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.

You’re Not on TV: Look at More Than Three Homes!

Family TVAccording to real estate agent Jason Crouch (of Austin Texas Homes, LLC), real-estate-related cable shows like “House Hunters” “My First House,” and so on have had a noticeable effect on his home-buying clients’ expectations.

Not that he’s entirely complaining — he wittily titles his blog post on the topic, “I Should Probably Send Thank-You Notes to HGTV and TLC.”

The reason? These shows have managed to convince some buyers that they should make a decision after visiting three, or at least a small handful, of homes. Says Crouch, “Needless to say, I appreciate the idea that we don’t have to visit a virtually endless number of homes to make a solid decision.”

Indeed, some home buyers — pre-HGTV at least — are known for driving their real estate agents crazy with their “This one’s too big,” “This one’s too small” syndrome. They never manage to find (or, if it’s a couple, agree on) a home that’s “Just right.”

But visiting only three homes? That’s got to be a sign that TV is rotting people’s brains.

After so small a number, you’re only just starting to get to know your local market; to get a sense of what’s available at what price. You’re only looking at a small slice of what might be available within your time window. Ask your real estate agent — he or she probably already knows of homes that will be coming onto the market within the next six or so weeks. You’re putting on blinders with regard to the biggest financial decision you might ever make.

So rest assured, the cameras aren’t rolling, and your real estate agent will happily visit more than three homes with you. (And by the way, how often have you watched “House Hunters” and thought, “Gee, I wouldn’t have wanted any of those homes!”)

 

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).

Unpermitted Construction by Former Homeowner May Affect Current Owner

outhouseRemember last week’s blog post, “Of Mice and Moss: Tales of Unexpected Homeowner Expenses“? A significant number of people contributed tales of — to quote one of them — “stupid repairs and improvements of previous owners.”

This of course raises the question, why weren’t the issues revealed during the home buying process? My guess is that they’re precisely the types of issue sellers are least likely mention on the disclosure form mandated in most states. After all, the sellers think of disclosures as where they list and describe problems with the property,  such as an aging roof or a crack in the basement floor slab.

But that beautiful new tile that they installed in the kitchen? That’s not a problem, it’s a handmade masterpiece! (Never mind that it ripples in a few places.) And the new bathroom that Cousin Ed created where the back porch used to be? Perfection itself! So perfect that they didn’t bother taking out a permit for it! (The inspector might not have understood Cousin Ed’s avant garde pipe installation style.)

If the former owner could live with some slapdash construction, the current owner sometimes can, too. However, complications arise when it comes time to sell the place yourself. What do you tell the buyers? Do you have to fix the problems? To shed some legal light on these issues, we’ve posted a new article to the Nolo website, “Discovering Unpermitted Construction When Selling Your Home,” by attorney Allison Nash.

Hide Prescription Drugs Before the Open House!

pillsAll of our Nolo real estate products warn home sellers of the perils of leaving anything valuable in an accessible place during your open house. However, a recent headline from Washington State, “Real estate agent helps catch prescription drug thief posing as potential home buyer,” reminds us how relevant this advice remains.

The thief in question was ignoring cash, jewelry, and other valuables, and heading straight for the medicine cabinet in search of prescription narcotics.

When you think about how many people have some Vicodin left over from a past surgery — pills that they’ve probably forgotten are even there — you can see why a thief would figure this was a good bet, and might even reasonably hope that the homeowners wouldn’t notice the loss.

The sale of prescription drugs is apparently a big enough deal for the FBI to dedicate a separate reporting line to it: 877-RxAbuse (877-792-2873).

What can you do to avoid contributing to this trade? Clear out your medicine cabinets of all but the low-cost basics before an open house, and put any prescription meds in a locked area or even the trunk of your car. (Prevention is a far better approach than being suspicious of every house visitor who asks to use your bathroom!)

Not Buying a House Is Okay, Too

mens roomsEvery once in a while, a journalist asks me to make the “case” for homebuying. That shouldn’t surprise me: I write books about homebuying, I own a home, and I love walking neighborhoods and looking at homes. I even have a little collection of tin houses sitting on my office shelf.

But let’s get one thing straight: Loving houses doesn’t mean I’m an “advocate” for buying one. It’s a lifestyle choice, and the financial outcome is anything but guaranteed. Some people can (with the right landlord) be perfectly happy renting their whole lives. They’re mobile, they can enjoy weekends free of home repair obligations, and if the place gets seriously damaged, they won’t be the one calling the insurance company.

Why am I bringing this up now? Because panic levels seem to be rising right along with interest rates, additionally fueled by headlines like, “Families Blocked by Investors From Buying U.S. Homes.” (This article makes the point that, with rising demand for rentals, investors are moving in with all-cash offers that individual buyers can’t match.)

So let’s refocus on other voices in the media, such as that of Kelly Phillips Erb, in Forbes, with “11 Reasons Why I Never Want To Own A House Again” and Carl Richards for The New York Times, in, “It’s Not Everyone’s Time to Buy a Home.” They discuss varied reasons not to buy, from the amount of interest you’ll plunk down to the fact that you are the only true expert when it comes to your own life.

If you decide to keep renting (and I’m not advocating for that, either!), the most important thing to do is understand your rights as a tenant.

Of Mice and Moss: Tales of Unexpected Homeowner Expenses

beesI’ve been doing a little research lately on how much a homeowner should expect to spend on home repair and maintenance. The experts have actually come up with a number: They predict you’ll pay out 1% – 3% of your home’s purchase price amount each year.

Seriously? How can a two-bedroom California bungalow, bought for $700,000 because it’s in an area of inflated prices with a good school district, cost more than twice as much to maintain as, say, a five-bedroom mansion in Buffalo bought for a mere $300,000?

And then there’s the sheer unpredictability of homeownership. I asked friends whether their homes had thrown any surprises at them, and oh, did I get a flood of replies. Here are some choice ones, which I’ve tried to group thematically:

CRITTERS, CRITTERS EVERYWHERE

  • “Approximately $800 to hire a state-licensed animal trapper to capture and remove a squirrel, five raccoons, and an opossum from my backyard in urban Los Angeles. The raccoons had established a ‘latrine’ that was a horrible mess and a health hazard.”
  • “Beehive in the walls, which cost $600 to remove.”

WATER EVERYWHERE, TOO – OR WORSE:

  • “Plumbing line replacement for older home with tree roots growing into the pipes — $8,000 to replace the line from house to street.”
  • “Tree roots growing into the sewage system, sewage backs into house, must pay to replace carpet, furniture and to fix the issue into the street…$20K later….”
  • “Flat roof eventually leaks causing wood rot.”
  • “I was stunned to discover that my home in urban Miami was not connected to the sewer system but had a septic tank. It failed, and I connected, at a cost of thousands.”

CURSE YOU, FORMER OWNER:

  • “Undoing the stupid repairs and improvements of previous owners. Like the unpermitted second bath that cost us $8,000 to retroactively legalize (for mortgage purposes).”
  • “Added costs of normal repairs (say, replacing a toilet) and discovering the plumbing underneath is below code and has to be replaced as well.”
  • “Undoing the bad building from the first remodel – constantly finding out how the guy who did it really didn’t know what he was doing.”

THERE’S SOMETHING GROWING ON HERE:

  • “Moss removal from the roof cost us $1,100.”
  • “Tree maintenance. Holy cow, it’s expensive, especially if you have redwood trees.”
  • “Recurring mold on the roof that costs about $1,000 per year to power wash.”
  • “It’s costing us several thousands to get our palm tree trimmed. Now I tell my kids: You’re not just getting a house, you’re going to be responsible for everything around it.”

WHO WOULDA THUNK?

  • “Cast iron radiator had a crack in it and it cost us $$$ to have it replaced and a new one installed.”

Does that cover the scope of possibilities? Well, not really, because then there are situations where your own life takes an unexpected turn, as one friend’s did when her husband was hit by a car. She says, “Making [the house] accessible was a matter of ramps outside, and taking out a kitchen wall and repouring the bathroom floor inside. Well, and now we’re building a 2nd bathroom on the back . . . [and] we actually have had to hire someone to help with yardwork and minor fixes.”

There’s really nothing more to say, except, “Expect the unexpected.”

Should Sellers Have Warned About Neighbors’ Holiday Lights Display?

holiday lightsHow would you feel as a new homeowner if, with Halloween barely over, you watch your neighbors get out ladders and start gearing up for a massive  holiday display — complete with lights by the thousands, inflatable snowglobes, an open garage full of displays, and music?

That might be cute for the first five minutes. Or if it were a mile away. But then your cat starts coughing at the fumes from the lines of visiting cars, the blinking lights create a horror-show strobe effect on your bedroom wall, and the tune to a certain carol takes up permanent residence in your ear.

So why is it that I’ve met scads of homeowners who say they weren’t advised of such neighborhood holiday shows by their home seller? In one case, it was the seller himself who was the local manic decorator — and didn’t warn the buyer to expect kids knocking at the door in December, wondering when the “Santa’s Workshop” in the garage would open.

Most states in the U.S. require sellers to warn buyers of not just physical issues with the home, but environmental or neighbor-related issues that could have a material effect on its value. In California, for instance, the Transfer Disclosure Statement asks about “neighborhood noise problems or other nuisances.” Not every light show is a nuisance, of course — but at close range, or when a house attracts unprecedented traffic levels, it’s no stretch to say the seller should warn the buyer. (Of course, most homes are sold in summer — and who’s thinking about holiday lights then?)

Oddly, I can’t find any record of U.S. lawsuits against sellers for failure to disclose local holiday light displays. It’s not as though buyers are shy about suing home sellers for nondisclosure, of everything from past crimes on the property to neighbors’ regular loud arguments and late-night parties.

And neighbors have brought lawsuits against the owners of homes with overwhelming displays alleging nuisance. (Perhaps that’s the more relevant path to getting results, given that a few bucks from the home seller isn’t ever going to fully compensate a homeowners for the lost sleep from those blinking red lights.) Some have even explored even more creative approaches — check out attorney Rich Stim’s blog on, “Can We Report Neighbor for Blasting Copyrighted Christmas Music?

Or could it be that homeowners feel just too Scrooge-like suing over what’s meant to be a bit of holiday fun? In any case, if you’re a home seller, you can avert some future bad feelings by telling your home buyer what’s ahead — or at least leaving them your Santa costume.

You’ll Scream When You See How Much Americans Spend on Halloween

basketHold on, a yawning gap has been revealed in Nolo’s accounting for likely first-time homeowner expenses: Halloweeeeen!

You think I’m kidding. But that’s because, back when you lived in Apartment A on the 14th floor, you didn’t have to worry about lining your front lawn with styrofoam gravestones or filling your candy bowl in preparation for hordes of little princesses or,  God forbid, Miley Cyruses.

Take a look at your neighbor. He’s probably already affixing a giant fuzzy spider to his front entryway. Americans currently spend a collective $1.96 billion on outfitting their home for this holiday. I’ll leave the “per-household” calculation to someone whose math brain wasn’t apparently eaten by zombies, but given that my household accounts for about $10 of that sum, you’ve got some serious slack to  pick up.

And beware: If you live in one of the zip codes identified by ZipRealty as the “best places to trick-or-treat,” your bowl of candy had better be cauldron sized. Here in the Bay Area, San Francisco’s “West of Twin Peaks” neighborhood made the list.

For more (and more serious) tips on budgeting for home ownership, see “The Essential Guide for First-Time Homeowners.”

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!”