After hours of home searching, your buyers have finally made a decision.  It’s the home of their dreams, the price is perfect and they see the value. They are excited about the prospect of buying their new home.  As a seasoned Agent you prepare your contract as air tight as you can possibly make it.  You assure every page is initialed, every clause examined carefully, each paragraph closely scrutinized.  You and your qualified, pre-approved buyer have done your homework and you are certain all is right with the offer.   You send it off to the Listing Agent with a hope and prayer and wait patiently, maybe for a couple of weeks, albeit but you wait patiently. 

But wait!  What’s this Bank Contract Addendum?  What does it do to your contract?  They are accepting your contract and all the conditions set out in it. Or are they?  At this point you and your buyer read the Contract Addendum.  As you negotiate each paragraph you and your buyer become more and more concerned about the terms to which the Bank wishes you to agree.

The REO addenda often have the following terms: 

 AS IS, WHERE IS – including:  Property condition, personal property in house, debris in yard, environmental hazards and tenant/prior owner holdovers

Inspections:  Buyer may have to pay $250 to de-winterize the house for inspection purposes.  Inspections are for INFORMATIONAL PURPOSES ONLY.  Repairs by seller, if the seller agrees, will have a cap.  The seller may choose to provide a credit to the buyer – please review that very carefully.  Inspections, including the pre-closing walk through must be completed by the number of days specified in the contract

Title Issues:  Normally, title is conveyed by a SPECIAL WARRANTY DEED which means there is no recourse against the seller if there are title issues pre-dating the seller’s ownership. If the seller is paying for the title insurance they are usually preparing a title policy based on a very limited title search.  Which means any unreleased judgments, liens, trusts or major title issues are not revealed and could pose a threat to the new owner if title insurance is not in place.

Commission:  The commission is often based on NET purchase price.   Any closing costs subsidies, credits and/or repairs are backed out of the sales price and the new amount is used as the basis for the commission. 

What is your responsibility when it comes to protecting your buyer from the terms in the Bank addendum?  First, you need to remember that you can make changes to the addendum.  While the banks frown upon a marked up addendum, feel free to use blank space in the addendum.  The listing agent must submit this to the bank. Also, you should read each paragraph through carefully.  These addenda are ever adapting creatures and you need to be sure you know what your buyer is signing.  It never hurts to be extra careful.  This is probably the largest purchase of your buyer’s life.  As such, they should feel comfortable with the documents, with the closing company and with the fact that closing may take longer than a traditional transaction.  Buckle Up!  Receiving the bank addendum is just the beginning of what may be a very exciting ride.