[PLEASE NOTE: In this post, real estate Attorney John Pitrelli kicks off a series to help homebuyers avoid the hazards that can arise when the Seller is a bank or lending institution. To view John’s other posts please click here.]
When you are dealing with the bank
Currently a substantial number of our settlement transactions involve Banks 
or other lending institutions as the Seller.
Buying from a Bank can be risky. It is my intention over my next series of posts to provide guidance to buyers to reduce the risks. In this first post I will explore the issues that occur when contracting with the Bank’s asset manager. Subsequent posts will deal with the issues of Special Warranty Deeds, the importance of title insurance and the need to resolve all issues prior to settlement.
Watch this addendum
When you submit an offer to a Bank it is usually presented using a standard Board of Realtors approved contract that will hopefully be drafted by an experienced Realtor® such as Kathy O’Neal. Generally the listing will not identify the Bank, Seller, by name, but will instruct the selling agent to state the Seller as “Owner of Record.” Invariably, if the Bank accepts your offered price and terms, it will demand that you sign its counter-offer addendum to ratify the contract. It is this addendum that creates the major risks for the buyer. This counter-offer addendum has been drafted by counsel for the Bank as a form to be used on all the Bank property wherever located and however acquired.
Know the risks
An instruction is usually sent with the counter-offer addendum to not strike through any of the terms of the addendum if you want to have your deal ratified. However, banks will routinely consider reasonable revisions if you present them through a counter to their counter-offer. If you ratify the Bank’s proposal without further modification you are frequently agreeing to accept the following risks:
– accepting the property in “as-is” condition regardless of whether systems are in working order
– using the Seller’s settlement agent to close the transaction
– accepting insurable title rather than marketable title
– subjecting yourself to a daily penalty if closing is delayed
– having to order Homeowner’s Association and documents at your own expense
– accepting deductions from Earnest Money Deposit if Seller defaults
– assuming duty to pay the Grantor’s Tax normally paid by Seller
We recommend using a counter addendum to the Bank’s counter-offer addendum to reduce and/or eliminate these risks. An experienced real estate agent, with some assistance from us will understand the importance of and know how to draft this addendum.
You can contact John at j.pitrelli@keytitleva.com]