Can you add contigencies such as inspection/financing to BO properties that are sold as-is?
It doesn’t make any difference whether the property is sold “as is” or not. When you make an offer, you are really offering to enter into a contract to purchase. You can (within certain limits) put anything into a contact. If the other side doesn’t like some items they can counter offer these items out of the original offer. You, of course, can counter offer them back in.
You should always have contingencies covering: inspections, financing, appraisal, getting a loan at a certain interest rate, etc.
The important things to remember about a contract -
- The principals must have capacity. They must be of legal age, they cannot be adjudged to be insane, they cannot be under the influence of chemicals, etc.
- There must be mutual consent - both parties have to have reached agreement without duress.
- There must be consideration. Something of value has to pass from one to the other. This may be in the form of money, a promise to do something, a promise not to do something.
- There must be a lawful purpose to the contract. For example, you cannot enter into a contract to rob a bank.
In my experience, banks will not allow many or any contingencies on REOs. I have done many REOs. However, I know that others have had different experiences. I would ask the realtor representing the REO. She should know what the bank will accept.
You can treat these as any other property you would put an offer in on. The banks won’t fix anything, but you certainly can put in inspection clause in there so you can either back out of the deal, or negotiate on price.
Getting utilities turned on for inspections on REO properties can be very difficult, though.
Good point. The contract states that the utilities can be turned on at the buyers expense during the inspection period. Is that necessary though? I am going to get an inspector in the property - and if it has structural issues, termites etc … I should be able to pull out of the contract correct?
Nic, It depends on the inspector if you need the utilities turned on. Some will have the generators that can power the house to check the electrical system, heating and air, etc. If the house has gas appliances then you may need the gas turned on to make sure the furnace works properly. Check with your inspector and see what he needs to do the job right. As for pulling out of the contract if you find some major issues on the inspection: yes, as long as that is specified in the contract. Best of luck to you.
It’s also critical to check the plumbing system on homes that have been winterized in colder climates. Frozen pipes can be very expensive to remedy. I say utilities MUST be turned on and all systems checked before going forward. The bank agreed to split the cost of having utilites restored on the last REO I bought. I thought that ws a fair agreement.
are most of you guys buying reos to fix and flip or cash flow i’m looking into rehabb property and sell but alot of people are telling me there isnt any deals in reos is his true?
Why would they tell you that? There are REO deals out there. Yes, you might be able to get a better deal with a seller, but then again, the bank will keep discounting the property if it doesn’t sell.
Granted there are probably less REOs available, and depending on your area, there might be more competition for them.
I know that Countrywide won’t allow any contingencies. All of the REOs that I’ve looked at have had the utilities on.
Here in San Diego, there are a ton of REOs. The problem is that most of the realtors that BPO them are trying their best to keep the market up by over estimating the price. The good deals go within a few hours.