Friday, April 18, 2014

For Sale...

This is a discussion of the many problems that people tend to have when dealing with real estate agents, the companies they work for, and their brokers.  It seems as though real estate agents today are only concerned with one color, green.  When they look at you or I, they see money, the more sales they make, the more they make.  If the property is out of your budget, push it anyway.  They do not seem to understand or care that this purchase might be the most important purchase of your life, regardless of your age.  They will lie, or blatantly misrepresent the property, and they really do not care what you as the purchaser want in a property.  They refuse to see the potential hardships they will inevitably cause on you, and your family.  The potential ruin a person, just so they can make more.

Everything that I am going to discuss in this letter happened to people who were either attempting to buy, or did buy a home.  Always remember when you are moving from one state to another, to always be careful, learn about the area where you are moving.  I mean learn about the neighborhood, learn about the community, do not just take the word of your real estate agent about anything.  Many of those who died in the Washington State mudslide might still be alive if they had only known.  Thirty people lost their lives in a tragic event that they never even realized could happen where they were living.  Sure, some might have elected to live there anyway, but the real estate agents should have been honest about the possibility.  This goes for the selling agents as well as the buying agents.  However, as it stands, I doubt any of them were informed about geological studies of that area.  I doubt any knew that those homes were located in a dangerous area.  The real estate agents played a numbers game with people’s lives, and the people lost.

I do not know which is worse, thirty people lost their lives, or that this type of behavior happens all over the United States.  The sellers want to keep this information hidden from buyers, because it increases the chances that the home will not sell, and should it sell it will be for a depreciated value, and real estate agents play along because their pay is based on what the home sells for.  What makes matters worse is that even your agent, the one working for you will be willing to play along with this, remember the seller is paying them in the end, so they are not going to buck too much.  It will certainly lull you into a false sense of security, the agent is working for you, they are there to protect your interests, outside of possibly showing you homes outside of your budget.  Ultimately, they will do what they have to do to get the property to the closing table, and if it means lying to you to do it.  Now let us assume that he does have your best interest at heart that he or she is really attempting to protect your interests in this adventure.  If there is a problem which would require you to go to court, your buyer broker would be in a very bad situation, it would be a conflict of interest for them to testify.  Remember they work for you, but the seller is paying them, it is a muddy area of ethics and law. A muddy area that many agents will use to get out of going to court or being held accountable, should something go wrong.  At this point, real estate agents have actually supplanted used car salespersons as the least desirable people to do business with, get them in a house by any means required.

But I am sure you are now asking about your local Real Estate Commission.  This I would find comical, if it were not so insane. Who is the Real Estate Commission? They are the people who ensure that real estate brokers, companies, and agents within a given state are abiding by the laws, and just plain good ethics in their business dealings.  Remember, you sell or buy a home, the agent makes a commission from the sale, the broker takes a percentage based cut of that commission.  So they have a vested interest in making sure that agent sells, sells, sells, for a better and better price.  So, for them, it is advantageous to not be aware of a problem with a home, or to know if an agent is being unethical.  This creates a buyer beware environment.  But back to the Real Estate Commission.  Well we know that they are tasked with keeping agents and brokers acting in a law abiding, ethical way, but who makes up this commission?  Well, they are elected; buy the brokers, to police the brokers.  This really is akin to letting the fox police the hen house.  It isn’t like you or I voting for the county sheriff.  The real estate commission is often composed of brokers, and agents.  So you see the problem now?  Brokers being tasked with keeping themselves honest, and acting in a responsible ethical way.  Self-regulation, accountable only to themselves, unless you go to a regular court.  Again, this perpetrates a buyer beware environment, even with protections many states have put into place (such as full disclosure laws). 

We really need to change how we view real estate, and the laws surrounding it.  We need to ensure that homeowners, who are selling a home, have two things done.  These homes need to be thoroughly inspected, by an independent inspector.  Not someone the seller or buyer knows or some home inspector within the community.  There also needs to be an appraisal done in the same way, an appraisal performed by someone whom they are not acquainted, and someone who is not from the community.  This would cut down on many factors that currently come into play, among them personal biases by the appraisers, inspectors.  Problems would be known, and a true price would be given before the home was listed on the open market.  The agent/broker could pay this outright with that total added to their commission; it could be paid by the seller and subtracted from the commission.  This is to protect the buyer, removing an element of the buyer beware environment.  Buying a home or property is not like buying a car or an appliance.  If you have a problem it is not as easy as going back to the store for a refund or replacement, it is not like you can run to the dealership and complain until the problem is fixed.  You are stuck with that lemon, one that can very easily bankrupt you, or leave you stuck for life. 

Nevertheless, this leaves a few other issues.  Buying a home is not an easy task.  It requires years of work, just to gather the money to put down on a home.  It is not like most people can just craft twenty five or thirty thousand dollars to put down on one.  When you go home shopping you have budget constraints, a certain amount of money you can pay for a mortgage payment, taxes, closing, and various other expenses.  So, you tell the agent representing you that you can afford a home in the $150,000 price range.  What does this agent do?  They will show you a few homes around that price range, but they will show you more that cost more than what you are able to spend.  The thing is, the homes they will show you out of your price range are always nicer than the homes in your price range.  Sure, you a likely able to afford those higher priced homes, but I would always be leery of going that route.  Life is not static, the unexpected can happen, and while you might be able to afford it now, you might not always be able to.  This is something agents neglect to look at, but we should.  I am not dissuading anyone from buying a home, I am not telling you that if you really like a home, or even love it not to buy it.  I am just saying that we should always be mindful of what we can and what we cannot do without putting ourselves in a bind. Regardless, never fall in love with a home until your name is on the deed.  

I previously mentioned that you need to familiarize yourself about the area before you start looking for real estate in a new area.  This is actually easy to do, but you might not think it is.  If you are curious about how safe of a neighborhood it is, all you need to do is call the local police department, they will tell you as a matter of public record how many times they have been called that that specific residence, and neighboring homes.  They will tell you the nature of the calls; they will not tell you specifics, but the gist of it.  If there was a rape five doors down, they will tell you that there was a rape in the area.  If you want to know about potential pedophiles, it is easily found online.  You should always find out about the stupid things.  How many times animal control has has been called to the neighborhood, if people let their dogs roam, if they are “vicious”, if there are wildlife issues, and the like.  If you are in the area, you might drive through the neighborhood at various times in the day; get a feel for it in the morning, evening or night.  See if the neighbors are night owls who like to party all night, or if the place is quiet most of the time.  You can contact different government organizations and find out if your potential home is in a flood plain.  Contact the local college geology professor and find out about fault lines, but HUD and FEMA can also tell you these things.  Learn about the local weather, while the majority of tornadoes are in the Midwest, some other areas are prone to them.  Learn about that nearby creek, it might become a raging river or lake if you get heavy rainfall.  If you are buying in a mining community, learn where the embankments are, but this also applies to places near manmade lakes and damns. Specifically on that one, you need to know if you are above the damn/embankment or below it.  If you are near a military base, you need to know what they use for practice.  Some of the modern weapons can create earthquake like conditions.  Finally, you need to check the CLUE list.  If you are not familiar with what that is, homes in high-risk insurance groups (basically homes that are high risk for insurance payouts) will be listed there.  It could save you a major headache should something can go wrong, because many things might not be covered.  Also you will find that homes on this list are more expensive to insure than those that are not on it.  No home is safe from this list, I personally know of several homes in the Washington DC area that are on it.  Remember it has nothing to do with you, or your credit, it is based solely on the location of the home.  Always do your diligence on a property, you cannot depend on others to do it for you, remember they have biases all their own.

Always take any contracts you may sign to an attorney, your attorney.  This is to protect yourself.  Far too often contracts are watered down with so many legal terms that even the lawyer might have problems with it.  Simple contracts are always good, but they rarely happen these days.  Some might assume that you can trust an attorney that your real estate agent or their broker have on retainer, but I wouldn’t.  Remember, all your agent and their broker sees when you are around is green.  You are not a person, but money, their only vested interest is you buying or selling a home.  When they say they would love to live in this or that house means nothing, they are trying to sell you a home.  It is like a car salesperson saying they would love to own this or that car, even if they detest the brand they are currently selling.  I would go as far as saying that sometimes it is actually safer to deal with a smaller real estate company.  Sure they might lie to you, just as agents from larger national companies, but you might get someone who is actually honest, does care, and will fight to protect you. 

One should also be leery of so called “rent-to-own” deals that you might encounter.  You should also be wary of offers to work with you while you repair the home.  You might find that you are sitting on the street, while they sell the home to some other person.  Remember, when you are dealing with an agent all the see is green, the same can be said when you are dealing with a seller acting as an agent.  You might contract to buy the home, and through a series of incidents find yourself without the home, and out of the money, you foolhardily put into the home.  When renting, fair housing only applies to a specific set of landlords, not all.  Always check on your local real estate laws, just to make sure.
This whole message is about more than your pocketbook/wallet.  This could be your very life, the lives of your spouse and children, the people you care and love most in the world.  While it is your money, you will do as you will, but these things can also ruin your lives in many ways.  It can ruin your credit.  Some of these issues may cause you an inability to recover, your American Dream, the dream of owning a home, becomes the American Nightmare.  It truly is a buyer beware market, and that is wholly wrong.