Florida Real Estate Foreclosures – The Nightmare of Buying From a Bank

Posted By on June 25, 2009

I am involved in several Florida real estate transactions for the purchase of bank owned foreclosures. These days most Florida real estate transactions are purchases of bank owned foreclosures and I can’t believe that anyone would think that things are any better now than they were during the mortgage fiasco. Some of my clients have not only found it difficult to purchase a home, but there doesn’t seem to be any additional consumer protection.

For example, some banks are requiring inspections prior to contract. The banks are asking Buyers to go out spend time and money on an inspection, and then wait to see if the Bank wants to accept the buyer’s offer. The banks are asking Buyers to not only accept property condition risk, but also to incur financial risk. I understand that people are buying foreclosed homes and the “Buyer should beware”, but this is a bit much.

Also, FHA is supposed to help provide financing for those with little or no down payment. The problem is that some banks aren’t accepting contracts where the financing is provided by FHA. The reason seems to relate to FHA’s requirements relating to seller made repairs and inspections. I thought FHA was expanded to help alleviate the problem, but how can it alleviate the problem when bank sellers wont accept FHA qualified buyers.

Further, realtors are having to alert buyers and other realtors of numerous contingencies before a contract can be submitted or considered by the Seller. To illustrate, below is a copy of a “Offer Checklist” that a Florida Real Estate Broker provides to other real estate agents outlining things that should be submitted and other requirements in order to expedite the transaction:

Offer Checklist

This list has been provided to you to help your contract meet the seller’s requirements. It is not an affirmation that your offer has been accepted, this is just to insure that it is in the proper form which offers you the opportunity to expedite the process.

1. All offers must be written on the Florida Association of Realtors “As Is- contract for sale and purchase” form from our office (also in attachments).

2. A 5% deposit is required in the form of a cashier’s check or money order. Your contract will state that upon verbal acceptance from the seller this money shall be deposited with the seller’s closing agent. A copy of the original Cashier’s Check is REQUIRED to present an offer.

3. Once your contract is verbally accepted, should the buyer fail to close through no fault of the seller, the 5% deposit is non-refundable.

4. All inspections are done prior to submitting an offer, thus there can be no inspection period or cancellation fees options. Inspections must be performed in the property’s “As-Is” condition.

5. If your contract is ALL CASH you must show proof of the source of funds to be used, to close in the amount of the purchase price or more.

6. If your contract is FINANCING; it cannot be contingent on the property’s condition, the contract is subject to Title only. If the property qualifies for financing, the offer must be submitted with a pre-qualification letter for your client and their FICO score to receive 21 days for loan approval. No other financing contingencies will be accepted. If the MLS states “No Financing Contingencies” this means the seller believes this property will not qualify for financing. In this case, the seller would request a letter from the Lender stating that “the present condition of the property is acceptable for” their “lending guidelines”.

7. If the property has any outstanding code violations the purchaser assumes the risk and liability for these code violations (if any). If the Municipality or County requires a re-occupancy certificate this will also be the responsibility of the purchaser.

8. Changes to the contract and/or the addendum(s) will not be acceptable. Including any attachments, which directly conflict with the seller’s addendum(s).

9. ALL OFFERS ARE SUBJECT TO MULTIPLE OFFER SCENARIOS. WHICH MEANS THAT THE SELLER IS CONSIDERING ANY OFFER AT ANY TIME. PLEASE MAKE SURE YOUR PURCHASERS MAKE THEIR HIGHEST AND BEST OFFER AT ALL TIMES.

10. Purchaser to pay __________ Realty Inc a statutory compliance fee of $350 for maintaining records and file information in storage. (if applicable to this property, it will also be stated in the MLS remarks)

These requirements aren’t simple nor are they transaction friendly. In fact, some of these provisions are unreasonable and unconscionable.

My suggestion is to consult with an experienced Florida Real Estate Broker/Agent and an experienced Florida Real Estate Attorney to guide you through the real estate transaction process. I believe it’s more important than ever to talk and seek counsel from someone with experience in the foreclosure purchasing process.

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