In a typical Illinois real estate sales transaction where no short sale or foreclosure is involved, seller provide three disclosures to purchasers: 1) the Illinois Residential Real Property Disclosure; 2) the Illinois Radon Disclosure; and 3) the Federal Lead-Based Paint Disclosure. But what happens in a situation where there is a short sale or a foreclosure? Which disclosures are required?
Well, although the bank is involved in a short sale, the bank does not own the property; the seller is still the property owner, and all deeds, affidavits of title, and other documentation at closing is signed by the seller. TTherefore the Illinois Residential Real Property Disclosure Act and the Illinois Radon Awareness Act both apply. The federal statute regarding lead-based paint disclosures also applies. Bottom line -- a seller in a short sale transaction must provide all three customary disclosures to the buyer, and the seller will be bound by the laws governing these disclosures. Failure to provide the Illinois Residential Real Property Disclosure can have disastrous consequences; click here for more information.
Foreclosures, on the other hand, are a different scenario. Once a property has been foreclosed, it is owned by the bank, and the bank most likely has little or no knowledge of the physical condition of the property. Therefore the bank will not be required to provide an Illinois Residential Real Property Disclosure or an Illinois Radon Disclosure. However, the bank should still provide a lead-based paint disclosure, especially if the property was built prior to 1978.
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4 comments:
So in case of bank owned foreclosed properties, the buyer is at quite a disadvantage since the seller is not required to complete a property disclosure form. The rules favor/facilitate the bank, rather than Joe the Home Buyer, in this type of sale! Fair or not?
I don't think it's necessarily unfair. After all, the bank would not have the requisite knowledge to complete the disclosures -- it's equally, if not more, unfair to ask the bank to complete forms without any actual knowledge about the condition of the property. When buying foreclosures, usually the buyer is getting such a great deal that most buyers don't seem to care about the disclosures! Whether or not that's the right attitude, who knows?
Foreclosures are sold, as is, right?
A typical foreclosure sale is "as-is", yes. However, in certain circumstances, I have seen banks complete some repairs or provide credits towards inspection items.
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