Tip 8-2014: Termite, Well & Septic Reports for REO's

If a Purchaser is buying an REO property, the REO seller will usually not pay for the termite, well, and septic reports. Therefore, it is up to the Purchaser's Realtor to order the necessary inspections within the proper time frame. The reports are valid for 30 days, and the usual REO Addendum provided by the REO seller requires that all inspections must be completed within ten days of final contract ratification.

Even if the contract is amended to show that the reports will not be provided, some lenders will not allow a closing without those reports. Accordingly, the best practice is to determine if the reports are necessary for closing and to communicate that information to all parties involved in the closing. Ordering the reports at the last minute can cause issues/delays with underwriting approval.

Remember, though, that the REO Seller normally claims they will not make any repairs as the real estate is being sold "as is." If the reports are obtained within the correct time limit, the Purchaser is still able to terminate the contract due to failed well, active termite infestation, or significant mold presence. However, it may be possible to use those reports to negotiate a credit or a repair from the REO Seller as they still want to dispose of the property.

The bottom line is that the timing of when to order the inspections can prove to be tricky when dealing with an REO property. Yet, if communication lines are open, parties can work together to ensure that this detail of the closing does not slip through the cracks.

 
Contact me at 434-951-0858 or Tucker@TGBLaw.com if you have questions.

William D. Tucker, III
Tucker Griffin Barnes P.C.
Charlottesville, VA
434-973-7474
www.TGBLaw.com