I wrote about this in a previous newsletter but want to give more details since this ties in to the whole aspect of the dirty little secret about foreclosure properties.
I started working with a young couple in May right before their wedding and after they had the wedding and honeymoon and we got their financing worked out we looked for a home for them. We found one at the end of June they really liked and went to contract. It was a foreclosed property in Dunedin that had a new roof and A/C system and needing updating inside, but was in a great area. However, the pool looked like the creature from the black lagoon could rise out of it at any time.
What we were told by the listing agent was that there was a water lien that had to be paid off and that the seller (the one who did the foreclosure) was aware of it and they were just negotiating on it. We arranged the contract so that the water lien would be paid off, the water service would be turned on and the pool would be cleaned prior to the start of the inspections – or so we thought.
After 2-3 weeks of trying to get this matter handled, my client’s mortgage broker informed me that she had received documents from the title company showing that not only had the lien been known about since January but that there were also code violations with the City of Dunedin which would have to be resolved. She sent me the paperwork and after reviewing it and seeing that the code violations dated back to 2012 or 2013 and was resulting in fines of $250 per day since that time – I realized that the amount of fines accrued were more than the purchase price my client was paying for the house.
I brought this up to my client and suggested that we cancel and move on since we couldn’t even get the inspections done yet, they had given notice on the property they were leasing and had to move by the end of August, and their loan lock would be expiring – but they really wanted the house and didn’t want to cancel.
Then I emailed the listing agent about the undisclosed code violations and she informed me that once the water was turned on and the code violations were all fixed (they were all pool related) it would take at least 1-2 months after that time to get it straightened out with the city so that the title could be cleared for closing. When I informed my client of this latest news, they decided to cancel even thought they really didn’t want to. The good news is that the day after the cancellation we found another house that was even better than the one they had cancelled on and they did close on that one before the end of August and are very happy with it.
But none of the frustration or aggravation they had to go through was necessary. If the issue regarding the code violations had been disclosed upfront my clients could have decided whether to pursue purchasing that home with the knowledge of what would have been involved and how long it might take.
Now you might be asking why didn’t the listing office disclose this info. I asked that too and the answer is not as simple as it seems – and ties into what I wrote in the earlier post about the culture of deception and concealment.
The info about the code violations and penalties came from a company that did lien searches and they provided that to the title company. I don’t know if the title company had provided that info to the seller or the listing agent. This is a pattern I’ve seen (and go over in the tale of my other buyer) where there are different parties involved and there either isn’t communication between the parties or there is an understood agreement between the parties that if there is an issue that they aren’t to communicate it.
In politics this is known as “plausible deniability” – if a politician doesn’t know about something he can’t be held responsible for it so it is understood by those around him or her that they will keep certain things hidden. Then the politician can fake some outrage over the situation, throw some people under the bus (who end up landing on their feet at a lobbying firm somewhere making half a million dollars a year) and the politician comes out of the resulting scandal ‘clean’. This happens in both parties and in many high government positions (for those of you who think I’m pointing toward one party or the other).
I got to see how bad this actually is in the foreclosed property field with my other client – this one is really disgusting.