I just received a counter offer back on a Bank of America property (formerly Countrywide) with a new twist that I haven’t seen before in REO contracts. Countrywide officially became Bank of America Home Loans about two weeks ago. I’ve sold quite a few Countrywide REOs and was used to how they did things. However, it appears that the switch over to Bank of America has changed some things.
This counter offer indicated that an “over list price offer shall not be contingent upon property appraising at purchase price.” So, if you bid over the purchase price, you must be able to and willing to pay that price regardless of what the property appraises for. On the one hand, this may discourage buyers from overbidding properties and then hoping that the appraiser will save them from their own bad judgment. Also, some buyers bid way over what is reasonable as a strategy and then use the appraisal to end up paying a price that other bidders most certainly would have been willing to pay. A clause like this may cut down on that type of behavior.
However, where buyers bid up a property $5,000 or $10,000 over current values in an effort to win a bid in this competitive market, their fate may rest on that particular appraiser’s viewpoint of whether our market has stabilized or is still declining. For buyers who are not cash heavy, and cannot make up the difference, this can place yet another obstacle in front of them.
REO contracts are notoriously one sided in favor of the bank, but I had not seen this particular term in another REO contract until now. Ideas in the REO world tend to spread like wildfire; once the bank’s in house counsel learns that another bank is writing in a particular term they many times want to toss it into their standard agreement as well — after all why not? So, if this catches on, we may unfortunately see more and more of it. I hope it is not a sign of more to come.
I specialize in helping people buy foreclosed properties here on the Central Coast. If you would like a list of bank owned properties (REOs) in the Santa Maria, Lompoc, or surrounding areas, send an email request to me at email@example.com. Or give me a buzz at (805) 878-9879 and I will set up a personalized tour of homes for you.
Tni LeBlanc, JD, M.A., e-PRO
Broker/Owner, Mint Properties
(805) 878-9879, tni@MintProp.com
*Based on the information from the Central Coast Regional MLS. Neither the Association, the Multiple Listing Service, or Mint Properties guarantees or is in any way responsible for its accuracy. Data maintained by the Association or its MLS may not reflect all real estate activity in the market. Buyers and sellers are advised to consult with their own attorney for legal advice — this blog does not offer legal advice.