The other day I wrote a post on property disclosures but wanted to expand that post in regards to bank-owned properties.  Our Oregon Association of Realtors® has this to say about ORS 105.465 and property disclosures:

In most cases, residential property sellers in Oregon must provide a Seller’s Property Disclosure Statement to each residential buyer who makes a written offer.  The form used by the seller is mandated by state law.  The seller’s representations regarding the property are based upon the seller’s actual knowledge at the time the disclosure statement is made and are not the representations of any financial institution that may have made or may make a loan pertaining to the property, or that may have a security interest in the property, or any real estate licensee engaged by the seller or buyer. Licensees are not responsible for misrepresentations by the seller unless they know of the misrepresentation and fail to disclose it. 

A buyer should carefully review the seller disclosures and verify, or ask their licensee to verify, any statements of concern.  REVIEW OF THE SELLER’S PROPERTY DISCLOSURE STATEMENT IS NO SUBSTITUTE FOR PROFESSIONAL INSPECTIONS. 

Here in Oregon, sellers may claim an exclusion and are not required to complete a property disclosure under ORS 105.470 only if they qualify under the statute in these instances:

• The first sale of a dwelling never occupied, provided that the seller provides the buyer with the following statement on or before the date the buyer is legally obligated to purchase the subject real property: “THIS HOME WAS CONSTRUCTED OR INSTALLED UNDER BUILDING OR INSTALLATION PERMIT(S) #___, ISSUED BY_____.”
• Sales by financial institutions that acquired the property as custodian, agent or trustee, or by foreclosure or deed in lieu of foreclosure.
• Receivers;
• Personal representatives;
• Trustees;
• Conservators; or
• Guardians.
• Sales or transfers by governmental agencies. [1993 c.547 §7; 1995 c.198 §1; 2003 c.328 §5]

From Phyllis Harb in Los Angeles come these interesting scenarios which are happening in our local Portland real estate market with bank-owned properties as well:

1)  A homeowner contacts their lender for a loan modification, they complete the necessary paperwork and to validate a lower value might provide the lender with information regarding the condition of their home.  The lender denies the loan modification; the homeowner loses their home through foreclosure.

The lender lists the home with a local Realtor© as a foreclosure. The new buyer moves in and was never informed of the former owner’s claims (or even written reports) regarding the condition of the home.

2)  A home is listed with a local Realtor© as a short sale.  A buyer is found and escrow is opened.  This buyer conducts a thorough inspection of the home.   After the inspection, the buyer asks for a credit and the inspection report is forwarded to the lender. The lender/seller refuses to renegotiate and the buyer does not complete the sale, the homeowner loses their home through foreclosure.  The new buyer moves in and was never informed of the written reports regarding the condition of the home.

3)  A homeowner has major damage to their home caused by fire, flooding, mudslide or ???.   Their insurance carrier pays a claim, and because the claim is over a specified dollar amount the check must also be endorsed by the homeowner and the lender.  The check is endorsed, the lender has a record of the claim.  The homeowner later loses their home in foreclosure. A new buyer moves in and was never informed of the written reports regarding the condition of the home.

Just be aware that the house you thought was a deal because it was a bank-owned foreclosure, may become the nightmare money-pit you never wanted or could afford and; ultimately, isn’t such a good deal afterall.

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