Mar 9, 2012

Tip 10-2012: Termite, Well and Septic Reports for "REO's"

Tip 10-2012: Termite, Well and Septic Reports for "REO's"

Last week's Tip discussed similar issues for Short Sales.  This week I want to focus on REO's.  If a Purchaser is buying an REO property, the REO Seller will usually not pay for any of these inspections.  Therefore, it is up to the Purchaser's Realtor to order the termite, well and septic reports.  The usual REO Addendum provided by the REO Seller, requires that all inspections must be completed within ten days of final contract ratification.

Accordingly, do not forget that the termite, well and septic reports are also required within the same ten days.  Normally the REO Seller claims they will not make any repairs as the real estate is being sold "as is."  If you do obtain these reports within the correct time limit, the Purchaser is still able to terminate the contract due to a failed well, active termite infestation or significant mold presence.  Additionally, armed with these reports, it may be possible to negotiate a credit or a repair from the REO Seller as they still want to dispose of the property.

A new issue with the termite, well and septic reports concerns timing of payment; when does the Purchaser have to pay for the cost of these reports?  In the normal course of business the termite company would bill the settlement agent and expect to be paid at settlement.  Now with the possibility that the REO Purchase "may go South," several local termite companies are requiring that they be paid in advance by the Purchaser.   

It is a good practice tip to warn the REO Purchaser that they may be asked to pay for these reports by a credit card or check prior to the actual inspection. 
Please contact me at 434-951-0858 or if you have questions.  Thanks for allowing us to send you these tips.    

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William D. Tucker, III 
Charlottesville 434-973-7474 | Lake Monticello 434-589-3636  

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