Does lender have to disclose known material defects in foreclosure sale?

[Marie T]

Does anyone know if the lender forecloses, do they have to legally disclose or can they sell it "as is" in a foreclosure sale?

I went to an open house in my neighborhood over the weekend and the realtor there was asking if my house had problems with expansive soil as it runs through our neighborhood. When I told her yes, but we have repaired a lot but a lot left to repair too, she said we would have a heck of a time trying to sell it because we legally would have to disclose all known defects which now Chase knows too as I put everything wrong with the house in an addendum to my hardship letter.

I am wondering because I think if they legally have to disclose, it would make my house less attractive to foreclose.

[faith]

Originally Posted by Marie T

Does anyone know if the lender forecloses, do they have to legally disclose or can they sell it "as is" in a foreclosure sale?

I went to an open house in my neighborhood over the weekend and the realtor there was asking if my house had problems with expansive soil as it runs through our neighborhood. When I told her yes, but we have repaired a lot but a lot left to repair too, she said we would have a heck of a time trying to sell it because we legally would have to disclose all known defects which now Chase knows too as I put everything wrong with the house in an addendum to my hardship letter.

I am wondering because I think if they legally have to disclose, it would make my house less attractive to foreclose.

Marie T,
When buyers buys a foreclosure home, they should not be surprised if the house is damaged or need repairs. Banks do not take care of properties once they took possession of the house and that means that the condition of the house may deteriorate rapidly. They normally put in the contracts the word AS IS condition so that no one may be sued for any damages to the property. The buyer needs to inspect everything including property taxes before buying a foreclose homes. Short sale also says in the contract AS IS condition and so is the used car for sale. So buyers beware.!!!

[Marie T]

Thanks Faith - I understand that as far as the "as is"...what I'm talking about if I am trying to get a modification and trying to explain to the bank that my house has structural damages and have alerted them to that, don't they have to disclose that to potential buyers since I have made them aware of it?

I am just trying to point out to Chase why it is more appealing to modify my loan than to foreclose.

[jakelabry]

Yes, I think they do have to disclose it but if the sale is "as is," they do not have to repair it.

[faith]

Originally Posted by Marie T

Thanks Faith - I understand that as far as the "as is"...what I'm talking about if I am trying to get a modification and trying to explain to the bank that my house has structural damages and have alerted them to that, don't they have to disclose that to potential buyers since I have made them aware of it?

I am just trying to point out to Chase why it is more appealing to modify my loan than to foreclose.

Marie,
Yes, I agree with Jake. When the homeowner or banks sell their homes by law they have to disclose everything they know about the house to the buyer. The banks or seller also let the buyer know that it is AS IS condition, no warranty given, no home and termite inspection. If the buyer wants to have home and terminate inspection or electrical inspection done, they have to pay for it and if the inspector recommend to have it repair and the bank or the homeowner does not want to have it repair, the buyer can make a counter offer minus the costs of the repair, that's what my buyer did on my first house.

Hope this helps.

[faith]

P.S.

The buyer or the bank who purchased and now owns the house must disclose any problems before the sale or have them repaired.

Since banks do not care to do much with foreclosures, though, it is more likely it will sell the property in AS IS condition and let the purchasers know the lender will not take any responsibility for anything wrong with the house.

A foreclosure buyers must be prepared for this and have their own home inspection done before closing on the house. If there is a lot of damage, either the price will be negotiated down to take into account repair costs, or the buyers may simply walk away from the deal.

If the lender does not sell it to the buyers in AS IS condition, then that lender might be responsible for making any repairs to the house for damage that was never disclosed to the purchasers during the sales process. The new owners would have to sue the bank responsible for disclosing the damage – and not the former homeowners.

[Marie T]

Thanks for the input...I appreciate it!

I understand about the "as is"....that the bank is not required to repair before selling the house. If they do have to disclose what is wrong with the house, that is what matters to me as I think if they have to disclose they may realize it is in their best interest to do a loan restructure instead of foreclosing.

[Marie T]

I know they are not required to repair anything and with alll the homes banks have taken back, banks do not have the funds to do that.

What I want to know since it is law that all homeowners must disclose all known material defects, are banks under the same law?

[booggs28]

MarieT - I live in ohio - here banks are exempt in having to provide Property Disclosures -

[faith]

Originally Posted by Marie T

I know they are not required to repair anything and with alll the homes banks have taken back, banks do not have the funds to do that.

What I want to know since it is law that all homeowners must disclose all known material defects, are banks under the same law?

Good morning Marie T,
When the banks foreclose on a home, they know nothing of physical condition of the home. Therefore they don’t need to disclose anything about the home. If a buyer comes along and has a home inspection and that person sends a copy to the bank, the bank then has knowledge of the actual condition of home. Once they have this knowledge they are required BY LAW to disclose these conditions to future buyers.

[Marie T]

Thanks Faith....actually, Chase absolutely knows the condition of my home. I sent an addendum with my hardship letter describing all the defects in the house in great detail.

At this point, they have received at least 4 copies of it so there is no way they can say they had no knowledge of it.

I know if you are a homeowner selling your home, you must disclose anything you know that is wrong with the home or risk a lawsuit. That is one of the reasons we are in this mess....I lost my job shortly after we discovered the worst of the structural issues, and although we had exhausted savings to do repairs, there was/is a lot left to do and could not sell because we could not sell for what we owed.

If it is truly the law that the banks have to disclose known defects, that makes me feel they will be more likely to try to work out a modification with me as the house is already about $100,000 underwater without the defects.

We have even questioned the sanity of staying here given what needs to be done even if we get an affordable mod but it is our home.

[faith]

Originally Posted by Marie T

Thanks Faith....actually, Chase absolutely knows the condition of my home. I sent an addendum with my hardship letter describing all the defects in the house in great detail.

At this point, they have received at least 4 copies of it so there is no way they can say they had no knowledge of it.

I know if you are a homeowner selling your home, you must disclose anything you know that is wrong with the home or risk a lawsuit. That is one of the reasons we are in this mess....I lost my job shortly after we discovered the worst of the structural issues, and although we had exhausted savings to do repairs, there was/is a lot left to do and could not sell because we could not sell for what we owed.

If it is truly the law that the banks have to disclose known defects, that makes me feel they will be more likely to try to work out a modification with me as the house is already about $100,000 underwater without the defects.

We have even questioned the sanity of staying here given what needs to be done even if we get an affordable mod but it is our home.

Marie T,
Good morning. If you really wants to be approved for Loan Modification you have to do a good strategy plan. My opinion if it counts is this. When you talk to your negotiator, you can say that it is for the banks's best interest to approve you to an affordable Loan Modification, instead of foreclosing this house. Then tell him or even write a letter to the lender stating that you have disclosed to the banks all the damages in this house. If they decide to foreclose on that house, by Law, the bank has to disclose all the repairs that needs to be done to the future buyers and therefore it will be very expensive to the lender.

One, the future buyer might demand to have all the repairs done.
Two, the future buyer might offer a low price
Three, they walk away. Then the house will be sitting longer in the market to do the steps 1,2, 3 again.

Just a thought and not a legal advice.

God bless you always.

[Marie T]

Hi Faith,

Thank you again, the way you spelled it out makes perfect sense.

So when you say:

"Then tell him or even write a letter to the lender stating that you have disclosed to the banks all the damages in this house",

I do not have a servicer, my loan was with WAMU, now Chase, never sold to an investor. I have not worked with a negotiator, I was working with the Chase Homeownership Center, denied first for insufficient income, then payment raised beyond what it was before and I cannot afford it. I have started working with NACA but they are very difficult to communicate with as they are so busy.

Do you think I need to send it registered mail to both WAMU and Chase so they can't say later they did not get it?

[faith]

Originally Posted by Marie T

Hi Faith,

Thank you again, the way you spelled it out makes perfect sense.

So when you say:

"Then tell him or even write a letter to the lender stating that you have disclosed to the banks all the damages in this house",

I do not have a servicer, my loan was with WAMU, now Chase, never sold to an investor. I have not worked with a negotiator, I was working with the Chase Homeownership Center, denied first for insufficient income, then payment raised beyond what it was before and I cannot afford it. I have started working with NACA but they are very difficult to communicate with as they are so busy.


Do you think I need to send it registered mail to both WAMU and Chase so they can't say later they did not get it?

Marie T,
You should always make sure that the lender get your letter by having it certified or registered mail. You need to email the supervisor or the executive team of Chase explaining in detail your financial hardship. Then mention to them about the condition of the house and how much it will costs them if they foreclose it, that by law they have to disclose those damages to the future buyer if they foreclose your home, so instead of foreclosing, why don't they put you an in affordable loan modification with low interest, 30 years fixed. You have to tell them what you want to happen, otherwise they will be the one thinking of what they want to do with your home. I can't find any email of the executive team of Chase, I heard that it's hard to deal with them. My thoughts and prayers are with you and your family. Be patient and persistence. Moe's favorite line is, the squeaky wheel gets the grease. If you bombarded them with email and letter to a supervisor or executive team you can get hold of, I am sure you will get the help you deserve.

Blessings and take care.