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Saturday, September 22, 2007

Doing the Sgt. Schultz routine...

I’m dealing with a lot of foreclosures lately, so I get to experience several variations of the Sgt. Schultz routine. Every bank or mortgage loan company that has a foreclosed home in their REO inventory (that stand for Real Estate Owned, an acronym in our industry and not Real Estate One; although we do have an REO arm to our company too and manage quite a few bank-owned properties) has a bank documents package that they send out in response to any offers on the property. These bank packets, as they are called, range from 20 pages to 40-50 pages and all say the same thing, just like Sgt Schultz – “We know nothing.”

They go on to say in excruciating detail that not only does the bank know nothing, but it is also responsible for nothing. Somehow that doesn’t come as a surprise. I’m sure that they paid teams of lawyers for weeks of work to craft these packets. Page after page contains disclaimers for every conceivable thing that could possibly be wrong with the property and absolves the bank from any liabilities should the home buyer later find the problems. About the only thing that I haven’t seen in these documents is some disclaimer about Osama bin Laden hiding in the basement or crawl space; although they do cover rats and other vermin, so maybe he’s covered in those clauses somewhere.

This practice in real estate is just our industry’s little piece of the burden that we all bear for the excesses of litigation in our society. We have messages on lawn mowers telling us not to stick our hands under the mower while it is running. Well, DUH! We have warnings at the McDonald’s telling us that the coffee is hot and may burn you if you pour it all over yourself. OK. I haven’t seen a warning on a hammer yet telling the user not to hit him/herself in the head with it, but that’s probably coming. Most of these things start with the assumption that the user/owner of the thing is basically stupid and would do these things, if not warned. They are all a consequence of some lawyer somewhere convincing a jury that the product maker was liable for the injury caused to the user because they did not tell them not to do the stupid thing that caused the injury.

So, now we have banks using 30-40 pages of high-priced legal words to tell us that they are not responsible for the mold in the attic or the fact that the plumbing has been stripped or that the furnace doesn’t work in the abandoned repo house that you may be about to buy. There is an underlying assumption here that the buyer is so euphoric over the fact that they’re getting this $200,000 house for $50,000 that they will throw caution and common sense to the wind and not do an inspection to protect them from these surprises. I suppose that some buyers might do just that; and so, the banks need to protect themselves from the buyer’s lawyers, who will be trying hard later to prove to a jury that the poor innocent home buyer stuck his hand under this incarnation of the running lawnmower because there was no warning sign from the bank telling him not to do that. Lawyers – ya got to love their chutzpa!

If you're interested in a foreclosed home, go to my Web site - and look for the little foreclosure sign on the Home Search page. That will take you to a site that Real Estate One runs called If you see some that you think yoou'd like, give me a call and we'll go see some together. I visited one this morning that should have it's interior pictures in the dictionary next to the word "nasty". They're not all that way, but this one looked like it might have been used as a crack house at one time. It was definitely a dumpster queen.

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