REO CYA

So…you have a buyer. And your buyer likes a house. But the house is owned by a lender — it’s an REO. And the lender that owns the house tells you in a very polite but very firm tone that while they’d love to get an offer, they’ll expect it to be on their “preferred” agreement of sale that has all sorts of terms and conditions that they want in an agreement.

So far, so good. You work with your client to understand the terms of the contract and the buyer is ready to sign the form, but there’s something nagging at you. Isn’t there something missing?

Odds are, if you’re dealing with an REO contract (or many attorney-drafted contracts presented by unrepresented buyers), there IS something missing. What’s missing is likely to be certain statements or provisions that are required by the Licensing Act.

RELRA has a list of provisions that must be in any agreement of sale where a licensee is involved (section 455.608b). This includes a disclosure of zoning status, the fact that a highway occupancy permit may be required for certain properties, a statement of the role being played by the licensee and notice of the real estate recovery fund. There may also be other provisions (such as a lead paint disclosure) not included in these contracts.

To help brokers cover themselves in these situations without having to remember exactly what needs to be included, PAR has the Broker’s Disclosure Addendum to the Agreement of Sale (Form BDA). This form contains these four mandatory elements, as well as several additional terms that may be helpful to brokers in the transaction. Although some of the provisions are subject to negotiation, don’t let anyone tell you that any of the four mandatory items have to come out. While taking them out won’t cause the transaction to fail, it may expose the broker to later liability even if there was not actual harm in the transaction.