Buyer Disaster Barely Avoided

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I hate it when my clients have to go through situations like this but at least I can then share what they went through so that you can hopefully avoid a similar situation.

The Beginning

This buyer was referred to me by his aunt and father who had both bought homes from me in the past. He was getting married in a couple weeks and wanted to buy a home after he returned from his honeymoon. To ensure things went as smoothly as possible, I had him work with the best mortgage broker in the area before we ever went looking at houses.

We started looking at homes in late May and he and his new wife found out quickly (to their surprise) what a low inventory market meant for buyers. We finally were able to get a home under contract at the end of June and it was in a great area, had a new roof and A/C and we were able to negotiate a deal that would work for them. The one big issue was that the pool looked like a swamp because the water could not be turned on until the outstanding, rather large, water bill was paid. However, we were assured that would be taken care of quickly and the pool would be cleaned properly so we could do our inspections.

The owner was Fannie Mae, the servicer was NationStar and the listing agent is one who does a lot of foreclosed properties in addition to working with regular sellers. The listing agent never had any communication with me or my clients’ mortgage broker throughout the entire transaction despite some attempts to contact him – we only dealt with the assistants in his office.

It Gets Bad, and Then Gets Worse

After 2 weeks of trying to get someone to get the water bill situation sorted out we had to get an extension on the inspection period and closing date.

Then we got paperwork from the title company about the water bill and the lien on the property related to it. Included in that paperwork was info about code violations which had never been disclosed to us even though these violations were in existence since 2012, were disclosed to the title company back in January of this year and were accumulating $250 in fines from the City of Dunedin. I figured out how much the total was at that point and it was over $300,000 in fines which was quite a bit above the sale price. All the code violations began when the owner was in possession of the property prior to the foreclosure and were all related to the pool and its screen enclosure. Often these can be taken care of quickly, but nothing could be done about them until the water was turned on.

3 1/2 weeks after the contract date the water bill had still not been paid, we could not do the inspections, the code violations could not get corrected and we only had 1 day in the extended inspections period. To complicate things futher, my client was leasing a house and the lease ended on 8/31 so as of the end of August they would be homeless if we didn’t get things resolved.

So I emailed the listing agent, his wife (who is also an agent) and everyone we had dealt with in their office. I got a reply that morning from the listing agent’s wife who described all the trouble they were having getting the water lien paid and then informed me that the code violations would probably take 30-60 days to get resolved with the City of Dunedin, and that was after they were fixed!

Based on this latest info (which had not been disclosed upfront) and my client’s time constraints we had no choice but to cancel the contract and because of the way it had been handled we were able to do that without any issue. But now we had to find a house that could close before the buyers’ lease was up.

A Better Experience

The next day we went out looking at available houses and were able to find one that my clients liked even better and we were able to negotiate a contract before the end of that day. The seller was very cooperative and the listing agent was very helpful and continues to do a very good job at making things work out for everyone. We are now on track to close within the timeframe needed and my clients are quite relieved.

There is a significant difference in how a purchase goes (or a sale for that matter) based on who the listing agent is, and my client got to see that in a quite dramatic way!

Lessons to Learn

When buying a foreclosure you will find that the bank or government entity that owns the property are not very forthcoming about property condition info in most cases. This is also true in many cases where the seller is an individual or company that has bought the house to fix it up and then resell it right away (“flip” it).

In most of these cases I see in the listing or hear from the listing agent that the owner is ‘exempt’ from providing a written property disclosure since they ‘never occupied’ the property and so don’t have any info on the property condition.

This is actually a bunch of B.S.! I have been in a lot of foreclosed properties and in some cases have reported major issues to the listing agent only later to see that the listing did not disclose any of these issues. It is also impossible for someone who is flipping a property to not know anything about its condition when they have done a partial or complete remodel.

I contacted the Florida Realtor Association’s legal hotline and spoke with someone about this and they told me that in Florida there is no requirement for a seller to provide a written property disclosure. However, both the seller and the listing agent are required by law to ‘disclose any facts that materially affect the value’ of the property. So saying someone is ‘exempt’ from providing a written disclosure because they ‘never occupied’ the property is just someone’s idea of a way to cover their butt.

If you ever run into this your response should be to inform them that neither the agent nor the seller are ‘exempt’ from disclosing known fact(s) that materially affect the value of the property and that if either the agent or seller does have any such knowledge that you would like them to do disclose it at that time.

The other thing to learn from this is that when selling you need to make sure that you choose a listing agent wisely. Even though the situation above has to do with a foreclosed/bank-owned property this same listing agent also does regular listings. Since the sale of your home or condo is going to be one of the largest transactions you will be involved in during your lifetime you should make sure that the person who is helping you with this will do a good job for you and at the very least you should check their online reviews or communicate with some of their past clients.

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