Profile picture for bhoskins5

REO Property Information

My wife and I are currently in the market for a new home. This past weekend we came across a home we both fell in love with.  However, the home is owned by US Bank and is being sold as part of the Wells Fargo REO Program. So, here comes the fun part... After viewing the home and falling in love with it, our real estate agent began asking the listing agent questions.  The listing agent said that the previous owners left the water running on the second floor, when they left the home.  The second floor was flooded, and as a result came falling down to ground level.  The real estate agent said everything was replaced and the entire second floor was redone.  When asked who did the work, the real estate agent said "Home Depot."  However, upon checking with Home Depot they do not do all the work that was needed to repair this home. My wife and I have a lot more questions!  However, we are finding it almost impossible to get any answers.  Our main concern is the structural integrity of the home, as well as health concerns due to possible mold from the flooding. What is the procedure when the bank has to make repairs like this? Do they have to make sure the home is repaired and brought back to code?  Do they have to ensure that the property is free of mold?  Before submitting an offer all homebuyers have to sign an owner-occupant addendum, stating that you will occupy this property within 30days after closing and remain in the property for at least 1 year. Can they make homebuyers go through this if the house is not structurally sound or mold issues? Finally, we understand that the bank is exempt from disclosing certain information.  However, are they exempt from disclosing major repairs and mold?

  • July 08 - Dayton
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Answers (3)

Profile picture for rfcollett
Buying an REO home can be a bit tricky.  I bought five of them in the past year.  Not only are banks,(fannie, Freddie, hud, etc.) exempt from making residential property disclosures, but they almost always insist on selling the house "As Is". More importantly, I have seen several occasion where the bank "cleans up" a house in ways that hide the defects.  For example, cleaning and painting walls might remove all evidence of surface mold, without curing the defect.  Even a normal "property inspector" will not always find defects that have been covered up.  The problems you describe are potentially very serious.  One of the other contributors suggested you hire your own 3rd party inspectors. This is essential.  A general home inspector will have standard caveats in his report that describe items that are "beyond the scope" of the general inspection. You will need to bring in a trustworthy structural contractor or an inspector who is a specialist in these matters. Also bring in someone who can test for mold. I would insist on seeing the actual contract for the "home depot" repairs together with the warranty.  Was the contractor licensed and bonded?  Probably not, or else they would have been promoting this as a selling feature. 
  • July 13
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Profile picture for craigfial
I'm in the process of negotiating a transaction with Wells Fargo now.  Their contract requirements are insane and also restrict my client relationship which I will file a complaint with the Florida Banking Commission.
Regarding your situation.  You can only make an offer based on what you know to be true and accurate.  You should have at least 15 days inspection period for a foreclosure property that has been renovated.  During that time,you have a right to do a complete inspection and evaluation of the workmanship.
You can also ask the seller for receipts or who performed the work.  The seller is NOT exempt from disclosure laws. 

If this was a flip from an investor, I would be a little more concerned about quick fixes to maximize profits, but Wells Fargo could have much more liability if work was not completed properly.

You can also look to see if they pulled any permits for work.  If the work required structural, electric, or plumbing, there should be a permit.

Lastly, if you make an offer. MAKE SURE your agent calls Wells Fargo to make sure the offer was received. I'm dealing that an agent who claims to have submitted the offer, but Wells has no record of it. 
  • July 08
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Profile picture for JoshBarnettREIB
Hire independent inspectors for every issue that you have with the property.  Do not trust outside sources, hire your own inspectors to answer your questions. 
  • July 08
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