Category Archives: Inspection

Undisclosed Real Estate Secrets Have a Way of Getting Out!

arrowheadIt’s a wonder that home sellers and developers continue to try to sweep evidence of issues concerning the property’s condition under the rug — or, in the case of the Rose Lane development in Larkspur, under some new pavement. Word always seems to get out somehow. 

As recently reported by Peter Fimrite in the SFGate article “Indian artifact treasure trove paved over for Marin County homes,” developer Larkspur Land 8 Owner LLC, though following the letter of the law (the California Environmental Quality Act) managed to conveniently arrange to have all the contents of a 4,500-year-old “treasure trove” of Coast Miwok life carted off and buried in an undisclosed location. The artifacts included human remains, tools, musical instruments, harpoon tips, spears, throwing sticks, and more.

Although the actions were done with the input of archaeologists and the oversight of Indian tribal members, the plan conveniently allowed the developer to move ahead with building homes and cottages that will sell at a starting price point of over $1 million.

Fimrite quotes a tribal representative as defending their choice of what to do with the objects, saying, “If we determine that they are sacred objects, we will rebury them because in our tradition many of those artifacts, be they beads, charm stones or whatever, go with the person who died. …” Obviously there are some difficult issues to balance here regarding who has an interest in and decision-making right over ancient artifacts.

But this blog is about real estate, and one of the more interesting points made in the article was by consulting archaeologist Dwight Simons,  who said not only that, “”This was a site of considerable archaeological value,”  but “The developer was reluctant to have any publicity because, well – let’s face it — because of ‘Poltergeist’.”

Whoa. If you don’t remember the movie “Poltergeist,” it was about a family in a housing development whose daughter is terrorized by ghosts.

Well, the developer’s got plenty of publicity now. I searched the article in vain to find any indication of who actually spilled the beans.

Will the shock of what was done to the property reduce its value in buyers’ eyes? Hard to say — plenty of homebuyers are desperate to buy in the Bay Area, and might not think twice about this. So perhaps the developers’ main worry at this point is that new homeowners will start hearing strange noises in the night . . . .  in which case, they might want to see the “Home Defects, Damages, and Insurance” section of Nolo’s website.

They’re Tweeting About This House!

IMG_4987Well, it looks like a charming young couple was intrigued by the open house, and is moving into our “cottage.”

(When selling a house with less-than-impressive square footage, it’s important to use appealing words like “cottage” rather than “matchbox” or, God forbid, “birdhouse.”)

Like any smart homebuyers, they’ve done their looking around (two other places within sight of my kitchen window were visited and rejected) and conducted a thorough home inspection.

I believe they were then convinced by the following home features:

  • Room for a growing family. (The Oak Titmouse lays from three to nine eggs.)
  • Solid construction. This one was built by Berkeley Rustic Birdhouses, known for complying with the International Standards of Ornithology.
  • Security. Try as you might, Mr. Squirrel, you’re not getting your head in that front door.
  • Quiet neighbors. (Well, the neighbor’s dog does have it in for the postal carrier. Let’s say “relatively quiet.”)
  • Sunny location. But not too sunny.
  • Cleanliness. As is recommended, I removed the old nest last year and cleaned the inside with boiling water. Every responsible home seller should behave similarly. (With perhaps a little less of the boiling water.)
  • Proximity of restaurants, bars, and other amenities. The water in the nearby birdbath gets changed daily, and there’s an all-you-can-eat buffet of seeds on a nearby ledge. How’s that for a Walk Score?

I do notice, however, as the moving in progresses, that they occasionally have trouble getting their furniture in the front door. Next time I trust they’ll wise up and carry a tape measure.

 

 

There WILL Be “Yes” Answers on the Disclosure Form

iStock_000000433950XSmallHas an entirely clean seller’s disclosure form — free of reports of home defects, environmental hazards, local nuisances, and so on — ever been accurately presented in a real estate transaction?

Notice that I said, “accurately.” We’re not talking about how a few misguided sellers, filling out the standard form that is required in residential home sales transaction in most states in the U.S., may think, “This place will sell better if I pretend it’s perfect.” I don’t think anyone is keeping statistics on how often that happens.

According to a recent column by real estate agents Tarpoff and Talbert (who write for various California local papers), what happens in a normal transaction is that, “There are always ‘yes’ answers” to questions on the disclosure forms about whether the home has various issues or defects.

That’s not a surprise to anyone familiar with the real estate world. A home starts deteriorating the minute someone sets foot in it, or even without the presence of humans. A seller would have to be utterly oblivious to overlook the cracked window, the door that doesn’t close, the in-law unit that the previous seller didn’t pull a permit for, and so on. Any seller with any sense of responsibility, or who is working with a real estate agent who explains that transactions go better (and are less likely to lead to later lawsuits) if sellers are forthcoming with the truth, will come up with numerous items worthy of disclosure.

But to anyone new to the process of buying or selling a home, it’s worth reflecting on the importance of (if you’re a seller) filling out the disclosure form accurately and completely and (if you’re a buyer) reading the form carefully, asking follow-up questions, and not panicking when you see some of those inevitable “yes” answers.

The disclosure form is, after all, an outgrowth of a shift in various states’ laws away from the old doctrine of “caveat emptor,” or buyer beware. That doctrine put the onus on buyers to investigate the home’s condition, and not to come crying back to the seller if it turned out that the basement floods every winter. (Just as it had for the last 35 years.)

That doctrine may have offered seeming simplicity, but what a mess for buyers trying to accurately gauge the value of the home they were buying. Not to mention the fact that neither buyers and sellers could be sure they wouldn’t meet again in a courtroom, with buyers alleging that sellers had gone beyond the confines of the doctrine and committed outright fraud.

Today’s laws and forms requiring seller disclosures make for a far better chance that the home-sale transaction will wrap up with everyone feeling well-informed and relatively unworried about later disputes. And now’s a good time to mention that Nolo’s website has extensive online information about the seller disclosure laws in various U.S. states.

Reasons to Spend Longer at an Open House

IMG_4113If you’re a recreational open house visitor (as I am) or a serious buyer who can tell at first glance that you don’t like the place, walking through an open house can take as few as five minutes.

If, however, you’re seriously interested in a house that you’re touring while it’s open to the public, there are ample reasons to stay for a good long time — longer even than your instincts might tell you.

You may, for example:

  • Overhear what other visitors are saying. A second, third, and additional set of eyes is always useful in forming your own judgments. Other visitors may notice flaws that you hadn’t, or open a door that leads to space you wouldn’t have otherwise noticed.
  • Overhear the real estate agent answering visitors’ questions. Information that isn’t on the listing or advertising materials may be relevant and important — perhaps regarding an upcoming change in the neighborhood, indications of how many offers have come in so far, or the history and scope of remodeling work. Some agents will even unwittingly reveal aspects of the sellers’ personalities.
  • Pick up on the “buzz.” You don’t even have to hover too near other lookers to get a sense of whether they’re excited by the place or not. Are they looking bored, plugging their noses, and leaving quickly? Or pulling out tape measures and cell phones? Such information is highly relevant in setting your own offer price, if any — too much excitement, and you’d better be planning to bid over the list price.
  • Notice things that won’t necessarily appear within five minutes. For example, if a neighborhood fire station discharges regular vehicles with blaring sirens, or a train passes by every 15 minutes, it will help to know exactly how loud they are.

By the end of all this, you yourself may have some good questions to put to the listing agent! Just make sure to be clear on whether you’re already represented by an agent of your own. Otherwise you could find yourself facing a hard sell, as the agent makes a pitch to represent you as well as the buyer (a dual agency arrangement that we don’t recommend).

Knowing Your Home Inspector’s Background May Change Everything

roofAs a reader of Nolo’s books and articles on real estate, you probably know that we recommend that home buyers ALWAYS include an inspection contingency in their purchase contract. That allows you to hire one or more licensed home inspectors to do a full report on the house, and to close the deal only if satisfied with (or able to negotiate around) whatever problems the report turns up.

But Patricia Wangsness, a broker with Coldwell Banker in Washington State, adds some important cautions to this advice: “Realize that inspectors are not all alike! Even if you hire an inspector who is fully licensed, you might find that one who is a former electrician will tell you a great deal about faulty wiring and sockets and deemphasize some other issues, while one who’s a former plumber will look hardest at drains and pipes.”

What’s going on here? Aren’t you hiring the person to conduct a “general” inspection of your home?

“Yes,” explains Patricia, “but inspectors arrive at this career in different ways. Some came from the building industry during the downturn, when they lost their jobs. Others simply decided that inspection was easier than what they were doing before. I’ve even heard media ads for inspector training courses, with taglines like, ‘Make your own hours! Work only three days a week!’”

This can be a serious issue, given the breadth of a standard home inspection. The inspector needs sufficient knowledge to evaluate most of the home’s features and systems. He or she should walk through the entire house, examining or testing for defects or malfunctions in its structure, systems, and physical components, such as the roof, plumbing, foundation, fireplace, doors and windows, electrical and heating/cooling systems, and so forth. The inspector will also check the exterior of the house for grading and drainage issues, problems with retaining walls, and more. (See the “Home Disclosures, Inspections, and Appraisals” section of  Nolo’s website for more information.)

As a buyer, you can understand why this makes it especially important that you do your research before choosing an inspector. Even if you find one whom you’re confident is highly trained and regarded, finding out details concerning his or her background might help you understand various related issues in the transaction – such why the inspector is focusing more on some problems than others, or perhaps why the seller responds to a request for repairs with, “But we did a pre-sale inspection and that never came up as an issue!”

If you’re a home seller, this insight might even weigh against getting a pre-inspection with the hopes of fixing up problems before putting the house on the market. As Patricia explains, “You might repair all the problems the inspector tells you about, only to have the buyer’s inspector come up with a list of new defects!”

Should Seller Allow Buyer to Do Pre-Offer Inspection?

OLYMPUS DIGITAL CAMERAThere’s a lot of buzz lately (at least in areas where multiple offers are making a comeback) about buyers getting the sellers of homes in which they’re interested to open their doors for a professional home inspection before, not after the buyer submits a purchase offer.

Buyers are being told that it will ultimately make their offer more attractive, given that they can, armed with extensive knowledge about the house’s condition, submit an offer with no inspection contingency. (The post-offer inspection, based on a contingency or condition written into the contract, is a time when negotiations often get contentious. Enough defects are usually found for the buyer to ask for repairs or a reduction in purchase price, and haggling over the details can consume — or derail — the entire process.)

Some sellers remain leery, however, of allowing pre-offer inspections. Let’s look at why, and whether these are reasonable concerns.

1) Sellers fear that the buyers will turn up defects in the property that even the seller hadn’t known about. True, this could happen. A seller who has lived in the home for years may have little idea of what’s been going on “under the hood,” so to speak. And once the seller knows of the issues, he or she will, in most states, be obligated to disclose them (or any of them that are “material”) to all other potential buyers. (See Nolo’s articles on “Preparing, Showing, and Making Disclosures About Your Home” for more on this.) As daunting as this might sound, however, it’s worth remembering that the truth about the house will likely come out eventually. Unless the market is super-hot and you’ve got buyers willing to waive the inspection contingency blindly, some other buyer will eventually conduct an inspection that turns up the defect, and you’ll be no better off than you would have otherwise been — or possibly worse off, if the buyers’ shock causes them to ask for a major price reduction.

2) Sellers feel they shouldn’t have to put up with an inspector in their home for a buyer who may not even ultimately bid on the place. True, if the inspection report comes back with a long list of defects, the buyer may get scared off completely. But there’s no reason to fear that buyers are running around casually hiring inspectors to write up reports on every home in which they’re remotely interested. These inspection reports cost a few hundred dollars a pop! Only a buyer with a serious interest in your home is likely to request a pre-offer inspection.

3) Waiting for the buyer to conduct an inspection might delay the process. Actually, this is more a concern for the buyer than the seller — as the seller, you don’t have to wait around for any one offer, but can put a deadline on considering them, and review other offers while you wait for the folks doing the preinspection to get everything scheduled and sorted. More and more home inspectors are, in light of this recent trend, making themselves available for inspections within a few days of being contacted by the prospective buyer.

Ultimately, the choice is yours, as the seller, as to whether to let a buyer conduct an inspection of your home before making an offer. But more and more successful home sales are now taking place this way.

“Dear Prudence” Is Giving Real Estate Advice?!

spookyYou just never know what people will decide to write to an advice columnist about. Only yesterday, a couple asked “Prudence” (Emily Yoffe, of Slate) whether they should buy a house that was the site of a horrific and widely publicized murder, in which the husband dismembered his wife. The couple work as a mortician and a pastor, respectively, so they aren’t personally freaked out by death, but they’re worried about what the kids and others will say.

Prudie’s advice is fine as far as it goes. She says if you’re comfortable with living there and want to buy the place, just be sure to tell the kids soon, and perhaps hold a prayer ceremony to . . . well, she didn’t say it, but I’m assuming to rid the house of ghosts and negative energy.

But there’s a lot more this couple should consider, namely:

  1. Their statement that, “Thanks to the Internet, we know all the horrific details of the case” is disturbing. It suggests they might not have learned about the murder from the sellers. A seller is, under most states’ laws, supposed to tell buyers, in writing, about anything that might materially affect the value of the house. If the seller did not, in fact, tell them about this, what else are they not telling? See my earlier blog post about a lawsuit by a buyer against a seller who neglected to disclose a murder/suicide that had taken place in the house for sale.
  2. Is the couple getting a bargain for the house? They’d better be. The place is, in real estate jargon, a “stigmatized” property. The fact that they may be willing to live there doesn’t change the widespread public perception that it’s tainted. Some properties of this nature remain on the market for years, or ultimately have to be bulldozed out of existence.
  3. Have they considered resale value? Once stigmatized, always stigmatized, if the event was horrific enough. And it sounds like this one may have been.

In the end, this couple may actually be the perfect one to buy the house and make it into a cozy, ghost-free place to live. (In fact, buying a stigmatized property is one of Nolo’s “Top Tips” for getting an affordable house.) But to the extent that a home is also an investment, let’s hope they proceed with their eyes wide open, and press the matter hard in negotiations.

Millennials Are Hip to All the Bidding-War Tactics

firewkIf you’re shopping for a home in a hot market — of which there are many, such as Riverside,  Sacramento, Las Vegas, and Oakland — chances are you won’t be the only one making an offer on any given home. And that spells a bidding war.

It’s a war with an invisible enemy, given that you aren’t likely to know who you’re bidding against. And there’s little back and forth — you have to make your best offer and wait to see whether it’s the chosen one.

Typically, the savvy listing agent will schedule a day for presentation of offers, during which a line of buyers’ agents will troop in to deliver the written documents and make a case for why your offer should be the one the seller favors above the rest.

Chances are pretty good, however, that the other bidders will include some “Millennials” — that is, young-ish people born between 1977 and 1992.  And according to a Trulia study cited in Forbes magazine, the Millennials are the group most likely to pull out all the stops and use “aggressive” bidding tactics.

I got a little worried upon first reading the word “aggressive” in the headline, picturing fresh-faced young ‘uns stalking other prospective buyers and slashing their tires, or resorting to underhanded negotiating tactics. No, it turns out they’re just ready and willing to unleash the full volley of tried-and-true ways to make their bids stand out, such as writing a personal (and mildly pleading) letter to the seller, bidding an amount over the asking price (duh), asking friends and family for a loan to help fund the purchase, and removing contingencies from the offer (such as inspection or financing).

Still, the fact that the other age groups surveyed were LESS likely to adopt any and all of these tactics suggest a bit of heel-digging-in. Wannabe buyers who make conservative, “not a penny over asking” offers rarely win bidding wars, and may end up spending more than they would have as home prices eventually outpace them. See “How do I make sure my home purchase offer is the strongest?” for more information.

Disclosures, Schmosures: First, Make Sure Would-Be Buyers Don’t Get Hurt!

MINOLTA DIGITAL CAMERAA recent California case is being hailed as an expansion of the listing real estate broker’s duty to warn buyers of dangerous conditions within the house. The case is called Hall v. Aurora Loan Services, LLC, 2013 DJDAR 5460 (April 26, 2013). In many ways, however, it’s a reminder of how common sense, rather than reliance on the letter of the law, can save home sellers a whole lot of hassles — such as broken legs and lawsuits.

Here’s what happened. The home seller, prior to putting the house on the market, commissioned a home inspection. This is a common practice among sellers in order to get a heads-up on home defects and potentially fix some of them before buyers have a chance to use them as negotiating points. The inspector’s report mentioned that the pull-down stairs leading to the attic needed “repair and replacement.” (Not, obviously, the stairs shown in this artsy image.)

Wouldn’t you think common sense would be screaming in your ear at this point, “Fix it!”? Or at least put up a warning sign? Or at least ask more questions if you weren’t entirely clear on what the report was saying?

But neither the seller nor the selling broker did any of that. Instead, in keeping with California disclosure obligations, they provided copies of the inspection report to everyone who visited the house. One of those visitors was a real estate agent with her clients. The clients ascended the stairs, the real estate agent followed, the stairs collapsed, and the agent fell and broke her leg. Lawsuit time!

Not terribly surprisingly, the court said, in essence (yes, I’m paraphrasing hugely here),  “Don’t just hand people the darn report, tell them the stairs are dangerous!”

But really, the most pithy commentary on this whole sad sequence of events was offered by the bloggers at the Law Offices of James J. Falcone, who said: “The [court] opinion doesn’t say how the clients, now stranded in the attic with the agent writhing in pain on the floor below, got out of the attic.” Indeed, court opinions often leave out the most interesting facts!

Repair Negotiations Show Why Buyers, Sellers Shouldn’t Share Agent

In Barry Stone’s column on Inman News this week, “Resolving disputes over home repair estimates,” a worried home buyer writes in with an almost classic scenario: The buyers are in escrow, their home inspection reveals that the furnace needs repair, and now they’re negotiating with the seller over how much the repairs will truly cost (with different prices named by different contractors) and how much the seller will pay for it all.

Unlike some homebuyers who don’t know which contractors to trust, this pair feels pretty confident in their own heating repair folks — and less than eager to rely on the lower bids (surprise, surprise) from the seller’s favored contractors. As with all mid-escrow negotiations, this may come down to how badly the buyers want the place, and how hard the sellers want to push back, risking the collapse of the deal.

But there’s a wrinkle to this case that caught my eye: The buyers say, “When we insisted that the work be done by one of our contractors, the sellers’ agent said this was an “outlandish” request.” 

Where’s their own agent in this deal? Stone noticed the same thing, and said, “Hopefully you have an agent of your own who will negotiate on your behalf, rather than giving in to the sellers’ refusal.”

I’m guessing they don’t have their own agent. Dual agency — when the same agent attempts to handle the deal on the buyers and sellers’ behalf — is still “common” in the U.S., according to a survey of agents by Inman. This arrangement often arises when buyers visit an open house before getting an agent, fall in love with the place, and agree to the listing agent’s urging that, “I can just draw up all the paperwork for you and we can get this deal done!”

Hopefully the seller’s agent in the above case disclosed to the buyer  (as is legally required in most states) that they’re now in a dual-agency relationship, and got the buyer’s written consent. (But did the agent really explain what it meant?) Hopefully also, the buyers will soon catch on to the fact that the sellers’ agent is not fulfilling his or her duty, as a dual agent, to act in an unbiased manner, avoiding promoting the interests of one party to the detriment of the other. They should raise this issue with the agent and his/her broker/supervisor.

Because there’s no doubt that calling this buyer’s request “outlandish” is promoting the sellers’ interests. It’s rather, well, outlandish.