Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
We just looked at a house and decided to make an offer. This house is an REO. The listing agent tells our agent that this particular seller does not accept/reject/counter offers until the buyer has completed inspections. If you submit an offer and then do inspections and the house fails you do not get your earnest money back.
Why would anyone pay for inspections if they do not have a contract? Why would anyone put down earnest money that they could not get back? Has anyone heard of this?
Location: Mokelumne Hill, CA & El Pescadero, BCS MX.
6,957 posts, read 22,326,702 times
Reputation: 6472
In my state, an offer to purchase on the local form is the governing document unless and until the seller (bank) makes their addendum (counter-offer) available for signature to the buyer. Your earnest money at the very least should be secure as the earnest money is held by the broker until there is an acceptance of the offer. So, good luck bank trying to "keep the earnest money".
The inspection expense might be at risk, but you might be able to "sell" your inspection(s) to a subsequent offeror if you find the property doesn't measure up.
I would assume that no earnest money is deposited until the bank accepts the offer, including the seller and buyer signing the bank addendum. Sounds like in this case, their addendum would not allow return of earnest money from an inspection. I've heard of a similar situation locally (maybe same bank?), and my advice would be to find another property unless you're OK with losing the EM, or as DMenscha said, can resell the report.
I think what you are saying is they will not accept a clause "contingent to inspection" or something similar.
I have been thinking about this myself over the last couple of months. I am not looking to sell anything for at least a few years, probably longer but I was thinking about it. My present thought is to not accept offers with ANY contingencies. It is just too easy for the buyer to back out of the contract. It gives the buyer the advantage of a contract (price and other terms) with the flexibility of ending it with barely a reason. (there is always something out of the inspection that can be used to end it). The seller has no such advantage.
The drawback is the buyer would like to know if his price will be accepted before going through the expense of an inspection. I don't have a feel for that one way or another.
But back to the original question, I think a bank, who is likely not going to fix anything anyway, is looking for non-contingent offers that can just close. I don't see you losing your deposit because I think what the bank is saying, do the inspection before you even make the offer.
We just looked at a house and decided to make an offer. This house is an REO. The listing agent tells our agent that this particular seller does not accept/reject/counter offers until the buyer has completed inspections. If you submit an offer and then do inspections and the house fails you do not get your earnest money back.
Why would anyone pay for inspections if they do not have a contract? Why would anyone put down earnest money that they could not get back? Has anyone heard of this?
Basically, what the bank is saying is.... "This house is being sold "as is, where is". *If* you do not wish to submit an offer without having the house inspected first - fine. You pay for the inspection and we will allow the inspector to come in and look around. If you are satisfied with the outcome and want to submit an offer, be our guest.
All of the REO properties that the company I work for lists are all "as is, where is".
... But back to the original question, I think a bank, who is likely not going to fix anything anyway, is looking for non-contingent offers that can just close. I don't see you losing your deposit because I think what the bank is saying, do the inspection before you even make the offer.
Not very practical around here. Banks typically get multiple offers, and if you take time to inspect before the offer, odds are you will lose out to someone else. And no guarantee the bank will take your offer anyway even if your inspection good. High risk of losing inspection cost with nothing to show for it.
First of all houses don't "fail" inspections unless you are talking about an FHA required inspection. For normal inspection reports you get a document that covers the areas that may need to be addressed / are of concern as needing repair /maintenance. Generally a good idea to do it AFTER you are pretty sure that everything is close to what your are looking for, doing it BEFORE an offer is not off the charts stupid, as long as you can afford to walk away from the house if things are too costly to deal with.
If the LENDER is demanding a "non-refunable earnest deposit" for the right of INSPECTION they are either being misunderstood or are on POWERFUL hallucinogenic drugs. My guess is this is a misunderstand as you state they WANT you to inspect BEFORE they accept an offer and that generally means you will NOT need to submit any earnest money...
There is some logic to paying for an inspection before making an offer, namely that the buyer can have some details to bring the seller to reality. Somehow I rather doubt that any lender is going to price an REO with defects in an completely unrealistic way, but who knows what is their 'plan' if they are on the wacky meds.
Not very practical around here. Banks typically get multiple offers, and if you take time to inspect before the offer, odds are you will lose out to someone else. And no guarantee the bank will take your offer anyway even if your inspection good. High risk of losing inspection cost with nothing to show for it.
I realize that. The risk is all on the buyer.
I wouldn't be surprised if it goes this way though. Maybe instead of a $1000 inspection where every circuit etc is checked, another type of inspection is done to just check the big items, e.g. foundation/roof, before an offer is made. The more comprehensive inspection is done after the offer is accepted but the buyer is now locked into a contract where the deposit is now at risk.
A lot depends what type of market we are in.
I am just watching and gathering opinions. I appreciate your comments.
Basically, what the bank is saying is.... "This house is being sold "as is, where is". *If* you do not wish to submit an offer without having the house inspected first - fine. You pay for the inspection and we will allow the inspector to come in and look around. If you are satisfied with the outcome and want to submit an offer, be our guest.
All of the REO properties that the company I work for lists are all "as is, where is".
20yrsinBranson
I am seeing the same thing, here. It separates the wheat from the chaff.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
