Category Archives: Inspection

Selling a House With a Story

Every house that wasn’t built yesterday has its own history: Perhaps a famous person lived there, or the house was one of few to remain standing during an earthquake, or it’s where the former owners always put up the best holiday display.

When a house’s history is dramatic enough, it can actually affect the property’s market value, for better or for worse. The court cases usually emphasize the instances of “worse” — for example, when sellers fail to disclose a violent murder on the property, which despite having no affect on its physical condition, creeps most people out enough that they don’t want to pay as much for the place.

But even something like the aforementioned holiday display can affect a buyer’s enjoyment of the property. A couple I know bought a house where the owners had accompanied their holiday light show with a “Santa’s workshop” setup in the garage — with the result that, for years after my friends bought the place, kids would show up demanding to see Santa. (Fortunately, the sellers had warned them in advance, so there was no need to drag Santa into court.)

The question when selling a house is, do you play up the history or not? I imagine this was discussed by the owners of a property sold last week in North Oakland. The house was once owned by Black Panther co-founder Bobby Seale’s parents. Back in the 1960s, Seale, Huey Newton, and others met there — they apparently drafted the Panthers’ manifesto in the dining room.

Some prospective buyers, upon hearing this news, might have said, “Cool.” Others might have wondered what they’d tell the folks back in Peoria. Perhaps in response to this possible mix of audience responses, the sellers here took a low-key approach. They didn’t mention — much less play up — this bit of history in the house’s listing materials. It merely received a quiet mention in the disclosure packet. Instead of focusing on history, the sellers played up all the contemporary features they’d added to the house — maple cabinets, quartz countertops, and so on.

That didn’t stop the sale from becoming a local news item, however:

Here are the stories from the Huffingon Post (“Black Panther House Sold in Oakland“) and the San Jose Mercury News (“Black Panther birthplace flipped and sold as trendy Oakland showpiece“).

Wouldn’t Any Homebuyer Want to Know About a Murder/Suicide on the Property?

The big news in real estate law these days is a decision by the Pennsylvania Supreme Court holding that a home buyer has the right to sue the seller and the real estate agent for neglecting to disclose a murder/suicide that had taken place in the house for sale. (See Milliken v. Jacono, 2011 PA Super. 254). The crime took place in 2006, when Konstantinos Doumboulis, who owned the home prior to the Jaconos, allegedly shot his wife and himself, leaving his children to call 911.

It was a crime that made the news, such that two professional real estate appraisers stated (on behalf of the buyers) that the property was worth 10-15% less as a result. The buyers themselves stated that they wouldn’t have bought the place had they known.

The Milliken case is based on a Pennsylvania law requiring sellers to disclose “material defects” in a property during the sales process. Nearly every U.S. state has a similar law, or common law concept, mandating that sellers tell prospective buyers what they know about the property — instead of withholding key facts that might affect how much the property is worth, under the bad old rule of “caveat emptor” or buyer beware.

The Pennsylvania supreme court’s decision doesn’t seem too surprising, although it was hardly inevitable, given that the trial court had ruled in favor of the sellers. Court decisions across the U.S. have emphasized home sellers’ responsibilities to be upfront about the condition of the property — not just regarding physical defects, but other matters that may affect what an ordinary consumer would be willing to pay. A classic example is the 1991 Stambovsky v. Ackley case, from New York, holding that the sellers of a Victorian mansion that had become the site of local haunted house tours should have told the buyers about its supposed ghostly inhabitants. (For details, see “Buying a Haunted House: How Will You Know Beforehand?“)

One thing that does stand out about the Milliken case, however, is the home sellers’ assertion that they asked their real estate agents something along the lines of, “Should we tell the buyers that they’ll be living on the site of a recent murder/suicide?” and the agents said, “No need.” That’s a rather large “oops” on the agent’s part, and a reminder that agents are not lawyers, and should not be looked to as the last word on such matters. Not that all home buyers need a lawyer in order to fill out their disclosure forms, but given the general real estate wisdom that sellers should err on the side of disclosure, specifically to head off the possibility of lawsuits, I would have thought the agents themselves would have had the wits to advise the buyers to consult a lawyer.

For more information on disclosure requirements and best practices, see Nolo’s article on “Required Disclosures When Selling Real Estate.” And if you’re a home buyer, do your research before relying entirely on the sellers’ disclosures! A little Googling about the previous sellers might have turned this news story up.

Hollywood Celebs Sue Home Sellers

Spending millions of dollars on a home is, apparently, no guarantee that it won’t come with defects.  Just ask recording artist Rihanna, who bought a $6.9 million Hollywood property only to discover that it flooded during rains; or MGM-Studios head Roger Birnbaum, who bought a $16.5 million mansion which, he says, “began to leak like a sieve” during winter. Both have recently filed suit against their sellers, asking for monetary damages to cover repairs.

(And we thought it didn’t rain much in Los Angeles!)

Any lessons here for us non-celebrity buyers of non-mansions? How about:

  • No matter how famous the seller, ask lots of questions before the sale. Birnbaum bought his home from a big-name Hollywood talent agent turned house flipper named  Sandy Gallin. The house sure looks nice — in fact, you can peep at its current listing, because Birnbaum is trying to sell the place for $16 million. (Does he really want to claim it’s made of “the finest materials and accoutrements?”) But if what Birnbaum is alleging is true, Gallin’s fame doesn’t translate into a leak-proof roof.
  • Filing suit makes people mad. Witness the TMZ reports about Gallin’s response to Birnbaum’s lawsuit, in which he calls it a reflection of Birnbaum’s ” well-known miserly and parsimonious behavior. ” That’s why I recommend trying a demand letter and mediation before marching into court, as described in this free Nolo article, “Home Defects: Sue the Seller?”
  • Not only should buyers get a home inspection done before buying (duh), but be alert to any signs that the inspector isn’t exhibiting Sherlock-Holmes-like vigilance. In Rihanna’s case, she claims that the inspector initially reported that an improperly sloped exterior door potentially allowed for water intrusion; but when the seller then argued that the area was fully protected by a seven-foot overhang, the inspector basically rolled over (my words, not hers) and said it was fine. No surprise, Rihanna is also suing her home inspector.
  • Litigation is expensive, regardless of the size of your home. Legal experts estimate that Rihanna, for example, may have to spend six-figure amounts for legal fees, hiring teams of experts to demonstrate that the inspector’s conduct fell below the expected standard of care in the industry, getting estimates of repair costs, and more. (This according to the article, “Why high-end buyers of real estate need to be cautious,” by Bradley P. Boyer and Saundra K. Wootton, in the Daily Journal, a legal trade publication.) None of those costs are tied to square footage!
  • Moisture problems lead to big repair costs. (No wonder insurance companies raise your premiums when they hear about them.) When buying a home, look hard for any evidence of staining, dampness, or rot, and don’t rest until you’ve made sure the house has no history of leakage (or that any such history has been dealt with appropriately). You may need to ask for repair reports, or go to your city building department and get records of permits for repairs and improvements.

Here’s some more free info for home buyers: Nolo’s article, “Get a Home Inspection,” which describes how to find a good inspector, what inspections are needed, and more.

Is “As Is” Really “As Is” When Buying a Home?

At last, someone has written a cogent explanation of what the buyer should (or has a right to) expect when buying a house “as is.”

Frankly, I’ve been confused by the differing accounts I’ve read or heard — some say “as is” means that you pays your money and gets what you gets, no basis for price reductions (or later lawsuits)  if any repair needs turn up. Others say that you can still include an inspection contingency and ask for repairs — which makes one wonder, “In what sense is that sale ‘as is?'”

So, big thanks to Tara-Nicholle Nelson for her article “Buy real estate ‘as is,’ use inspection contingency,” syndicated by Inman News.  I haven’t been able to find the article online yet (I read it in the Montclarion), but it’s sure to turn up one of these days.

In the meantime, here are the most important points:

  • The meaning of “as is” varies by state.
  • In most states, it means the buyer takes the property “as disclosed.” So anything the seller revealed to the buyer ahead of time, such as a leaky roof, becomes something you cannot go back and negotiate over. Any surprises regarding the house’s condition, however, are fair game for negotiation.
  • In a few states, it doesn’t matter what the seller told you, “as is” means you accept the risk of flaws in the property.
  • Regardless of what state you’re in, insist that an inspection contingency be included in your offer.  That way, if the house’s repair needs turn out to be more than you want to take on, you can at least back out of the sale without losing your earnest money deposit. You might even be able to negotiate with the seller despite the “as is” clause, with the seller’s willingness to pay for repairs or agree to a price reduction dependent on how eager he or she is to sell. (But, as Nelson points out, it would be unethical to try negotiating over issues that were disclosed by the seller from the beginning. )

And, a final tip from me: Remember to choose an inspector with a reputation for giving houses a detailed once over. Get independent recommendations — some real estate agents, unfortunately, will recommend inspectors who soft pedal problems and therefore ensure that the deal goes through.