Don't fall victim to a lying home seller
Be a smart homebuyer and don’t take sellers at their word. If they're holding something back, it could cost you.
Buyers beware: In a tough real-estate market, it's tempting for sellers to stretch the truth or lie by omission on their disclosures, and cover up minor — but material — problems with a home in order to close the deal. That makes it even more essential for buyers to do their due diligence before closing, including having a professional home inspection and even chatting up the neighbors to make sure they discover all essential facts about a place before buying it.
"When times are tough, people get tougher," said Mike Crowley, broker of Spokane Home Buyers in Spokane, Wash. "Verify that they're telling the truth."
Seller disclosures vary from state to state, but generally require documentation of material problems with the home, such as leaks in the roof, past or present flooding issues, pest problems, presence of structural issues, lead paint, mold problems, electrical problems and water or sewer issues. (Bing: What must sellers disclose in your state?)
"Each state has its own disclosure requirements, and municipalities within the state have specific requirements," said Edward A. Mermelstein, a real-estate attorney with Edward A. Mermelstein & Associates in New York.
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"Then there's a slew of disclosures that are not required by the state that an experienced broker or attorney would know about and ask about," he said. For example, in some areas, including Florida, there recently has been a high incidence of faulty drywall used in home construction, he said. If it's possible that defective materials were used in the home a buyer is considering, they should demand that be disclosed.
Sellers are expected to fill out disclosure documents honestly, answering questions about the property to the best of their knowledge. They also aren't supposed to conceal any defects of the home, said Neil B. Garfinkel, a real-estate attorney with Abrams Garfinkel Margolis Bergson, in New York.
But as a buyer, don't take sellers at their word. If they're holding something back, it could cost you.
Burden of proof
Sure, if sellers do fib — and it can be proved that they knowingly weren't upfront about something — a wronged buyer could sue for damages.
"If a purchaser who has children is buying a home and the seller knows there has been lead (paint) discovered in the home, God forbid a child gets sick, and you're going to have a serious lawsuit on your hands," Mermelstein said.
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The tricky part is coming up with proof the seller had knowledge of the problem and opted to lie. Proving this kind of fraud can be tough, said Benjamin D. Clark, president of the National Association of Exclusive Buyer Agents. And sometimes the legal costs aren't worth pursuing the case.
That's why you're better off catching discrepancies before closing, when a seller is still willing to negotiate in order to finalize the deal, he said.
Still, sometimes, a buyer can be successful in proving a defect was omitted from disclosures or covered up, and receive compensation to fix the problem after closing — without having to go to court, Crowley said.
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As an example, he referenced a case in Colorado. At an open house the buyers attended — and at the walk-through before closing — candles and cookies scented the home. But when the buyers moved in, there was a strong smell of cat urine throughout the house. They called their attorney, a strongly worded letter was written, and the sellers provided money to replace padding and carpeting, Crowley said.
Crowley suspects the buyer could have easily proved a cover-up in court. "The people weren't willing to gamble. They did pay for it."
Michelle McLean also discovered an issue after purchasing a home in Vernal, Utah. It had a septic tank, but she found out only after closing she was required to hook it up to the city's sewer line. Clark said the fact could have been specified within Utah's standard seller disclosures.
McLean contacted her real-estate agent, and the seller ended up paying for the hook-up.
Catch before closing
You'll have a much easier time getting problems taken care of prior to the completion of the sale. Get a professional home inspection to reveal issues, but don't stop there.
The more information you can request, the better off you are, Garfinkel said. "It puts you in a better position to avoid those kinds of problems," he said.
Before closing, Clark and a client of his discovered there was a history of sewer problems at one particular home, which the seller didn't disclose. The seller was confronted about it, and he spent between $5,000 and $7,000 to get it repaired.
"We talked to the neighbors," Clark said, and one of them indicated that a tenant moved out of the home due to plumbing issues. "We hired a plumber because of that tip, to snake the sewer line with a camera. A lot of connections were broken, parts had cracked and fallen in," he said. Roots interfered with the line as well.
Talking with neighbors that surround the property will often help turn up any big problems with a home or uncover property boundary disputes, Clark said.
All of this isn't to say that most — or even many — sellers lie on their forms, or that the disclosures aren't useful to buyers.
"In my mind, the two benefits of those forms are that a buyer gets information from sellers, but also buyers are reminded of the things that might be on a property," said Ralph Holmen, the National Association of Realtors' legal counsel. "It's like a checklist of things to investigate."
Remember, too, that when you're buying an existing home it's important to have realistic expectations, Crowley said. Know what you're getting into, but understand that sellers might not know about a particular problem in the home. And there's nothing to say that things won't pop up right after you close.
"If you have unreasonable expectations, you will always find something to be disappointed with," Crowley said. "There's always going to be a surprise with a used home. My water heater went out the first week."
Welcome to homeownership.
The biggest problem with real estate transactions is that so many people involved like the agents and mortgage brokers are commissioned sales people who only get paid when the deal is done. They, therefore, have a vested interest in getting the deal done as quick as possible for as much money as possible.
These days many folks who work in the real estate industry are not making as much as they once did, so it’s tempting for them to look the other way or ‘fudge” some facts so they can get paid.
Getting rid of the commissioned sales salary structure for real estate agents and mortgage brokers and putting them on salary may alleviate some of these issues, but it is so entrenched in the industry it’ll be virtually impossible to change.
Watch "Holmes on Holmes" on HGTV. Home inspections are not worth the paper they are written on most of the time. Even the best home inspectors can't see into walls or through pipes. Most of them have very little training to begin with and don't have to know a thing about construction. Be smart and ask for the sellers to provide a one-year home warranty to cover anything major that goes wrong within the first year of your ownership. Now THAT is worth something!
Just watched my daughter go through the process of buying her first home. First realtor was a zero, kept taking her to neighborhoods and houses that weren't fit for a young unmarried woman. She very wisely waited and found a young female realtor who understood what she was looking for.
Being on a limited budget, many but not all the houses had been foreclosed on. So disclosures were scarce. When my daughter found an inspector she liked through the first realtor, she hired him again even when with the second realtor. I'm sure the inspector was amazed that the whole family turned up for the inspection of each house, all of us wanted to be sure that all the questions were asked.
The last house not only passed inspection, but also was valued in the appraisal much higher than my daughter's bid. Amazingly the house only a couple years old, 3 bedroom, 2 bath in a well maintained neighborhood. The realtor found this jewel of a house that stayed just within the budget.
Is there work to be done? Sure, but the bones are good and we'll act as her painting crew, she still will have to invest some money but it only will enhance the house's value.
Rule 1. Get your financial ducks in a row
Rule 2. Find a realtor who understands your needs
Rule 3. Find an inspector you trust
Rule 4. If you don't find it right away, keep looking
I'm a Real Estate Agent in Texas. I was showing houses to the brother of a friend of mine. One house had severe foundation problems. Of course the brother and his wife liked the house with foundation problems. I pointed out the problems and tried to move them on to other houses.
. My clients insisted they liked the house with foundation problems. I told them I would not write the contract on that house. Ultimately they bought another house in the same neighborhood that turned out to be a money pit. They used another agent. It doesn't pay to be honest.
What this article, like so many other articles, does not address, is how clever sellers, and banks, can be, in order to sell property.
I once read about a selling document, in which problems were listed, but in such a technical way, that only expert agents could decypher what was on the pages.
One seller even listed a house as "Un-Limited Potential for Improvement", which translated to "Only whispers and prayers, are holding the place together.
The best one was they tried to get me to pay for their mouse treatment, a YEAR after closing. First of all, they waived their pest inspection during the 11th hour of the sale. They were going to get one, then decided not to. I disclosed that there were no termites or wood-boring insects, which I'm required to disclose. I had mice a couple times, and called the Orkin man, who just came and put a bunch of glue traps around the house. He didn't do anything or suggest anything to keep them from burrowing under the foundation. His glue traps didn't catch anything except dust bunnies, I was catching them with my spring traps. So these folks get mice come fall, and call the same Orkin man, who helpfully told them I had used him once. D'oh! So of course they ran with that and used it as proof that I LIED (in their eyes) on my property disclosure and I owe them money for it. Well gee, I'm not required to tell you that I had mice once (who would??), was I supposed to tell you I had seen spiders and house flies too? Sorry folks, but mice are a common pest, and it's YOUR house now. Was I also supposed to disclose that during the fall months the willow tree in the back yard drops lots of leaves and branches?
Falling victim to a lying home sales person is to be expected. Been going on since the begining of time....Would be nice is MSN talked about all the people who have fallen victim to a lying President