Home Buyer Beware

home buyer beware
Home buyer tips

Whether you admit it or not, buying a home is a stressful endeavor.  Even if you’ve purchased a home before, the process can be somewhat nerve-wracking and overwhelming.  Taking time out of your already busy schedule to search and visit homes, as well as applying for a mortgage can make life hectic.  So, who needs the added worry that that the home seller and/or listing agent is trying to hide something from you?  Home buyer beware.

Maryland requires the home seller to disclose any known latent defects, regardless if they are choosing the disclosure or disclaimer option. To be clear, the Maryland Real Estate Commission’s Residential Property Disclosure and Disclaimer Statement states that a seller must disclose “Material defects in real property or an improvement to real property that: (1) A purchaser would not reasonably be expected to ascertain or observe by a careful visual inspection of the real property; and (2) Would pose a direct threat to the health or safety of (purchaser and/or occupant).”  Regardless, there is still a “home buyer beware” atmosphere. 

How can you proceed confidently with your home purchase if there is a sense of distrust?  To counteract the home buyer beware phenomenon, focus on “trust and verify.”  The concept of trust and verify is about taking disclosures at face value and exercising due diligence.  To the best of your ability, confirm the accuracy of what is disclosed, as well as investigate any areas of concern.  Many items can be verified online, or by calling the locality where the house is located. 

Home buyer beware

Of course, you should always conduct a home inspection.  However, prior to hiring your home inspector, ask about their scope and limitations of the inspection.  Home inspectors are considered generalists, such that they are not typically an expert in any aspect of home construction, or the home’s structure and systems.  However, they are trained to identify potential common problems.  They will also recommend that you consult an expert for further information on anything that is outside the scope of the inspection.  And although home inspector licensing laws prescribes minimum inspection standards, there is no guarantee that everything will be inspected thoroughly beyond a visual inspection (e.g., chimney or pool).  Make sure your inspector meets your expectations so as to thoroughly inspect all systems of the home. 

If the home was expanded, verify that additions and/or modifications to the home were permitted by the local jurisdiction.  Unpermitted additions can create a number of issues, including having your lender deny your mortgage.  It’s not uncommon for additions/modified items (such as a deck, and even electrical improvements) in a home to go unpermitted.  This is usually because the home owner did it themselves, or hired a contractor who cut the corner of getting a permit.  The permitting process certifies that repairs/renovations comply with local building and zoning codes.  Making sure any addition or home expansion was permitted and passed final inspection gives peace of mind that the completed project meets local building health and safety standards.

Keeping home buyer beware in mind, due your due diligence. There are many other aspects of the home which can be verified, including (but not limited to) schools and zoning.  If you’re buying a home to go to a specific public school, verify that the house is within the school’s boundaries and if there are plans to redistrict.  If you plan to have an air-b&b in your home, make sure the house is appropriately zoned. You should also check zoning and the local planning office to make sure your potential building/addition plans are not restricted.

By Dan Krell
Copyright © 2019

Original located at https://dankrell.com/blog/2019/09/04/home-buyer-beware/

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Real property disclosure

Finally, there is a new resource to get real property disclosure for home buyers. Home buyers can access property information that is not always readily available or hard to find.  A July 19th RealtyTrac (realtytrac.com) press release introduced Attom Data Solutions, their new parent company.  The introduction described what the company offers to the real estate industry and consumers.  Attom Data Solutions’ (attomdata.com) self-stated mission is: “to increase real estate transparency by arming businesses and consumers with the property and neighborhood data needed to make wise decisions.

You may recognize RealtyTrac as being the go-to resource for foreclosed homes.  But what you may not realize is, like other real estate websites it is an aggregator of information.  RealtyTrac describes itself as “the leading provider of comprehensive housing data and analytics for the real estate and financial services industries…” by providing information on over 125 million properties.

So the idea of aggregating property information is not new.  However, until now, there has not been this amount of information available for each property located in one place.  The size and scope of Attom Data Solutions’ aggregated information is mindboggling.  RealtyTrac’s press release revealed that the new parent company’s database of property information (called “ATTOM Data Warehouse”) holds more than 9 terabytes of information!  (One terabyte is 1 trillion bytes).  Putting the jargon into perspective, the data represents 99% of the U.S. population.  And it features “enhanced and standardized data for more than 150 million U.S. property parcels.”

Before the ATTOM Data Warehouse, you would have to check a number of websites and make inquiries to several local agencies.  The aggregated info includes: a property’s historical and current public records, ownership, mortgages, foreclosures, neighborhood information, demographics, environmental issues, natural hazard information, potential health hazards, and property features and neighborhood value information.

Besides being able to help you decide on which home to buy, Attom Data solutions’ reports may also help you decide on price.  Additionally, home sellers may find the information useful as a form of disclosure, to answer many of the questions that are often difficult to find.  Attom Data Solutions is reportedly offering data licensing to the industry, however the information is also available via their consumer websites RealtyTrac.com, Homefacts.com and HomeDisclosure.com.

The idea of consolidating property information into one location has been trending for several years.  There have even been hints of creating a national MLS.  Several years ago, the National Association of Realtors® created the Realtors Property Resource® (narrpr.com) to assist Realtors® in providing detailed reports to home buyers and sellers.  Besides offering details on neighborhood comps, the generated reports incorporate data from various sources. Buyers and sellers are informed of analytics, trends and other factors. Of course, RPR is exclusive to Realtors®.  But if you receive a report from your agent, they can help you with the analysis.

The amount of information about any given property seems to be ever increasing.  However, an ongoing issue echoed among professionals and consumers is that the data is not always reliable.  Even information that is pulled from public records are not always current. Verify the veracity included in any property report by cross checking several resources.

By Dan Krell
Copyright © 2016

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Real estate horror stories question the limits of seller disclosure

real estateProperty disclosure laws are mostly straightforward about making known the physical condition of a home that’s for sale. However, whether or not to disclose other material facts, that may include events that occurred in and around the home, is not always clear. Material facts about a home are often described as information that may sway a home buyer’s decision about the purchase or purchase price. Some of the more familiar material fact cases that are typically reported in the news include haunted homes and unruly neighbors. Yet, these two recent accounts have again raised the question and debate about what the seller and the real estate agent is obligated to disclose.

Sounding like a plot of a horror movie, it is the real estate horror story of a New Jersey family. Philadelphia’s WPVI-TV (New Jersey family says they are being stalked at new home; 6abc.com; June 22, 2015) reported on a family that was allegedly stalked through creepy and threatening letters. The new home owners started receiving these letters several days after closing on their million dollar home.

The letters were described as written by the “Watcher,” who claimed to be the latest of his family to watch the home with such statements as the home has been “the subject of my family for decades…” Other letter statements include “Why are you here? I will find out…” And, “I am pleased to know your names now and the name of the young blood you have brought to me.”

According to Tom Haydon, who reported on the lawsuit for NJ Advance Media (Lawsuit: ‘Bring me young blood,’ stalker told Westfield home buyers;nj.com; June 19, 2015), the new owners were so disturbed by the letters that they never moved into their new home; and have been trying to sell it. The family is suing the seller alleging that the seller knew about the “Watcher” because the seller did not disclose that they allegedly received a similar letter prior to closing.

You’ve heard about “Snakes in a Plane?” This next story is about an Annapolis MD family who experienced “snakes in a house.” David Collins reported for Baltimore’s WBAL-TV (Snake-infested Annapolis home rattles owners; wbaltv.com; June 5, 2015) about the snake infested home. Detailing the new owners’ nightmare; they said they used a machete as defense against snakes that reportedly dropped from ceilings, and slithered from the walls.

To rid the home of the snakes, the owners described how they ripped out walls, and tore up the ground around the foundation. However the report indicated that “experts” told the owners gutting the home may not guarantee the snakes would return because the snake pheromones and musk could attract new snakes; and that the home should be left vacant for fifteen years to rid the home of the musky odors.

The new owners allege that their insurance will not cover a claim, nor is their mortgage lender willing to help. The new owners are suing the real estate agent and broker for allegedly not disclosing the snakes; there are also allegations that the tenants who lived in the home prior to the sale, moved out because of snakes.

Legal experts across the country have weighed in on these extraordinary stories, only to illustrate how a seller’s obligation to disclose varies regionally. If you are selling a home and have questions about your obligation to disclose, consult your real estate agent and your attorney.

Copyright © Dan Krell

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

New smoke detector technology in the home

Home fire prevention

Among some of the new disclosure requirements for home sellers here in Maryland include those regarding smoke detectors.  Currently, home sellers are required to disclose whether or not smoke detectors “provide an alarm in the event of a power outage.”  However, there are new disclosure and updating requirements.

Effective July 1st, home sellers will be required to disclose to home buyers if installed smoke detectors exceed ten years of age, and if installed smoke have a sealed 10-year battery.  Approved by the Governor on May 16th, HB 1413/SB 969 was described by the Maryland Association of Realtors® Government Affairs Committee as having to provide such disclosure on an updated Maryland Property Condition Disclosure Form.  The summary also describes requirements for home owners, whose systems malfunction when tested or who have smoke detectors and battery operated systems older than ten years of age, to update older smoke detectors to new sealed battery systems.  Additionally, hardwired systems are required to be updated every ten years or at time of malfunction.  Additionally, landlords of one and two unit dwellings are required to upgrade to the new sealed battery systems when there is a change of occupancy or if current smoke detectors malfunction; in the case of buildings that contain more than two units, the legislation states that responsibility falls on the occupants to test and notify the landlord to replace smoke detectors (mdrealtor.org).

Although smoke detectors have been around for some time now, the technology is changing and is the main focus of the Maryland Smoke Alarm Technology Task Force Final Report (available at the Montgomery County Fire and Rescue Service website; montgomerycountymd.gov).  The Task Force was requested by the Maryland Fire Marshall to review smoke alarm data to determine strategies to reduce fire related deaths as well as identifying technology to improve smoke detectors.

One of the top recommendations made by the Task Force was to have battery operated smoke detectors “be the type that contains a long life sealed battery as its power source.”  Other recommendations include: the requirement for all State jurisdiction to adopt the International Residential Code (IRC) requirement to update smoke detectors whenever applications for permits are submitted; the requirement of installation of smoke detectors in all bedrooms and every level of existing homes; and the requirement for home sellers to provide smoke detectors that meet the building code.

Even though the smoke detector has been a regular feature of the home for many years, most home owners don’t understand the technology.  There are currently two fundamental types of smoke detectors, the ionization type and the photoelectric type:  The ionization smoke detector contains a very small quantity of radioactive material inside a component known as a sensing chamber, and “provides a somewhat faster response to high-energy or open flaming fires, due to the fact that these types of fires generally produce smaller aerosols.” While photoelectric type “responds faster to the aerosols generated by low-energy or smoldering fires, since these types of fire tend to produce larger particles.”  While many experts recommend that homes have both types of detectors, new technology smoke detectors will combine both types of detectors (from the Maryland Smoke Alarm Technology Task Force Final Report).

In addition to properly installed smoke detectors, experts recommend to plan and practice escape routes to reduce the time needed to escape a burning home.

By Dan Krell
Copyright © 2013

This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws.

Is there a duty to disclose recent low-ball appraisals?

by Dan Krell © 2009

(Home Buyers Beware)
Nothing can hurt a real estate transaction more than a home that doesn’t appraise to the contract price. In this depreciating market, I have heard many colleagues bemoan the “low-ball” appraisal. For a listing agent, a low-ball appraisal doesn’t just mean the possibility of losing a home buyer because the lender would not finance the purchase at the contract price; it’s also a dilemma of disclosing the valuation to future potential home buyers.

Although low appraisals also happen in appreciating markets, this market is unique. Along with depreciated values, the new Home Valuation Code of Conduct (HVCC) has also impacted on residential real estate appraisals and transactions. The HVCC was created out of an agreement between Fannie Mae, Freddie Mac and the Federal Housing Finance Agency to increase the integrity of residential appraisals by prohibiting lenders (or third parties) from “influencing or attempting to influence the development, result, or review of an appraisal report” (www.freddiemac.com/singlefamily/pdf/hvcc_746.pdf). The HVCC went into effect on May 1st 2009, such that Fannie Mae and Freddie Mac would no longer purchase residential mortgages with appraisals that did not adhere to the Code.

Before the HVCC was enacted, it was not uncommon for real estate agents and/or loan officers to try to influence valuations by offering alternate comparables or other pertinent information. This type of communication may have been necessary in cases that involved unique properties or where the appraiser was missing important information. However, it is also this type of communication that attempted to influence the appraisers to increase valuations!

To address the issue of appraisal influence, the HVCC requires strict rules on appraiser selection and communication; lenders and real estate agents are not allowed to hire appraisers nor are they allowed to communicate with appraiser in such a way that may influence the appraisal process (www.fhfa.gov/webfiles/277/HVCC122308.pdf).

Some critics of the HVCC complain that lenders are using third party appraisal services which hire appraisers who are unfamiliar with the neighborhood or worse- hiring appraisers from out of state. A colleague, relaying a recent experience, told me that a low-ball appraisal that was provided for a client may have been due to one appraiser coming to a home in Bethesda for the “inspection,” while another appraiser from Texas completed the appraisal for a national lender.

Low-ball appraisals do not kill all transactions. In fact, many buyers and sellers come to agreement on a new price and settle without any other obstacle. However, there are transactions where the buyer and seller cannot agree on new price and the home is back on the market. This is where the listing agent has to decide what information to disclose about the previous appraisal. Although Article 1 of the Code of Ethics and Standards of Practice of the National Association of Realtors (NAR.org) pledges Realtors “to protect and promote the interests of their clients,” it also obligates Realtors to treating all parties honestly. Additionally, Article 2 of the code of Ethics prohibits Realtors from misrepresenting or concealing pertinent facts relating to a property or transaction.

In the current market environment, low-ball appraisals may be an increasing trend. Revealing or not revealing these low valuations to future potential home buyers may also become a source of future disputes.

This column is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of November 16, 2009. Copyright © 2009 Dan Krell