Bank-Owned Homes
Amanda Bloomgren, Attorney at Melchert Hubert Sjodin, provided the answers.
Question
My husband and I are negotiating to buy a bank owned home. The bank wants us to agree to buy the property "as-is." Is it okay to buy real estate "as-is"?
Answer
It is standard for bank owned homes to be sold "as-is" and does not necessarily mean it is damaged. It merely means the property is being sold without any representations and warranties as to condition or title. The property could have little to no problems. But some properties, especially those that stand empty during a Minnesota winter, may have significant problems. You are always taking a certain level of risk when purchasing a home "as-is," but there are many steps you can take to protect your interests.
Be sure to negotiate for an inspection contingency in the Purchase Agreement. A properly drafted inspection contingency provides a window of time to have the property inspected. An attorney can both review the purchase agreement and help negotiate and draft the proper contingencies.
Make sure you have an inspection. A proper inspection will alert you to most of the physical problems relating to the homes condition. Be aware there is no government or industry regulation of inspectors. This means anyone can call themselves an inspector. Ask your real estate agent or friends for a reputable referral.
Get an owner's title insurance policy. Your lender will require a lender's title insurance policy. Many homebuyers think this also protects them against defects in title. It does not. It is worth it to spend the extra money for an owner's title insurance policy.
Ask around. Talk to your potential new neighbors. You can also contact the former non-bank owner of the property. You might be surprised what they are willing to share. Be aware, information provided by the former owner, neighbors or anyone else are not representations or warranties, but you may learn valuable information about the history of the home.
Lastly, rely on your instincts. If at anytime the deal seems too good to be true, it likely is.
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