Seller’s Disclosure is Required!
It seems like the banks that are selling the foreclosed properties (REO banks) are trying to rewrite Minnesota law! I am constantly bombarded by their version of purchase agreement and 100% of them require the buyer to sign a “bank addendum” after they accept the offer.
Many of these REO banks also believe that they are not required to sign a seller’s disclosure or the seller’s disclosure waiver. Minnesota Statute 513.52 -513.60 (Seller Disclosure law) requires a property owner of an existing residential property (including banks selling bank-owned foreclosed properties) to make a written disclosure to a prospective buyer, prior to entering into a purchase agreement, including all material facts of which the seller is aware that could significantly or adversely affect an ordinary buyer’s use or enjoyment of the property or any intended use of the property of which the seller is aware.
The Seller Disclosure law does allows a buyer to agree to a waiver of the seller disclosure requirements under Minnesota Stat. 513.52- 513.60. Such a waiver must be in writing signed by the buyer and the seller. Often the bank will argue that they are exempt from signing anything because they have never occupied the property or because the property was acquired through foreclosure.
Other times the bank (and some short sale sellers) will claim the buyer is agreeing to buy the property “as-is”. Selling a property “AS-IS” DOES NOT eliminate the seller’s obligation to make required disclosures regarding the property. A seller is still required to give, and a prospective buyer still has the right to receive, the required written disclosures from the seller even if the seller is demanding that the property be sold “AS-IS.” The “AS-IS” is not a “waiver” of any disclosures that are required by federal state and local government regulations to be provided by the seller.
So if you are buying properties in Minnesota, make sure you demand to receive the seller’s disclosure. Even though the waiver may not tell you anything, it is still your right to receive it.
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This is a great post Scott. Albeit, most banks continue to play by their own rules and it will always be a “buyer beware” market when it comes to buying an REO.
A good Realtor will advise his/her client to check out the property with their inspector FIRST. After that process and the buyer is OK with it, it’s the buyer’s problem if there are issues. Usaully, not a big deal. But, make sure to give the buyer plenty of time on the p.a. to back out. Most folks know that in a bank owned property situation, it will be the buyer’s issue. Better beware of city inspections, assessments, liens, etc. One can only be so careful! Even after closing, there may be “hidden” assessments due to errant title companies. It can be a true nightmare to unravel the city assessments from the past. Seller’s diclosures and 311 will only take you so far.