First, buyers are not dealing with a “normal” condition where an individual owns the house and one can seek out and attempt to fulfill the seller’s emotional needs as in a traditional real estate transaction. Banks do not have an emotional stake in the property, so they are very unlikely to be swayed by a buyer’s hardship or willing to undergo needed property repairs, etc.
Second, the bank’s asset manager is usually someone who is based out of state (and unfamiliar with the local market), is not in a position to give away any assurances about the property’s condition and likely, will only sell “as is”, where is, with no express or implied warranties. The bank’s goal is to be completely done with the property at closing, without any lingering responsibility for repairs, tax reapportionments, follow up calls from the new buyers in property defect issues, etc.
Third, don’t assume that the property is free and clear of all liens. Some buyers, particularly if they use the seller’s title company to close the transaction, discover too late that a search was done 2 weeks before closing (but not immediately before closing) and missed liens of ad valorem taxes or other problems that place a “cloud” over the title.
Protect Your Interests By Doing The Following:
- Do a thorough investigation of the property: Due diligence is your responsibility. Utilize a qualified house inspector, examine any bank required addendums and know what you are agreeing to. Conduct appropriate inspections (termite, septic, radon, etc.) so that you know what you are purchasing. By agreeing to purchase “as is”, insert contract language that protects you if the seller failed to put a tarp over the hole in the roof (discovered 3 weeks earlier) for example. Such seller negligence might cause you $30,000 worth of additional expenses if you weren’t careful prior to contract acceptance.
- Spend the money for a property survey: That is the best way to determine boundary lines. Acreage disputes are not covered by title insurance.
- Consider an Enhanced Title Insurance or GAP Insurance Policy: At the very least, have a title search conducted early on in the process and have the title company do another immediately before closing. In Middle Tennessee I recommend Stones River Title and Biltmore Title.
- Conduct a Final Walk Through Inspection to ensure that the property was in the same relative condition it was in at contract acceptance. Make sure language is in the contract that allows you to terminate with full return of your earnest money if the seller fails to either adjust the purchase price or to return the property to condition it was in as of the binding agreement date.
- Request and/or Require as a Condition to Sale, that the Seller Provide You with Previous Inspection Reports or other documents pertaining to property condition. Many listing agents and sellers will fail to disclose what they know about property because the seller is in an Exempt from Property Condition Disclosure Status. Just beware!
- Make New Keys ASAP After Closing: There’s no telling how many people have had access or copied the key to your new house. Don’t forget to reprogram the garage door opener and security gate if applicable.
- Buy a 1 Year Third Party Home Warranty (or Negotiate it with the Purchase Price): Thus may be the peace of mind you need during that first year.