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I bid on a foreclosed home in Round Lake and was able to get a good deal. I had the inspection and appraisal already done and my mortgage was all set to go. About a week from our closing date, I found out that because the bank did not winterize the property after our inspection, pipes burst on the second floor of the home. The water spread from the second floor all the way down to the basement, there was a hole in the living room ceiling and the floors were all wrecked. I had my agent notify the bank that I am no longer buying the home due to the extensive damage on it. I also had her request refund of my earnest money as well as compenstion for the money I spent on the inspection, appraisal,etc.. The bank would only return the earnest money. Do you think that I have any legal basis to get compensatioin due to the extreme negligence on the seller's part? After all, it's not like I changed my mind, the property was competely destroyed. Also, does anyone know whether banks have to disclose the damage that occured to the property in their ownership?
Thanks for any advice!
While I am not an attorney, it seems to me that negligence in this situation cannot be denied. I can't imagine there's no recourse for you, but you may want to pose this thread in the REAL ESTATE section instead of here, where both realtors and attorneys can give you relevant input. Good luck!
When you buy a foreclosed property you buy AS, Where IS, How Is. It's up to you to make the inspections, if possible.
You made the inspections and you did not find the damage that you describe.
After your inspection the damage occurred. You can request the bank to make the repairs, or you may be able to cancel the contract; depending on the contract language. The bank does not have to make the repairs.
Since the bank agreed to return your earnest money, I would take that and move on to the next deal. It's not worth an expensive legal battle that you probably would lose.
There is a general clause that says if the deal falls apart for any reason you get your earnest money back but that each side eats its own costs.
You might however take them to small claims court anyway. These are generally courst of equity rather than law and you just might get part of your costs back. They may also make you an offer to avoid the whole thing.
They may also be screwed up enough that they don't respond...
2bindenver, you would be surprised how negligent these banks are toward foreclosed properties. Our property was on the market for almost a year, you would think that they would ensure that the deal went through. As I mentioned earlier, we had everything all set, including being approved for a mortgage.
I discussed the situation with several real estate attorneys and all said that contractually we would lose in court, because there was no specific provision on the addendum discussing damage resulting from seller negligence.
Does anyone know of an organization that would handle complaints such as this? Any point in contacting the BBB?
Thank you all for your advice!
When you buy a foreclosed property you buy AS, Where IS, How Is. It's up to you to make the inspections, if possible.
You made the inspections and you did not find the damage that you describe.
After your inspection the damage occurred. You can request the bank to make the repairs, or you may be able to cancel the contract; depending on the contract language. The bank does not have to make the repairs.
Since the bank agreed to return your earnest money, I would take that and move on to the next deal. It's not worth an expensive legal battle that you probably would lose.
I totally agree with the Captain and it has always worked the same in my experience.
My brother has been doing REO Bank Properties for the last 10 years, mostly commercial, and some of the stories would read like fiction if you didn't know they were real.
Banks really are not and don't want to be in the Real Estate Business... Property Management is a very specific field in Real Estate and REO's are even more specialized... lots of folks are basically learning on the job.
A REO in my area has been completely stripped and the Bank could care less. I spent a couple of hours trying to track down the responsible party at the Bank Holding company several states away to inform them that the home is being stripped little by little. The person response was, "The Property is being sold AS-IS" ???
I bid on a foreclosed home in Round Lake and was able to get a good deal. I had the inspection and appraisal already done and my mortgage was all set to go. About a week from our closing date, I found out that because the bank did not winterize the property after our inspection, pipes burst on the second floor of the home. The water spread from the second floor all the way down to the basement, there was a hole in the living room ceiling and the floors were all wrecked. I had my agent notify the bank that I am no longer buying the home due to the extensive damage on it. I also had her request refund of my earnest money as well as compenstion for the money I spent on the inspection, appraisal,etc.. The bank would only return the earnest money. Do you think that I have any legal basis to get compensatioin due to the extreme negligence on the seller's part? After all, it's not like I changed my mind, the property was competely destroyed. Also, does anyone know whether banks have to disclose the damage that occured to the property in their ownership?
Thanks for any advice!
You are entitled to a refund of the deposit only, unless you negotiated a refund, during the offer period, to be reinbursed if you changed your mind.
How is there a hole in the livingroom celing and you not notice it during your initial inspection. I would think that would be noticable.
Final question, banks have to disclose KNOWN damages, under their disclosure statements during the listing. I'd say 99% of the bank properties I look at say "as is", putting you on warning that they are making no warranties, expressed or implied as to the condition of the property.
Take the refund for your ernest deposit, or negotiate better terms (such as a repair credit) to get an allowance to make the repairs. Be happy your getting that back without a fight.
Question: How about this scenario? If the first buyer of a bank owned foreclosure walks away due to environmental damage such as water, mold etc. found during home inspection AND they send the Inspector reports to The Bank, detailing the damage, inspector reports etc. Is the Bank not then required to disclose these reports to the second buyer that might come along or can they sell AS IS without any disclosures?
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Foreclosure not Winterized
