[PLEASE NOTE: In this post, Real Estate Attorney John Pitrelli continues his 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.]
In my last two posts I covered title concerns and risk imposed by Bank-counter addendums. In this post, I will address home inspection issues and legal exit strategy for a buyer when the deal is no longer desirable.
In virtually all contracts with bank-owned (foreclosed) properties the buyer takes the property “as-is,” and
“where-is,” with all it faults and no warranties or representation by the Seller. Moreover, most of those contracts state that the buyer earnest money deposit is “non-refundable unless otherwise stated in the contract or contrary to applicable law.” This is a scary proposition for most buyers. In my view it is another reason why buyers should have a highly experienced real estate agent representing them as “buyer broker.”
As a general rule a home inspection is critical whenever buying real estate and even more important when buying Bank-owned property.
Suppose you discover major structural issues in the home inspection, for example a leaky roof, poly-butylene pipes, termite damage, improper wiring, etc. You can and should ask the Seller (Bank) to remedy these issues with an appropriate addendum. If you don’t you will be soley responsible for making the repairs and may be unable to obtain financing from your lender to purchase the property.
Most properties in Virginia are located in a subdivision that is subject to Home Owner Association (HOA) or
Condominium Association (COA) covenants and restrictions. If your property is subject to Virginia HOA or COA Act, you have an unwaivable, unilateral way to cancel the contract. Both Acts provide a 72 hour statutory rescission right that cannot be waived by the buyer. The 72 hour period does not start to run until the buyer has been provided with an HOA or COA resale package.
A savvy buyer will use the HOA Act or COA Act to his or her advantage by not requesting the resale package until the latest, reasonable time and preserving the ultimate legal trump card for protecting themselves under the contract. Buyers can legally use the applicable Act to recind the contract and get a full refund of their otherwise non-refundable earnest money deposit.
[John welcome questions or comments. You can contact him at j.pitrelli@keytitleva.com]