For those of you who are planning on writing an offer on a bank-owned/foreclosure property, know this…certain banks such as IndyMac will not pay for any of your discount or "buy-down" points. IndyMac and certain other banks will send you an "addendum" after the contract and bank addendums have been signed (aka ratified) with several provisions in it, one of them being:
"Seller's closing costs not to pay for discount points and/or buy down points."
What does this mean to you as a buyer? It means that you'd better make sure you plan on paying any discount or "buy down" points out of your own pocket if you're trying to buy an IndyMac owned foreclosure property.
What if the bank agreed in writing to pay ______ amount in seller closing cost assistance and part of your closing costs is a buy-down point(s)? Even if these points are part of your closing costs which the bank agreed to pay for as part of the contract and bank addendum, the bank will refuse to pay for them.
Is it starting to smell fishy in here? Keep on reading, the smell gets stronger.
The person authorized to initial and sign the contract and bank addendums on behalf of the bank tends to forget to initial the contract in 2 or 3 places almost every time.
This brings up several questions:
- If the offer was already ratified, is the "addendum" really just an "ammendment"?
- If the offer was already ratified, does the buyer have to sign and agree to the "addendum"?
- If the buyer refuses to sign the "addendum", does the bank have the right to not move forward with selling you the property?
- Is the person authorized to initial and sign for the bank accidentally or purposefully leaving a few initials missing so one could argue that the contract wasn't technically "ratified"?
- Is the bank using the missing initials and "not technically ratified" as a way to coerce a buyer into signing the "will not pay for discount and/or buy down points addendum" and/or leaving the bank a way out of the contract?
- And lastly, is what they're doing right or wrong? If wrong, what can be done to stop it from continuing to happen.
I am not a lawyer and therefore will not get into legal-ease. This is a matter that should be referred to a lawyer for clarification and guidance.
What I will say is that I personally believe and it's my personal opinion that it doesn't seem right for a seller to accept and agree in writing to an offer that includes seller closing cost assistance and then come back later and say, "but I won't pay any discount or buy down points as part of the closing cost assistance I originally agreed to in writing".
Wait, there's more. Hold your nose real tight and breathe through your mouth cause the smell's gonna get worse…
Some of these banks don't bother to tell the listing agents that are listing their properties that this policy or the "extra addendum" even exist.
Despite this policy by these certain banks, is there a way to still get up to 1 point paid for by the bank? Yes, there is. Knowing this loophole is key to negotiating with banks.
Moral of the story? Be careful out there and make sure your buyer's agent knows what they're doing when it comes to foreclosures/bank-owned properties and dealing with the various banks out there.