I recently spoke to someone who had a real estate horror story experience. I thought I’d pass this story on and urge everyone to carefully select their real estate agent to avoid situations like this.
A father of two decided along with his wife that moving from California to New Hampshire to a less expensive place outside a city would be beneficial for their family. With all of their savings, they decided to put an offer on a six unit building sight unseen. (Don’t do that!) They sent a deposit and then moved their family across the country and actually rented one of the units in the building they were going to buy. Their plan was to live in the building and manage the rentals to help support themselves.
A week before the close, the husband/buyer ran into another tenant who asked if, as the new owner, he was going to pay the medical bills of her child who had gotten sick from lead poisoning. The buyer did not know what she was talking about but soon discovered that there was a lead paint problem with this woman’s unit and possibly throughout the building, which needed to be remediated. This was something he and his wife could not afford to do. He discovered that his agent and the agent who represented the seller (who both worked for the same real estate firm) had been told about this issue, as had been the seller. No one had disclosed it to this couple.
Due to this lack of disclosure, the buyer couple withdrew from the contract. The seller sued for specific performance, trying to force the sale. Although this was a losing action by the seller, the buyers still had to defend it. They countersued the seller and the real estate brokerage for non-disclosure, hoping to get their security deposit back as well as attorneys’ fees, since this was getting costly. You would have thought that there would be a happy ending for this couple and that they would prevail in a court of law. However, before this case was decided by a court, the seller went bankrupt. The real estate brokerage it turns out had no insurance!! The buyers lost all of their savings between the deposit and attorneys fees and had to move back to California and start all over.
What did they learn?
- Make sure your realtor is insured! If you are represented by a reputable large company like Pacific Union International, that company is very likely to be insured. While there are many reputable mom and pop realty companies out there, you should be very careful before selecting one.
- Hire a realtor with a great reputation and high ethical standards. Any realtor worth her grain of salt is going to make sure she properly discloses “all facts known to the agent materially affecting the value or desirability of the property.” See: California Association of Realtors’ Real Estate Agency Disclosure.
- Don’t make an offer on a property sight unseen. Do your due diligence before you make that offer. If these buyers had spoken to some of the renters, they probably would have discovered this lead issue before they wrote their offer.