Dear Michael: On an REO sale, who is responsible for all the unpaid HOA? Is it the lender selling the unit or the HOA who has to assume the loss?
Answer: REO (real estate owned) is a class of property owned by a lender – typically a bank, government agency or government loan insurer – after an unsuccessful sale at a foreclosure auction. As soon as the lender repossesses the property, it is listed on their books as REO and categorized as an asset (non-performing). The HOA must absorb monetary loss on anything pre-foreclosure, but once the lender repossesses the property, it then becomes the REO’s responsibility for all current dues.
The first trust deed is in favor of the lender. The financial institution that holds the mortgage is the first to get paid if there should be any monetary amount left over from the sale. Unfortunately, this is rarely the case as foreclosures usually happen when the mortgage exceeds the value.
Dear Michael: I was in escrow on a home when I found out through my home inspection that there is a serious structural problem. I am still within my contingency period. Can the seller refuse to sign the release of earnest deposit? And if they did, what will happen to my deposit?
Answer: If the seller refuses to sign cancellation instructions and the buyer is within the contingency period, then the seller can legally be at fault. You will both need to sign cancellation instructions to release your deposit. If you have a Realtor representing you, he/she will make the utmost effort to have the seller sign the release form in a timely manner. The last thing the seller wants is to have a home tied up in escrow with a buyer who does not plan on purchasing it. It is not to the seller’s advantage to procrastinate signing the release form. The seller will want to put their house back on the market as quickly as possible so he/she can work on getting the next buyer.
If a seller refuses to release the deposit, then it would signify mediation and possible arbitration of dispute. For the duration of the time it takes to resolve any discrepancies between buyer and seller, the seller cannot sell the home to anyone until the dispute has been resolved. It is imperative for a buyer to be satisfied with the property before removing contingencies.
Dear Michael: We did our home inspection and want to request that the seller credit us for repairs. How can we find out what the total cost of repairs? We want to ask for a credit before the close of escrow?
Answer: Per the CAR (California Association of Realtor) purchase agreement, you have a total of 17 days to complete your investigation of the property condition. During these 17 days you can take as much time needed to have all of your specialized (structural, mold, sewer line, etc.) inspections completed to satisfy you.
Once you receive your reports, make sure to read them attentively. Be fair with the seller when asking for a credit; this is not a time for negotiating the price of the house – that task has already been completed. If you cannot determine the exact cost for repairs, consult with a contractor or go online and do some research. When submitting your request for repairs you can either ask the seller to repair the defective items or you can ask for a credit in the amount that it will cost to repair. This amount is usually applied towards your non-recurring closing costs. The seller has a few options with which to respond to your request: He/she can say no to all, agree to partial credit and repair or say yes to all. Approximately 20% of properties fall out of escrow due to disagreeable circumstances related to the physical home inspection.