How To Avoid Real Estate Purchase Pitfalls
Photo by Scott Webb
Originally Posted On: https://lionlegalservices.com/how-to-avoid-real-estate-purchase-pitfalls/
Many real estate scams, and just plain mistakes, are so destructive they are hard to describe.
Think it can’t happen to you? It Happens All the Time!
Daily I am dumbfounded at the naivety of bright men and women, young and old, who do not understand or question various real estate documents, yet spend hundreds of thousands of dollars buying or selling property. And they do it without ever consulting someone who actually knows real estate and doesn’t have a horse in the race.
3 Things You Should Know About Real Estate Agents
The first thing to know is that real estate licenses are not that hard to get. It only takes a few hours to take the course and pass the test, and suddenly you’re a real estate agent. About 90% of first-time real estate licenses are not even renewed. That should tell us something about how valuable and hard to get they are.
The second thing to know is that real estate transactions can be very complicated, and too many agents don’t understand, or don’t pay attention, to much of anything beyond how to get you to the closing. Even most lawyers don’t involve themselves in real estate, because of the complexity. Real estate classes in law school are electives—not required—so only a few lawyers have the background to handle these matters!
The third thing to know is that a real estate agent’s livelihood depends on making the sale. “Your agent” may or may not have your best interests in mind. She or he does not earn a penny until the sale is closed and the money has changed hands. An agent earns nothing by pointing out problems to you that would make the sale not happen. That’s just how it works, and if you buy a pig in a poke you’re liable to be stuck with it.
It’s Expensive So Prevention Is Cheaper Than Cure
The most expensive investment most Americans make is their home. The risk is high, and if you discover problems after the sale, the cost to resolve them is high, too. Sometimes, a reasonable resolution does not even exist.
Fortunately, the cost is low to PREVENT a problem.
Why Does it Happen?
Some people set out to offload a bad investment onto an unsuspecting buyer, but that is not usually the case. Bad things happen because of lack of knowledge of the law, and the way incentives are structured to close a sale as fast as possible.
Think about it: everyone involved gets paid based on the sale going through. They are not neutral or unbiased, they want you to buy that house so they get their commission. They don’t represent you, or the Seller either. They represent the deal, and making it happen. The more money you pay and the faster you sign, the more money the agent makes and the faster it goes in their pockets.
2 More Things To Think About: Is The Deck Stacked Against The Buyer?
You couldn’t be blamed for thinking so.
The sales agreement you sign says that you release the seller and all parties involved if there is something wrong with the house. You’re not supposed to rely on what they tell you. The obligation is on you to “inspect” and discover any problems.
So what do you do? You hire an inspector, of course!
And then you find out the law protects inspectors! Inspectors can only be liable up to the amount you paid for the inspection ($400); even if it was their negligence that missed a big problem, costing you thousands of dollars. You have no way to recover against the negligent inspector.
2 Examples of Deals Gone Wrong
Example 1: a widow wants to sell her farm, but…
Forty plus years ago I was asked to help an elderly widow sell her farm so she could relocate to West Virginia to be with her only daughter. As I read the documents, I realized she did not own the property, that she and her husband signed a lease with option-to-purchase contract.
For almost twenty-five years she, her husband and two sons cleared and fenced the twenty acres, built a barn, renovated the house, and made monthly payments “as agreed” in cash to a local attorney. Had I known then what I know now I would have paid the costs myself to sue the hell out of the attorney for fraud and misrepresentation.
Example 2: A couple buys a new retirement home, but can they live in it?
A couple wanted a “rural home,” with an acre or two to “retire.” Driving around the countryside they saw a real estate sign situated in front of what appeared to be a new home and decided to see the house. The real estate agent said the parcel was about two acres, the new house was about fifteen hundred square feet, and the house had city water and a new septic tank.
They obtained a thirty-year VA loan without an inspection because, as the real estate agent said, it is new, “so what could be wrong?”
Turns out a lot could be wrong. For example, there was no septic tank at all!
The real estate agent stuck up for the builder and the appraiser said (I swear this is true) that he did not see raw sewage on the ground, so he figured the septic tank was okay. I asked him why a house that was never lived in would have sewage on the ground and he hung up on me.
Our clients brought in the documents they had signed, and all of them exonerated the builder, real estate agent and appraiser, and placed full responsibility on, you guessed it, the elderly and real-estate-naive buyers.
What to do?
Whether you are buying or selling, Lion Legal Services offers down-to-earth, realistic, money-saving advice and counsel.
When thousands of dollars are on the table it is foolhardy to rely on advice from your agent, who is being paid a commission to close the sale, no matter what. We sometimes joke that, if you’re not sure what to do, then do the opposite of what someone getting paid a commission tells you to do! That’s not always true, of course, but if ever the phrase “trust but verify” made sense, it how you should proceed in a real estate transaction.
Lion Legal Services provides advice, contract review, recommendations, negotiations for ridiculously low fees.
Real Estate Paralegal
We Can Help
If you are looking for effective legal representation in Arkansas that won’t break the bank, look for us at LionLegalServices.com. We will help you figure out your options and what the likely realistic result is in your circumstances. Say the word and we’ll come Roaring to the Rescue!