Rhode Island Foreclosures for Sale
Tuesday, September 16th, 2008
One of the most often misunderstood legal topics in real estate is the concept of “disclosure”. The laws change constantly and this leaves agents and brokers as well as buyers and sellers completely confused. This also applies to Rhode Island foreclosures for sale.
Throughout the 1960’s the realtor always represented the seller. The law regulated this and real estate agents were required to represent the seller exclusively. In those days the term “let the buyer beware” was the order of the day and agents and owners were not required to “disclose” any of the properties defects. It was tough luck if the buyer did not notice a major defect prior to the purchase of the property and there was little or no recourse.
During the time that has elapsed from the 1960’s to date, thousands of court decisions as well as state and federal laws have affected disclosure procedures. There has been a complete 360º turnaround and from “let the buyer beware” it has become “let sellers and their agents beware”. The law seriously frowns on any homeowner who fails to disclose defects in a property to a buyer. In terms of Rhode Island foreclosures for sale the same tenet applies. The bank or lender has foreclosed on the properties mortgage, purchase the property on auction and is now the legal owner of the property.
The sellers “agent” is also responsible for disclosure of any serious defect in a property and cases have been documented whereby agents have been successfully sued for non disclosure of serious defects. The problem arises in construing which defects are “serious”.
By means of an independent appraisal the investor in a Rhode island foreclosure for sale will have some idea of the value of the property in question and if it has any defects. On the other hand, by inserting a “contingency clause” in any offer to purchase, the investor is also able to protect himself. It is highly unlikely that the lender or their agent would fail to disclose any serious defects to the property, because according to the law, this is not allowed. But by use of an evaluation of the property, the investor can rest assured that they will not be in a position to lose.
A typical example of a contingency clause might read as follows, “This purchase is contingent upon receipt of an electrical, mechanical and structural inspection, as well as a condition report to be performed by (Inspection Company). The cost of this inspection is to be met by the buyer and performed within seven days of signature to this agreement. Should the inspection report contain any indication of defects, either structural, mechanical or electrical, the seller has the right to (A) correct the defect, (B) return the buyers deposit and negate the sale, (C) Negotiate with the buyer on correction of the defect”.
In this way the investor will protect himself from any serious defects that have not been disclosed to him.
