Don't bank on 'as-is' disclosure
Q. We bought our home from a bank that had foreclosed on the property, and they provided no disclosure statement of defects. They said the home was being sold "as is" and refused to make any repairs. Our agent said banks are exempt from disclosure laws that apply in our state.
Because they were unwilling to make repairs, we saw no point in paying for a home inspection. That was a mistake. Since moving in, there has been a list of plumbing problems, the fireplace needs costly repairs, and we had to buy a new forced air furnace.
How can banks assume no responsibility to disclose problems and defects in the homes they sell to unsuspecting buyers?
A. Situations like yours often occur when buyers purchase a foreclosed property, especially when they forego a professional home inspection. In one sense, it is understandable that banks refuse to make repairs, since they are not responsible for defects in homes they acquire by repossession and because foreclosed homes often have more defects than banks are willing to address.
What seems unreasonable is their exclusive immunity from the disclosure requirements that bind other sellers of residential real estate. This immunity is actually written into the disclosure laws of most states.
Legislative lobbying does have its benefits.
This being the current legal status, it behooves homebuyers to utilize all available means to safeguard their own interests when purchasing property from a bank or other lending institution. A common mistake in this regard is to forego a professional home inspection, simply because the bank refuses to make repairs. Buyers who make this tactical error assume the only purpose for a home inspection is to compile a fix-it list for the seller.
The primary purpose for an inspection is not to assemble a repair list. It is to let you know what you are buying before you buy it. In your case, an inspection report could have saved you a bundle of bucks and a mountain of aggravation. The bank may still have refused to make repairs, but the discovery of major defects could have altered your decision to buy the property at the price you paid.
Although banks may declare "AS-IS!" when they sell a home, the discovery of serious defects sometimes moves them to make repairs or other concessions. In one case, a bank was selling what they believed to be a four-year-old home. A home inspector determined the actual age of the building to be 28 years. In that instance, the embarrassed bank had to adjust the selling price.
When it comes to disclosure, a more respectable stance for banks and other lenders would be to hire their own home inspectors, without being asked or induced to do so. Banks have every right to sell a property without making repairs, but why should they not provide equitable disclosure? Not only could they render fair and honest representation with a detailed inspection report, they could foster public confidence and goodwill. They could demonstrate an interest and concern for consumers in general by acting in good faith, by providing factual and pertinent information to prospective homeowners.
They might even improve the public perception of their industry.
• To write to Barry Stone, visit him on the web at www.housedetective.com, or write AMG, 1776 Jami Lee Court, Suite 218, San Luis Obispo, CA 94301.
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