Michelle Millikin

Archive for the ‘Buyers’ Category

With the abundance of Wausau area foreclosures, estate sales and bank-owned properties within our Wausau area housing market, there is a common tendency for Seller’s to sell a property “as is.” Yet both Buyers and Sellers do not seem to have a firm grasp on what that really means and how it can affect a transaction.

A Seller may choose to use this clause (which can be used on any type of property) because they cannot afford to put any more money into repairing a property, because there may be a potential of environmental concerns they do not wish to confront or because they are incapable of dealing with such remedies due to physical or mental constraints.

The “as is” clause can mean one or both of the following: The Seller wishes to make no representations to the condition of the property and is holding the Buyer responsible for its determination and/or the Seller is unwilling to cure any defects if found.
Sellers need to realize that even if they have this clause disclosed they are not free and clear from some liability and duties in relationship to their property. For instance they cannot put a Buyer in a condition of “foreseeable” or “unreasonable risk or harm. They cannot conceal a defect or make it difficult for the Buyer to discover the defect or make false statements.

As a licensed agent, we still have to inspect the property, consisting of a visual walk thru of the property and ask the Seller questions of suspect conditions they may discover.

Lead-based paint disclosure requirements are not waived in an “as is” sale.

My recommendation is for a Buyer to write an offer contingent upon an Inspection. The Seller has already made it clear that they are making no representations and will more than likely not cure any defects or offer a financial allowance to the Buyers for what they find, however, it will give the Buyer the justifiable right to determine the property’s condition before full blown commitment. An inspection contingency gives the Buyer a right to back out if the defects are beyond acceptable and the Buyer no longer wants the property. If there is no inspection contingency, the Buyer is REALLY accepting the property “as is.” If the Buyer closes on the property and discovers a defect afterward, they cannot go after the Seller for compensation – they agreed to purchase the property based upon the condition THEY determined.

In the  fall of 2011 many banks were exposed for a scandal commonly referred to as “Robo-signing.”  Essentially the foreclosure epidemic was causing banks to have their employees sign as many as 50-200 documents per day to meet the demands of the flood of foreclosures, not allowing enough time nor resources for the employee to verify the documents prior to signing.  Some admit to only verifying the date, nothing more.  This calls into question the legitimacy of the foreclosures on a basic level – a bank has to prove it actually has the right to foreclose – that it owns the note and accompanying mortgage.

Unfortunately for the bank, the securitization of mortgages and the changes in property-ownership documentation that accompanied such deals can make it hard for the banks to establish clean chains of title and produce original documents.

Now these banks are having a difficult time restarting the foreclosure process and the once booming market for foreclosed homes has come to a drastic slow-down as a result.  Properties coming to auction in the states hit the most hard, such as Arizona, California and Nevada, have dropped 30%.  Many investors absorbing and rejuvenating these properties have simply stopped looking.  Why?

The risk of acquiring a property which has not been properly foreclosed is a huge risk.  Simply said, a buyer may not actually own what they paid for, and are investing in the renovation of, because the seller never had the right to transfer the property in the first place.  Investors of such properties put out the cash, want a quick return and do not want to wait for the attorneys to hash out the details.

And buyers are not flooding in to negotiate short sales like before either.  The theory is that homeowners think the bank will have a tough time kicking them out in this environment so they can live free for awhile, pay off other debts and build up their nest eggs.

End result:  The banks need to promise the full review of all cases but this is slow-going, tedious and time consuming.  In the meantime, lack of buyer confidence in an already weak market leads to further distress on the market.

Yet a properly handled transaction with a trained professional Realtor can help a buyer take advantage of this market.  Call me today to learn how I can help.