Banks Exempt from Seller's Disclosure - That's Not Fair
Posted Apr 24, 2008 @ 9:55 am, Viewed by 529 Visitors, Read 569 Times.
Even though I try to avoid them like the plague, I showed an expensive home the other day that was a short sale situation. The first thing we encountered when entering the home was that o so familiar smell of a wet basement that seems to stick with you even after you leave the house. We immediately open the door to the basement and the door, the drywall, and just about every surface is covered in mold. Being the brave Realtor I am, I decide to go down the stairs to investigate just how bad the situation is. Before I reach the bottom of the stairs I am met with at least 3 – 4 feet of standing water and almost get totally soaked. Needless to say, my clients were not interested and we were on our way. So we wasted a few minutes and maybe got a mold spore or two in my lungs, no biggie right?
Well after we left I got to thinking, this house will go to foreclosure and will most likely be picked up by the bank in this condition. They will then take care of the basement situation, rip out drywall and do who knows what else to fix this situation and put the home on the market. Because banks are exempt from filling out a seller’s disclosure, at least in
I understand that the bank has never lived in the property, however they do know things about some of their properties that should be disclosed. In this situation, they know that the basement flooded and the place was covered in mold when they took possession of the property. Call me crazy, but that should absolutely be disclosed to the potential buyer.
I really think something needs to be done to prevent this kind of thing from happening. If we can’t get the banks to cooperate, maybe we should have the listing agent fill out something disclosing all the material facts they know about the property. Am I wrong, is this just an inherent risk you face when buying a foreclosed home?
Mike Taylor is the broker/owner of Rebate Real Estate and sells Indianapolis real estate. He specializes in the north side and focuses on Carmel real estate as well as the rest Hamilton County including Fishers real estate.
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Social Bookmarking4 Responses to “Banks Exempt from Seller's Disclosure - That's Not Fair”
Myra Clay
I agree, but I do feel that the representative from the bank that has concluded that the property is to be sold in the REO category must assume some responsibility regarding the disclosure of the property. Realizing that the bank has and my loose money in the transaction due to the economy, the buyer as well as the agent has to understand the true meaning of "AS IS" condition. Therefore, a signature from the banks representative is necessary. Just a thought.
Cal - I understand what you are saying and I completely agree in some maybe even most cases the bank does not know anything about a property and should not be obligated to disclose anything. However, in the situation I described above it doesn't seem right that there is no process in place from the bank or whoever to disclose these facts.
You are right though, even if it is the correct thing to do who are you going to get to sign off on it? It takes weeks to get a signed contract...god help us if they had to fill out a seller's disclosure form
Absolutely correct...it is pretty much crap that the banks think that they dont have to say anything regarding the condition of the property even though the listing agent knows full well at times like this. I believe this may actually be an ethics issue that will need to be addresed with each Realtor Association!
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Mike Taylor is a resident of Indianapolis and the broker/owner of Rebate Real Estate. Rebate Real Estate offers full service representation for buyers and sellers and offers a 50% commission rebate. Read More
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I think that the disclosure is intended for the owner that is in the know. He can not disclose what he does not know. If he does know something though, he must. Precisely the reason the seller should fill out the disclosure on his own without agent assisstance - how would the agent know what to disclose and why would he want to take on filling out a disclosure document when he does not know. The bank is in the same position - they hold paper on a property where the owner did not live up to the terms of the loan - they would rather have a payment and a performing loan than an REO property, but who is at the bank that should make disclosures about a property that more than likely no one at the bank has ever seen. However, in the case you present above, the bank would be in the know and I agree maybe they should have to disclose, but I wonder who would be willing to sign off on it.