- August 29, 2018
- Posted by: Mike Kelly
- Categories: DRE, E&O Coverage, Foreclosures, Real Estate, REO
I’ve been harping on this one for a while, and here’s an example of the ‘relationship’ between Banks and REO properties, and the brokers that serve them.
Abby Agent of The Brokerage Inc gets a listing from Chase of America Fargo to sell a former auto-body shop. Her on-site inspection reveals oil stains all over the place, and the property just looks like one hot mess. Abby asked the Bank if it has any environmental assessments. The Bank sent one to her – along with a “confidentiality agreement” insisting that she not disclose the report.
Abby began wondering if her “actual knowledge” – from having received the report – would mean she had to disclose the report, and decided to check with the local municipality to see if it had any record of environmental ‘issues’ with the property. Abby sent the report to the municipality to help it ID the property and in its evaluation. The municipality came back with an “all clean” report. Whew !
The municipality also sent the “all clear” letter – to the Bank.
Who sued Abby for disclosing the report !
The Bank sued for $50,000 in damages.
Man, oh Man.
The Bank tried to hide the report.
But then disclosed it to the agent.
With instruction not to disclose it to anyone else.
What the … heck?
Abby has actual knowledge of the report. She HAS to disclose it to prospective purchasers.
The Bank knows that.
If she fails to disclose it – she (or her E&O carrier) will pay for the clean-up.
If she does disclose it – she (or her E&O carrier) will (as happened here) write a check to the Bank / client.
What do you do?
You walk away from that listing; or you demand the release of the report from the Bank.
Think about all the BPOs floating around out there.
Think of all the problems the Banks knew about in all those Foreclosure properties they off-loaded after a coat of paint.
It applies to commercial properties too.