- February 14, 2010
- Posted by: Christopher Hanson
- Category: REO
The Purchase Agreement
You may think that that CAR form Residential Purchase Agreement you know so well will be the form of purchase agreement used in the transaction. Right up until the time you get a 12-page Counter Offer from the bank. That Counter Offer overrules many of the protections in the CAR RPA form. You read it, and re-read it. Then you go talk to your client, the buyer. You start explaining the differences in the terms. You start walking them through each new term and condition and explain the meaning and consequences of each new provision. You have now begun practicing law without a license. And, if you thought the penalty of doing general contractor work was bad, just wait till the lawyers get hold of you.
The consequences of the contract form provided by the bank is just not something you, as a broker/agent, are allowed by law to discuss with your client. Tell them to seek advice from a
lawyer. Give that advice to them in writing. Tell them to think of it as a “legal inspection” just like a termite inspection, or a roof inspection. After all, they are getting a ‘bargain’ when buying the REO property in the first place. This legal review is just an additional cost of doing business. One that can save them tens of thousands of dollars later.
Banks are selling off tens (hundreds?) of millions of dollars of real estate. They have paid their lawyers tens (hundreds?) of thousands of dollars to draft purchase agreement forms that the bank will use in each transaction. The banks are NOT your friend. The bank’s lawyers certainly aren’t your friends.
What are some of these “bank terms?”
Disadvantageous terms (for the buyer) include, but are not limited to: mandating substantial down payments, liquidated damages clauses, forcing the buyer to prequalify with the selling bank, refusing to pay any closing costs, refusing to provide any disclosures, requiring hold-harmless agreements, requiring the buyer to waive certain rights while maintaining all of their own, charging per-diem fines for any delay in closing, not allowing any buyer inspections or contingency periods. And this isn’t a complete list.
Let’s not forget the infamous “as is” clause. A bank will try to get the buyer to waive any right to make claims for intentional withholding of known material facts, and then compel the buyer to agree to buy “as is.”