The REO addendum (provided by the REO Selling Bank, which supersedes any terms in the standard VAR Contract) usually allows for an “Inspection” by the Buyer. The “Inspection” clause may allow the Buyer to terminate the Contract if the Buyer is not happy with the inspection results.
In performing the inspection, there are several matters to be concerned about. First, there is usually a quick deadline for performing both the inspection and reporting the results and/or terminating the contract. This deadline is usually “ten” calendar days, which starts from the date of contract ratification.
Another problem is with the well, septic and termite inspections (which the REO will not provide). The well, septic and termite inspections may be included under the REO inspection clause, which means these reports may need to be performed within the “ten” calendar day requirement for inspections. This is completely contrary to the normal practice of performing these inspections within the last week before closing.
The basic advice is to read the REO Addendum carefully, especially regarding any inspection terms and deadlines. It’s my experience that most REO Sellers maybe flexible with some of these deadlines through the use of subsequent addendums. Just be cautious!!