Ask the Expert: Confidentiality In A Purchase, Negotiating with Banks on REO’s

Q.  I’m buying a home .  The seller requested that I apply for a loan with his lender in addition to my own personal banker.  Can the seller have access to all my financial records?

A.  It is contractually allowed, (and a common practice) when using a standard California Association of Realtors (CAR) residential purchase contract, to ask for a Buyer to apply with a lender specified by the Seller. This is expressly done to assure the seller that a lender, in whom the Seller has confidence, has looked at your creditworthiness and is assuring the Seller that based on your financials, you will be approved for your loan.

If you agree to such a request, should the Seller then be able to have access to all your financial records?
There is a clause in the Agency Disclosure which reads as follows:

“An agent is not obligated to reveal any confidential information obtained from the other party that does not involve the affirmative duties [listed in the agency agreement]. “Those duties do not include the disclosure of the buyer’s financial records. In other words, in all likelihood the Agent probably need not disclose your financials.

Additionally, in the Disclosure and Consent for Representation of More than One Buyer or Seller, there is a clause that reads as follows:  “NON CONFIDENTIALITY OF OFFERS: Buyer is advised that Seller or Listing Agent may disclose the existence, terms, or conditions of Buyer’s offer, unless all parties have signed a written confidentiality agreement.”  Whether your financials would apply, and whether you signed the Disclosure and Consent form are items that I cannot address.

Here is where I stand on this issue:
When I interview a client who wants to purchase a home, I have them meet with a lender at the same time. I leave the room, and expressly state that their conversation is confidential. I never ask for anything other than pre- approval from the lender, as it is my belief and standard of practice that the financial qualification of the buyer is a private and confidential matter, best handled by the professional whose job it is to consult on those matters. I also include a confidentiality agreement as part of my client’s offer to purchase.

I would recommend to any buyer that he/she make it clear that, in complying with a Seller’s request to apply with the Seller’s mortgage broker, all parties must agree to and sign a confidentiality agreement that restricts the financial agent from disclosing any confidential financial information to any of the parties.

I think that disclosing anything beyond a Buyer’s qualification to purchase the property, to any party in the transaction other than the Buyer, without the express permission of the Buyer, is a breach of confidentiality on the part of the lender. I include in that statement the release of FICO scores, etc.  This is a personal opinion on my part.  If you wish a legal opinion, you should consult an attorney.

Q.  I am buying a bank owned property.  The garage has problems and must be torn down.  I want the bank to lower the sale price, but I’m unsure how much to ask for.  Suggestions?

A.  Customarily,  bank owned properties are sold “as is” and only include fixing of issues related to health, safety, and livability, which most likely excludes garages unless directly affecting the livable portion of the property.  In other words, the bank may have already set the price, knowing of the defect and taking it into account in their pricing.  That being said, sometimes lenders will give credits if properties have been on the market a longer time than normal or have found to be unsalable in their current condition.

If this was something the bank missed, and you want to negotiate with them, then you want to be able to give them as much neutral, third party data as possible.  You should contact an appraiser in the market area of the property in question, and have an appraisal done on the garage to determine the “as is” value and “cost to cure”. If the garage is attached or built-in you would need the “as is” value of the property (as a whole) and “cost to cure” for the garage. Then you can determine how much lower in price may be acceptable to both you and the seller.

Hiring an appraiser may take time or money you don’t have to invest. The next best solution would be to contact a contractor and get a written bid to tear down the esisting garage and rebuild to suit. Be sure to use a reputable licensed contractor, and get more than one bid, if possible.

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