There are so many loopholes and bear traps that these REO banks put their documentation when buying foreclosed properties. Here is just one clause that I use to protect my buyers as much as possible:
Buyer and seller agree that if property is condemned, loses its zoning or rental license, has new code compliance orders issued, or otherwise changes status with any governmental jurisdiction prior to closing, the buyer may cancel this agreement by written notice to the seller’s agent and all earnest money will be returned to the buyers.
This clause is especially important when dealing with vacant properties in Minneapolis or Saint Paul. Occasionally between the accepted offer and the closing, the city can come in and slap the property with a vacant building fee or more code compliance. You want your customer to have an out if those costs could be too high.
3 comments
#1MN PropertiesFebruary 20, 2009, 8:38 am
Great post Scott. Have you ever had a bank refuse to sign this?
#2Tenant ScreeningAugust 11, 2009, 9:01 am
Hey Scott,
In my experience, usually the sales contract goes out and get signed, and then the bank sends their huge addendum with all their verbiage which, since signed after the sale agreement (which would include this clause you recommend I presume) would override this clause if they had verbiage to the opposite.
Where in the sales process to you inject this? With a buyer’s addendum *after* the bank addendum is returned?
#3Scott FicekAugust 11, 2009, 9:07 am
I put it in the original PA. I could argue that nothing in the bank addendum supersedes that clause.
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