Is the bank responsible for issues that come up after settlement on foreclosed homes

Below is an example of what may happen if you buy a foreclosure.

Buyer: We bought a foreclosed home, as is, from a bank. When we removed the old carpet, we found large cracks in the slab, leading to costly foundation problems. The contractor who repaired the foundation found evidence of previous foundation repairs that were done incorrectly.

We searched the county records and found that this older work had been done without a permit. Is the bank that sold us the properly liable for not disclosing this problem?

Answer: Banks are exempt from disclosure laws because, in most cases, they are unfamiliar with the homes they acquire through foreclosure.

If you had bought the home from a private party, that person might have had knowledge of the substandard foundation repairs and would have been required to provide disclosure. In your case, the bank was probably unaware of the problem and could not have provided disclosure.

Unfortunately, some banks take advantage of the disclosure loophole by avoiding information that they might have to disclose. For example, if you had hired a home inspector and had then decided not to buy the property, the bank would probably not have requested a copy of the report.

Without having seen the report, the bank could maintain plausible deniability with other buyers.