Oh, bank owned homes… they are EVERYWHERE. Still. Most experts say that the housing crisis (with its falling prices and general suckage) will not end until the large surplus inventory of bank owned homes is removed from the market. The last two homes I sold were bank owned condos, one was a $90,000 2 bedroom condo at Sky Terrace and one was a $120,000 2 bedroom loft at The Bridge, both in the St. Helens Neighborhood.
Purchasing a Bank owned home or condo (also known as FORECLOSURES not to be confused with SHORT SALES) is actually pretty straight forward. They are able to close about as fast as your bank can finance you (normally about 30 days) and are pretty responsive. There is a catch, however. A BIG CATCH.
Banks Owned Contracts Contain Many Secrets
Banks refuse to use the standard purchase and sale agreements (contracts) that buyers and sellers use in the state of Washington. Even though they hire local agents to represent them, they prefer to make their own rules AND their own contracts- and guess what? Those contracts are skewed favor of the seller. BIG TIME. Not only that, the language they use is often impenetrable. The worst part is that as Realtors, we’re only trained on the standard forms. We are forbidden by Washington State Law to interpret legal forms or paraphrase, because that’s PRACTICING LAW. Since it only takes a few months and a few hundred dollars to become a Realtor, they don’t consider us replacements for attorneys. Go figure.
So here’s where I’m going with this: when you go to buy a bank owned house you are going to be asked to sign ACRES and ACRES of paperwork that your Realtor will not be able to interpret for you. I’ve had clients sign them with no problems at all. For other clients, there have been issues from language that requires the BUYER to pay the SELLER’s excise tax to extremely short home inspection and title insurance verification timelines. You might be 10 days into your contract and find a huge cloud on the title only to be told by the bank that you have passed your title insurance period and now if you back out you will lose your earnest money. It’s awful. Don’t let it happen to you.
Don’t let the bank PWN you.
Get a lawyer. I’m serious. Your Realtor can help you find the perfect house, give you advice, help you solve all of the insane little problems that can pop up in a transaction, but unless they are also a real estate attorney they cannot effectively advise you on these forms. While having a real estate attorney review a bank’s evil purchase and sale and give you a heads up about what is in there before you sign could very well cost several hundred dollars, in the end it is better than losing your earnest money when you have to exit the contract for a legitimate reason. Every Realtor knows a few real estate attorneys that they can recommend you talk to.
As a final note, it is my opinion that this situation is predatory and ridiculous. Many buyers cannot afford hundreds of extra dollars on top of home inspections, earnest money deposits, etc to hire an attorney and will skip it, leaving them vulnerable to these banks’ predatory practices. As I said, the banks HAVE a local agent representing them who is trained in Washington’s forms. Our Washington State Attorney General is running for governor this year folks, and I recommend you drop him a line (while he’s still campaigning and receptive) to let him know what you think about these banks’ behavior.