Bank owned homes and their agents: Where does fiduciary responsibility end and human responsibility start?

By
Real Estate Agent with Keller Williams Realty - Lakeside Market Center

Would have loved to have left this sign on the doorOne of my biggest gripes with showing  bank owned homes is this:  The seller (bank, asset manager, Wizard of Oz...) does not have to provide full disclosure on the home.


Heck, they don't even have to provide partial disclosure on anything that has to do with the home.

 



Yes, I get it that they have never lived in the home.

Yes, of course they cannot attest to the every day workings of the mechanical systems.

But...(you knew this was coming didn't you?)

Obvious problems that are noted by a listing agent and forwarded over to the asset manager should be disclosed to potential buyers and their agents before an appointment is set. 

Case in point:   I showed 6 homes yesterday to a buyer client.  3 of them had obvious mold/mildew infiltration.  (I didn't need a test kit to figure that one out for myself.  The signs were obvious, the smell was horrendous as you approached the basement and the staining on surfaces made it impossible to avoid.)  HUD owned homes will have a statement right in the listing remarks if they suspect that a home has mold, or if they have test results that a home has this defect.

If HUD can do it, why aren't the rest of the owners following suit?  

I've talked with several listing agents who handle foreclosures in Macomb County.  Each and every one of them go through the homes prior to listing them, take photos, and forward them to the asset managers of the homes.  In this manner they are able to list the homes at the price they feel will need to be set to sell them.  Since the asset manager of the bank owned properties have photos and detailed descriptions of the homes, why the heck are they allowed to get away with not giving a disclosure?   Why aren't the listing agents making simple disclosure in the remarks section of the listing information sheet available to buyers agents and their clients?  

Is it the fiduciary responsibility of the agent to the sellers to paint a rosy picture of these homes regardless of the possible health effects upon someone viewing the home?

I vote:  Hogwash.

If we walked into a private sellers home to market it for sale and it was obvious that there was an issue with mold or mildew we would tell the seller "You have to disclose this, and it should be put into the remarks".  Put everyone on notice that the mold/mildew is there before they come to view the home. 

I had a young couple with me yesterday, along with 2 children.  (One an inquisitive 2 year old)  I was angry that the children were breathing that air, and worried about the littlest ones breathing after we left. Yesterday was the first time that I wanted to go back to my car, draw up a sign and tape it to the front door.  I didn't, as I don't have the right to do that.  But oh my I was tempted.


© Kris Wales - A Macomb County MI real estate agent



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Re-Blogged 2 times:

Re-Blogged By Re-Blogged At
  1. Gabe Sanders 09/01/2008 06:59 PM
  2. Paul Francis 09/02/2008 06:29 AM
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bank owned homes
foreclosures
macomb county

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Rainer
200,336
Richard Lecinski
Long Realty Company - Oro Valley, AZ

I think agents who do many bank owned listings, for one reason, do them because they are easy. No disclosures, no open houses and the term "Bank Owned"implies they are cheap.

Sep 02, 2008 09:03 AM #76
Rainer
125,603
Hope Goss
Ventura Property Shoppe - Ventura, CA
Ventura Real Estate

Regardless of how busy the listng agent might be - I'd like to be warned of a health issue before entering the home they've listed for sale.

Sep 02, 2008 09:56 AM #77
Anonymous
Les Bolton

Having represented banks with REO owned properties in the past I can tell you the asset managers are typically handling 200+ properties at a time. As a listing agent it is all you can do to get a response from them at times. Here in Texas agents do not fill out disclosure forms the sellers do and institutional sellers who have never occupied the property can't really accurately fill out a disclosure form. If they fill out a disclosure partially they could probably be held liable for what they did not disclose (which most likely would be unknown).

I know it is a foriegn concept to some agents but it used to be that agents previewed properties before they showed them. That way you are actually performing your duty to your buyer clients by not wasting their time. If a property is listed 20%-40% below market you can bet it is because it has issues that need to be dealt with. I would just as soon go into a house with mold issues as one that has pet odors so strong you can't breath and I have never seen a listing agent disclose that in the remarks section of MLS. I would like to see these MLS remarks "next door neighbor has dog that never stops barking", or "my seller is complete pig and never cleans their house". But listing agents will always try to shed the best light on their properties. "Bank owned property priced below market value" equals foundation problems, mold issues, as so on.

If you are representing buyers try previewing the properties beforehand. You can go in and out in 15 seconds instead of wasting your clients time. It is also a good idea to tell your buyers that many people walk away from their homes because they didn't properly maintain them and so bank owned properties are likely to need many repairs. Some banks do address these issues up front, but if they do they won't be priced below market value.

Les Bolton

Stanberry and Associates

Selling Austin and the Hill Country since 1985.  

 

Sep 02, 2008 10:32 AM #78
Anonymous
Cindy Knight

Hi Kris we do have a couple bank agents but the bank they are working with cleans the home up before putting it on the market. Ed and I do not want to be bank agents but we do sell many bank owned homes. Honestly, lately we have been very concerned about our own health. Lee suggests previewing these homes. Think about this - these days buyers here have to view 15-20 homes if 1/2 have mold and we work with 40 buyers a year that's 300-400 homes. Should we be concerned? How about after 5 years?

If the bank/listing agent knows the mold will effect the sales price then he/she has knowledge of a defect and should have to disclose - period.

Sep 02, 2008 11:41 AM #80
Rainer
1,619
Steve Aubertin
Maximum Results Realty - Pittsfield, NH

I agree with diclose, disclose, disclose.

BUT Les Bolton is absolutely right given todays market conditions shouldn't buyers agents be advising their clients that bank owned properties NEED WORK and if they are on a tight budget and cannot afford repairs perhaps they should look at other properties.

Sep 02, 2008 01:10 PM #81
Rainer
339,851
Kris Wales
Keller Williams Realty - Lakeside Market Center - Macomb, MI
Real Estate Blog & Homes for Sale search site, Macomb County MI

Edith:   This is why I brought it up.  If it is obvious, tell someone about it.  How simple is that?

Peggy:  I don't advocate going that far.  If a buyer wants a great deal and is willing to mitigate the issues then it should be up to him/her to do so.  Just let us know before we walk in the door.  That's all I'm asking.

Paul Francis:   Ouch.  I've never heard a listing agent say they are out of the business when all the foreclosures are gone.  That puts a different twist to the level of caring...

Sep 02, 2008 02:22 PM #82
Rainer
339,851
Kris Wales
Keller Williams Realty - Lakeside Market Center - Macomb, MI
Real Estate Blog & Homes for Sale search site, Macomb County MI

Russell:  I'm sure it will pass, but at what cost?  I bet you can tell I'm more than a bit tired of this :-)

Diane:  If a buyer wants to purchase one of these homes I'm not against that.  Good for them.  Just warn us before if there is a potential health issue while viewing.

Steve Homer:   Actually, I think it could be quite easy to mandate.  With obvious evidence of spreading mold make it mandatory that it be noted in the listing remarks and posted on the front door of the property.  Easy huh?  Guess it would be too easy for anyone to implement.



Sep 02, 2008 02:28 PM #83
Rainer
339,851
Kris Wales
Keller Williams Realty - Lakeside Market Center - Macomb, MI
Real Estate Blog & Homes for Sale search site, Macomb County MI

Lyn Sims:   Why do I bring up only foreclosures?  Because those homes are the ones that aren't giving disclosure.  There is no warning before entering these homes even when it is blatantly growing up the walls and on the ceilings.   I haven't seen one owner occupied home this year that has had this problem.  Not one.  And you can bet if it did it would be disclosed.

Renee:  Are you saying that you as a listing agent would have to disclose this on a REO even if the banks didn't?   Wow, I want to move to Las Vegas :-)  I wouldn't have to pack a respirator.

Chris:  I've never shot the messenger.  Yet :-)  Although I'm getting pretty darned close to showing up at some of the listing agents offices and asking them why the heck can't they give one word of warning???  They are happy to tell us that the electricity is off so pack a flashlight so no one breaks a leg.  But not to pack a face filter.   I understand the layers of people and bureaucracy that the agents have to leap through, but one word of warning is all I'm asking for. 

Sep 02, 2008 02:37 PM #84
Rainer
339,851
Kris Wales
Keller Williams Realty - Lakeside Market Center - Macomb, MI
Real Estate Blog & Homes for Sale search site, Macomb County MI

Kathy Anderson:   Frankly, I'm surprised that there hasn't been a lawsuit yet over this issue.  Realllly surprised.

Richard Lecinski:   I don't know about that.  From what I've heard (and seen from agents in my own office) they're a ton of work and stress for them.  Perhaps others have it easier, but not from what I've seen in my area.  But then again, Michigan has led the way for foreclosures unfortunately.

Hope:  Me too.  I don't think I'm asking for too much.  It's not like I'm asking for world peace :-)

Sep 02, 2008 02:41 PM #86
Rainer
339,851
Kris Wales
Keller Williams Realty - Lakeside Market Center - Macomb, MI
Real Estate Blog & Homes for Sale search site, Macomb County MI

Les Bolton:   I fully understand that the bank owners are not required to fill out disclosures because they have never occupied the homes nor could they attest to everyday mechanical issues.  I get it.  I also get that it is my job as a buyers agent to preview as many of these as I can, and I do.  I'm hitting 70-75% of them.  Frankly, there aren't enough hours in the day to preview all of them.  My question is this:  If you, as a listing agent, have viewed the home, taken photos, and forwarded information to the asset managers/banks about the condition of the home, how hard would it be to say to them "Listen, it's got creepy crawly green stuff growing on the walls.  I'm going to let agents know so they are aware before they enter."

My clients also know that the reason the foreclosure homes are priced below market value is because they need TLC.  They're pretty sharp buyers up here.  There is a huge difference though between needing updating (TLC) and needing mold remediation.

Also, as I'm previewing these homes I am being exposed to this.  Not only do I give a darn about my buyer clients and their families, but I do not like the way this stuff makes my eyes water and nose itch and the coughing that follows.

I briefly went through my list today:  I quit counting at 418 homes that I've shown and/or previewed.  Conservatively I'd say 10% of these homes had that wonderful creepy crawly blue-green stuff growing in the basements and in the upper levels.

That's at leat 41 homes that I've been exposed to.  This year.

So yes, I'll keep previewing homes.  But I shouldn't have to bring a respirator (Thanks Patricia, loved that line.)

 

Sep 02, 2008 02:49 PM #87
Rainer
339,851
Kris Wales
Keller Williams Realty - Lakeside Market Center - Macomb, MI
Real Estate Blog & Homes for Sale search site, Macomb County MI

Jean:   I've done that also.  Perhaps I should be more specific "Is there anything growing??"

Cindy:   I just mentioned the same thing in my reply to Les (previewing and our health).  Glad to hear that the asset managers you and your agents work with take care to clean up the homes and eliminate obvious health issues before people come in to view it.  (Yours were probably ones that I haven't had to leave running :-)

Steve Aubertin:   The point isn't about needing work.  Heck, the buyers know that.  It's about the potential health issues of going inside of these homes and not being warned about it.  I can't tell by the listing information if it's there, no one discloses it.  I do preview and am able to keep my buyers out of them for the most part, but what about me?  My health?

Sep 02, 2008 03:04 PM #88
Rainmaker
244,353
Mike Wong
Keller Williams Realty Southwest - Sugar Land, TX
Realtor, GRI, Project Manager

I walked into a bank owned property a couple of weeks ago, upon walking in I had a hard time breathing and felt like the air was heavy and damp. After venturing upstairs I saw the entire ceiling was dark and covered with mold. Some complete walls were covered with mold. I freaked out and ran out of the house immediately, yet my clients stayed in there.

There was literally a layer of 100s of square feet of mold covering the surfaces of the interior of the home, and I cant believe my clients stayed inside and wanted to make an offer. Absolutely insane.

Sep 03, 2008 12:21 AM #89
Rainer
339,851
Kris Wales
Keller Williams Realty - Lakeside Market Center - Macomb, MI
Real Estate Blog & Homes for Sale search site, Macomb County MI

Mike:   If a buyer wants to purchase one of these homes they can get a heck of a deal.  But I would bet cash money that you would have liked to have been warned about the mold before entering.  That's all I'm asking...

Sep 03, 2008 06:04 AM #90
Rainer
1,619
Steve Aubertin
Maximum Results Realty - Pittsfield, NH

Kris: I agree completely with your concerns, However the market is flooded with these types of properties. As a professional buyers agent we should be able to recognize these trends and take the necessary precautions. 

I'm not suggesting the listing agent does not have the responsibility to give buyers agents and buyers honest information. I Simply saying they are not doing so why not use the listing agents laziness to the buyers and buyers agents interests.

Most of us know what a bank owned property looks like on the mls. Limited information and vague remarks. If a buyer asks to see this property explain to them that there may be a mold problem and it may be dangerous and pack a couple of dust mask and be the hero.

You are right you should not have to do it, but when all you have is lemons make lemonade.

Sep 03, 2008 07:04 AM #91
Anonymous
Anonymous

Hi Kris,

This is Jacob Mermin in Lee county Florida. I am a full service inspection company which means I am one of the few inspection firms in Sw Florida that can do a certified home inspection, mold inspection,air quality inspection,and finally a complete certified hvac inspection. This is a big problem. Right now I am working with someone who has 38 homes from a bank that have all these problems and more. First of all forget about this bleach thing. It might work on a solid surface counter top, but it won't work on any type of porous material. Here is what you need to do. Make friends with a mold/home inspector and look at these homes before you bring your clients. I am on several realty teams and I look at homes prior to showings all the time. These problems are manageable. Real estate professionals must remind their clients to never ever buy or sell real estate with out first having a home inspection. Now you also need to have a mold inspection tool. I work with mortgage brokers and for a FHA loan they are recommending for the customers protection have a home inspection done. We all have to be pro-active. Go look at these homes with an inspector before you take your client. Have all the information and explain the problems to your client and assure them that these issues are manageable. Be a hero to your client by giving them disclosure up front and stop them from waisting their valuable time Worrying about the things that can be fixed. I will go with an agent anytime to look at properties and then go back with rubber gloves and masks with their clients to explain any issues. Second, tell your sellers to have their properties inspected before it's put on the market. Go to my website at www.mermininspections.com and take a look at my Move In Certified Program.

Jacob Mermin CHI/CMI

239-243-7322

 

Sep 03, 2008 09:47 AM #92
Anonymous
Amy Boxer - Welcome Home Furniture Rental & Staging

What a great post Kris.  You have pointed out yet another fall out from this mortgage crisis disaster that needs to be fixed.  Thank you for taking this issue on.

Sep 03, 2008 01:33 PM #93
Anonymous
Anonymous

Someone should pass a law requiring landlords, banks, and other entities that have not lived in the home at any time during the previous three months to get a pre-listing inspection by a thorough, extremely competetent home inspector. That's the best form of disclosure there is.

Sep 04, 2008 02:35 AM #94
Rainer
339,851
Kris Wales
Keller Williams Realty - Lakeside Market Center - Macomb, MI
Real Estate Blog & Homes for Sale search site, Macomb County MI

Steve:   I picked up a pack of 20 (filters) from Home Depot this week.  They're on the front seat of my car.  After reading all of the replies to this post there seems to be a general consensus from buyers agents:  Disclose, warn, give a heads up at the very least.  From REO agents:  Sorry, pack a mask. 

This really has been an eye opening discussion.    Thanks for sharing your thoughts Steve.

Jacob:   Having a home inspector come through with me on previews of these homes to check for mold isn't feasible.  We still have to go inside of them, we're still exposed without warning.  Of course I recommend a home inspection to all my home buyers as that is the only way for them to fully judge the "as is" condition.   Also, most of my buyer clients are not cash purchasers.  Active mold is something that will halt a mortgage application in its tracks.  Why have my clients offer to purchase on a home when they don't stand a prayer of getting a mortgage?

Amy Boxer:  You're welcome.  I would suppose staging wouldn't help properties like this unless they were remediated prior to you coming in!

Russel:   Bingo!   But I bet that won't happen until the "foreclosure crisis" is over with.

Sep 04, 2008 05:44 AM #95
Anonymous
Debra Higgins

And they want to change the law to allow banks to actual act as real estate agents. Sheesh!

Debra Higgins

Sep 09, 2008 08:34 AM #96
Rainmaker
238,236
Pat Fenn
Marketing Specialist for CJ Realty Group/Cindy Jones Broker - Springfield, VA

Came across th is old post and remember the days when it seemed every REO we showed was  a mess.

Dec 28, 2012 04:36 PM #97
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