Dear Juris Doctor,

I am purchasing from a mortgage company a home that was foreclosed. Are there any risks involved in the purchase?

A PGA resident

Dear PGA resident;

The department in a mortgage company that coordinates the sale of foreclosed properties is called “Real Estate Owned” or “REO.” Most of them have their own form contract or an addendum attached to the standard “as-is” sales contract.  It is important that you read the contract and/or addendum carefully because it alters many contract provisions related to the escrow agent, the deposit(s), inspections, closing costs, default remedies and the closing procedure.  In addition, it is important to be sure a lien search is ordered which will disclose open permits and code violations.  The closing agent may order the lien search, so I advise you to consult the closing agent to avoid duplication of work.  If the property is located in a condominium association or homeowners’ association, be sure you understand if you will be responsible to pay any delinquent association fees incurred before you become the owner.  It is important for you to view the estoppel letter issued before closing by the association or the management company on behalf of the association.  You should consider retaining the services of an attorney to protect your interest through the closing of the purchase.

Sincerely, J.D.

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