Buyer Beware of Real Estate Seller Mandated Addendums
Since the housing bubble burst the market has been saturated with homes that have been foreclosed on. A substantial number of homes presently on the market are owned by banks or other lending institutions. While the current market represents a great opportunity to prospective home-buyers, there are substantial risks involved especially when purchasing a home from a bank. Banks generally attempt to insulate themselves from any liability to a prospective buyers and frequently employ a mandated addendum after allegedly acceptance the sales contract submitted by a buyer.
A bank owned property listing frequently includes provisions such as “Seller Special Sales Contract (Form #2043) required. Addendum required after terms of sale are agreed upon”. Special Sales Contract Form #2043 is a St. Louis Association of REALTORS and Bar Association of Metropolitan St. Louis approved contract, and does not contain clauses which may place an inexperienced buyer at a grave disadvantage.
If the seller agrees to the offered price, the seller may verbally accept the buyer’s offer, but at the same time, submit a so-called “Addendum” which may not even be signed by the seller. It is against Missouri Real Estate Rules and Regulations to submit an unsigned counter-offer. The buyer may then be instructed to sign and initial the “so-called” Counter Offer Addendum, and to return it to the seller within a short period of time. By signing the Addendum which has not yet been signed by the seller, the buyer commits him/herself while the seller is not committed and is still free to sell the property to a higher bidder. The so-called Addendum is not an addendum at all but under its terms may supersede the local purchase contract/sales contract submitted by the buyer.
The addendum also may include a provision stating that the buyer has had the opportunity to consult with its legal counsel, and failure to understand the legal effects of the addendum is no excuse. The buyer is frequently only given a short time period to sign and return the so-called Addendum, and it is unlikely that the buyer actually obtained legal advice or understood the consequences of signing the Addendum.
The addendum also may include and “AS IS” clause. Under Missouri law and Real Estate Rules, an “AS IS” clause does not relieve a seller or its agents from disclosing known defects or problems with a property.
The addendum may also provide that the buyer acknowledge that he/she had reasonable time to inspect the property. CAUTION! In most instances the addendums provide for only a “ten day” inspection period from the date of final acceptance by the seller. Ten days is simply not enough time to fully research and inspect a property. HUD allows buyers fifteen days. Buyer Beware! if the seller refuses to allow additional time to perform time consuming and necessary inspections.
The purchase of a home is one of the most important decisions one makes. Do not let your dream home become your nightmare.
