One month ago, my buyers had narrowly been beaten out on a recently foreclosed property here in the Willamette Valley. C'est la vie. Come to find out, the buyer who beat us did not qualify for the loan within the first week of their acceptance. One week later, at the strong urging of the listing broker, my buyers wrote the same, acceptable offer on the same property. The owner is named "CORPORATE" in all documentation -- no name, no face. They required a letter of pre-approval from THEIR lender, although we had already submitted a letter of pre-approval from a perfectly acceptable mortgage broker with whom the buyer had made full loan application. We were told we'd get a response back within 48 hours.
Two-and-a-half weeks later, no response. Nothing. Normally, I would accept we wrote a lower offer. However, the listing agent had encouraged we write the same offer ("You JUST missed", were his exact words). I was in constant contact with the listing broker who displayed uncharacteristic frustration with the "asset manager" at the holding company representing the Corporate interest. After at least eight phone calls from me, constant emails from the listing agent, and finally, getting the listing agent's recommended lender's involvement to speed up the process of the actual lender, I received a response this morning: Acceptable as long as the buyer signs the attached 14-page Addendum! So here's my question:
Q: Why would a buyer ever sign one of these addendums? EVER???
Here's one term in the contract: Page 5 of 14, Section I: "Seller's Unlimited Right to Cancel The Agreement: At any time seller shall have the right, in its sole discretion, to elect to deem the agreement null and void if (I) Required by applicable law, (II) required by any existing contract or agreement binding upon seller and/or the property, including, without limitation, any agreements with the prior owner of the property, any mortgage insurer or any mortgage broker. Upon seller's delivery of written notice to buyer of seller's election to nullify the agreement pursuant to this paragraph, the parties shall be restored to their original positions as if the agreement never existed. Should seller exercise its decision to nullify the agreement, the deposit shall be returned to buyer. Buyer agrees that should seller nullify the agreement pursuant to this paragraph, buyer waives its right to sue seller for specific performance and/or damages and fully releases seller as further set forth in the release contained within paragraph V of this Addendum."
Another: Page 3 of 14, Section G: "Buyer also agrees to pay Seller a document preparation/review fee of Ninety-nine Dollars ($99.00) on the Closing Date. This fee shall be delivered to escrow and disbursed on the Closing Date per wire instructions provided by Seller." ~~ This previously-undisclosed fee was not stated in the listing.
And last, but certainly not least: Page 3 of 14, Section F, subsection iv: "Buyer's Authorization for Seller: Buyer hereby authorizes Seller, any agent or affiliate of Seller or any investigative agency hired by Seller, to investigate Buyer's ability to purchase the Property under the terms and conditions of the Agreement including, without limitation, ordering a credit history from a credit reporting agency and discussing Buyer's loan application with Buyer's Lender and/or its successors or assigns. Buyer shall be entitled, upon request, to a complete and accurate disclosure of the nature and scope of any such investigation."
So let me get this straight... The seller has complete access to my buyer's credit history/assets, they are charging my buyer money for no good reason, AND the seller can terminate the contract at any time, and my buyers have no recourse on the sellers at all?? The buyers pay for inspections, an appraisal, even repairs out of their own pocket, if applicable. And it is, quite simply, lost money. And lest I forget, the seller is selling the property "as-is, where-is". Completely arms length. No company name, no contact person. Nothing. They require the buyer to get loan approval through THEIR lender. Not free market choice for the buyer.
Please understand there are FAR more contingencies in this addendum: seller doesn't do a disclosure of any kind, seller can terminate the contract at any time until full acceptance by buyer and seller -- oh, and the seller doesn't sign ANYTHING for weeks at a time --, 14 pages worth of "etc., etc..." And let me state this strongly: IN ALL 14 PAGES, THERE IS NOT ONE MENTION OF A NAME OF THE OWNER OF THIS PROPERTY!!!
This is not a contract, this sniffs of unfair business practices. "You buy our property OUR way, or you don't buy our property." I've been told by several agents representing these entities: "It's their property. They can do what they want with it." True. They don't HAVE to sell it. But if that Corporate owner is one of the taxpayer-bailout lenders, THEY don't own it. The taxpayers do! And if Corporate entities want to hold onto their property, then STOP PUTTING THEM UP FOR SALE! They are not "For Sale". They are "For The Corporation"!!
Where is the wisdom in purchasing a property like this? Unless a buyer has hundreds of thousands available to them in cash, normal conventional or FHA financing options have simply been blocked. Plain and simple. The sellers won't do repairs. The buyer is on the hook for those, benefitting only the seller, IF the seller allows them access. If the seller does not give access for simple pest & dryrot repairs to put the property into structurally-sound condition (a standard requirement for FHA loans), we have no financing. OMG!!! The headaches with these properties bypass migraine territory and move right into incapacity. No wonder our lending institutions are under federal investigation/legislation.
Just a word of warning to buyers: If you look at foreclosed properties owned by "CORPORATE" owners, unless you have cash and/or pristine (and I do mean PRISTINE) credit, you may be wasting not only your time, but your money as well. I wish you the best if you travel down this path. My first-time buyers? They have walked due to frustration and may not buy their first home at all. Thanks, CORPORATE (whomever you are), for wasting our time.
I truly hope this helps someone out there. I'm not trying to step on toes, but trying to educate buyers on our current market conditions of foreclosures. If this blog makes you angry, and I hope it does, send it to your local legislator. Have them look into these contracts and get this garbage repaired before bailing out anymore of these behemoth financial institutions who created this mess in the first place. Giving them FREE money simply emboldened them to flaunt fair market practices for greed and total control, stagnating our real estate industry. Economists wanna know why real estate isn't selling? Here's a microscopic view of what's wrong with our system.
Enjoy the weekend, everyone. I hope it is sunny in your neck of the woods! :-) ~~ Bobby