released of any liability to the Buyer. That means that if you happen to be misled or taken advantage of while trying to purchase one of these properties, you likely have no one to blame but yourself. In our view, that’s no bargain.