How to avoid buying bad real estate
By Robert J. Bruss
Consumer Real Estate News
Ask any experienced residential real estate attorney
about his or her most difficult case. The answer will
probably involve a "bad house." While not exactly a legal
term, a bad house is one where the buyer alleges the
seller knew about a serious structural defect, but failed
to disclose it to the buyer before purchase.
Proving the seller knew of the undisclosed defect,
which the buyer usually discovers shortly after the
purchase, can be very difficult. Since it's human nature
to look for someone to blame, a home buyer usually looks
first to their seller, then to the realty agent, and
finally to the professional inspector if one was involved.
But buying a truly bad house can usually be avoided by
following the correct steps. Even brand-new houses have
their defects. A local building inspector's approval is no
guarantee. However, whether a new or resale house is
involved, home buyers can minimize their chances of making
a serious mistake.
HOME SELLER DISCLOSURES ARE NOT GUARANTEED ACCURATE.
Many states now require home sellers to provide written
disclosures of known defects. If the seller lied and
failed to disclose a defect, which the buyer can prove the
seller knew about, the seller is liable to the buyer for
damages.
Incidentally, the easiest way to prove what the seller
knew is usually to ask the neighbors. They often know as
much about a neighboring house as the seller knew.
For example, shortly after I bought my current home,
one of my neighbors came over to get acquainted. After a
few pleasantries, he said, "I suppose the sellers told you
about when that hill behind your house slid. There must
have been at least three feet of mud against the house."
When I replied that the sellers hadn't said a word
about the hill slide against my house, he quickly added
something about how all the new drainage toward the street
probably took care of the problem.
That was 26 years ago. Every time there's a heavy rain,
I look at the steep hill behind my house and wonder
whether it will slide again. Perhaps it's a good thing the
seller didn't disclose the slide, which was apparently
corrected properly, because otherwise I might not have
purchased my otherwise very desirable home.
HOME BUYER'S FIRST DEFENSE AGAINST BUYING BAD HOUSE
Today's smartest home sellers, before putting their
homes on the market for sale, obtain professional home
inspection reports. If any serious defects are revealed,
sellers should have them corrected so they don't become
detriments to a successful home sale.
The best realty agents recommend home sellers also have
customary or required inspections completed before
marketing the home, such as for termites, energy
efficiency, well-water quality, septic system, radon, and
building code compliance. Savvy home sellers then have any
defects corrected to avoid later problems.
However, the home buyer's first line of defense against
buying a bad house is to hire his or her own professional
home inspector in addition to the required or customary
specialized inspections. To avoid wasting money, the
buyer's professional inspection should be completed after
the seller accepts the buyer's purchase offer.
Before hiring a professional home inspector, buyers
should check the inspector's credentials. Be wary of an
inspector recommended by the realty agent. The inspector
might be known as "easy" because realty agents don't want
to recommend a tough "deal killer" inspector.
Personally, I prefer a home inspector who is a member
of the American Society of Home Inspectors. This
organization has the toughest experience and membership
standards. Local ASHI inspectors can be found at ASHI.com
or (800) 743-ASHI.
The cost of a professional home inspection should be
around $300. That's cheap because a typical inspection
requires at least two hours, plus time to write the
report. Smart home buyers and their realty agents
accompany their professional inspectors to discuss any
problems discovered.
Although I've used this example many times, it's worth
repeating. Several years ago, I looked at a run-down house
that had a bad fireplace crack. Fearing the entire
fireplace needed expensive replacement, I made my purchase
offer contingent on a satisfactory professional inspection
of the entire house. When I accompanied my inspector, I
asked him to check the chimney especially close. After
inspecting it completely, he reported the chimney was fine
and the crack could be repaired with special fireplace
mortar cement for about $150.
Later, I learned many prospective buyers rejected that
house because of the ugly fireplace crack. Fortunately, I
made my purchase offer contingent on a satisfactory
professional inspector's report, as smart home buyers
should always do. If I had disapproved the report, I would
have been entitled to refund of my good-faith earnest
money deposit.
Incidentally, hiring a professional inspector is also a
great way to avoid buying a "sick house." Don't hesitate
to ask your professional inspector about moisture and
mold, radon, asbestos, lead-based paint, formaldehyde,
carbon monoxide and other negative influences that concern
many home buyers.
HOW TO HANDLE "AS IS" HOME SALE
Recently I had the pleasure of visiting Sarasota and
Tampa, Fla., where I observed many modestly priced fix-up
homes with for-sale signs. As these are my favorite type
of profitable home purchases, I was drooling at the profit
opportunities.
Although I didn't have time to investigate, when a
run-down home is offered for sale "as is" that means it is
offered in its present condition and the seller won't pay
for any repairs. However, in most states, sellers must
disclose in writing the known defects of as is homes.
Selling a home as is is not a way to avoid defect
disclosures.
However, to avoid buying a bad house, prospective
buyers of as is homes should condition their purchase
offers on a satisfactory professional inspection report to
be obtained by the buyer after the seller accepts the
purchase offer.
IF BUYER DOESN'T ASK, SELLER USUALLY DOESN'T HAVE TO
TELL
Except for statutory defect disclosure requirements,
which vary by state law, if a buyer doesn't ask, the
seller usually doesn't have to disclose. It's up to the
home buyer to ask about special concerns.
For example, if the roof leaked, but the seller had a
new roof installed a year ago and it hasn't leaked since
then, the seller isn't required to disclose the roof
previously leaked. However, if the seller knows there is
toxic mold in the attic from the leak, the mold problem
should be disclosed.
But some problems are of special concern to just a few
buyers. Death on the premises is one of these potential
problems that bother some buyers but not others.
To illustrate, a few years ago, a San Francisco real
estate broker was sued by his home buyer for failing to
disclose there had been a suicide in the house. The broker
knew about the suicide, but didn't disclose it because the
event had nothing to do with the house's structural
condition or desirability. However, the buyer came from a
country where suicide on a property is considered a bad
omen. After learning about the suicide, the buyer sued the
realty broker. The jury found the broker had no liability
because the buyer didn't ask if there had been a recent
death on the property.
CONCLUSION. The best way to avoid buying a "bad house"
is for the buyer to ask lots of questions and make their
purchase offer contingent on a satisfactory professional
home inspection. Buyers should strive to learn everything
possible about the home before purchase.
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