Last time we went through five important points when running in to a REO addendum. Here’s the next five:
- Generally, or at least in Hartford County, the closing always takes place at buyer’s attorney’s office. Note that several of the REO addendums will make the closing at seller’s attorney’s office. If buyer won’t travel to seller’s attorney’s office, no problem, but beware that there may be a fee assessed against buyer. Recently, I’ve seen a $250 fee.
- As the buyer’s agent, it’s always good to keep the buyer’s deposit as low as possible. You will limit the buyer’s risk and know where you stand in the event of a default. From a seller’s perspective, this is bad as it actually gives the buyer some leverage over theses addendum terms. With that said, pay close attention to the default paragraph because assuming the deposit constitutes liquidated damages, that could be an expensive mistake…and if not liquidated damages in the Purchase and Sale Agreement, the REO addendum change the default damages to actual damages which will may put your buyer at even a greater risk than just losing their deposit.
- REO addendums may force the buyer to be responsible for all termite issues including inspections and repairs whereas this is typically the seller’s expense. This can get sticky if buyer is applying for a FHA or VA loan…so this is definitely something you want to know in the beginning of the transaction.
- REO properties are not exempt from the Smoke/CO detector affidavit and typically the buyer will be getting the $250 credit.
- Not very often, but it’s still out there, we will see a paragraph allowing the seller to terminate the contract at any time and return the buyer’s deposit. Obviously, not good and if at all possible, should be stricken from the addendum.
Bonus: No. 11. Given the time restraints on REO deals and the fact that closing dates are usually now “time is of the essence”, it’s important to anticipate the time frame needed to complete the inspections and mortgage process. It often takes longer to get the signed Purchase and Sale Agreement back in REO deals (up to 10 days and sometimes longer). So when tendering an offer, keep this in mind and extend out these dates to allow for the extra time that may be needed. If you don’t, and it takes 10 days to get the Purchase and Sale Agreement back, now your mortgage contingency and inspections dates just lost 10 crucial days…not to mention the closing date is that much closer. So bump out these dates to allow for the contract negotiations and timing.
In closing (no pun intended)…. All of these REO addendums should be reviewed by buyer’s attorney prior to signing and we are always available to help with the process. A good rule of thumb is “proper disclosure to the buyer” and “setting expectations” are helpful rules of thumb to a successful REO transaction. Actually, those rules of thumb work for almost every deal!