Leading Foreclosure Specialist Outlines REO Risk Management for Real Estate Agents

Lenders are shifting liability of REO (real estate owned) sales to listing and selling agents with addenda that pose greater risk than ever before for buyers of bank owned properties, according to Holly Eslinger, broker of Exclusive Homes and Land, and 2009 president-elect of the Arizona Assn. of REALTORS.

Eslinger was featured luncheon speaker for the Arizona State Women's Council of REALTORS Winter conference today in Prescott, AZ. She has specialized in sale of bank owned properties since the 1980s and issued strong words of caution for agents who represent banks and agents representing buyers. Lenders sell their properties "as is" and create additional liability for brokers and agents who represent buyers in sale of foreclosed real estate, she said.

"There is no recourse for buyers after closing," warned Eslinger, pointing to the importance of sharing bank addenda and disclosures before writing a contract.


Checklist for REO Buyers

1. Buyer Advisory. Documents describe a process that leaves banks free to sell foreclosed assets without property disclosures, and outlines a best practices for buying a bank owned property.
   
   
2. SPDS. There is no Seller Property Disclosure Statement available to buyers of bank owned properties and listing agents are urged to collect all inspection reports gathered during the term of the listing contract and make them available to prospective buyers.
   
   
3. All Lender Addenda. Purchase agreement addenda prepared by lenders' attorneys favor lenders/sellers and shifts the burden of liability to designated brokers. Paperwork changes from lender to lender and it is important for real estate agents to obtain copies of bank addenda so that prospective buyers can review the documents prior to writing a contract. Eslinger pointed to her own company policy about posting bank addenda online for easy access to these documents by buyer agents and consumers.
   
   Bank addenda supersedes the Arizona Assn. of REALTORS standard contract boilerplate, she said, underscoring the importance of reviewing lender documents prior to writing a contract, including language about:
   
   (a) mold
   (b) "as is" condition of property
   (c) purchase contract addendum
   
   
4. Inspections. Eslinger encouraged buyer agents to recommend that buyers tap all inspection resources possible prior to advancing with an REO sale.
   
   
5. Walk through. It is imperative to conduct a walk-through inspection of the property. This gives buyers an opportunity to address substantial changes in property condition and function that happen between contract signing and close of escrow.