How Can Homebuyers Lessen Risk Posed by Dishonest Sellers?

Have you ever heard the expression “Lipstick on a pig”?

Hiding defects is nothing new, however, this activity is certainly increasing in our area. Disclosure forms only go so far, particularly with the option of selecting or disclaiming all knowledge of defects.

The economic effects of the ongoing pandemic, historically low interest rates and fluctuating inventory are influencing an extremely unusual period in our housing market. However, one thing has not changed, houses are still for sale and, if you are in the market to buy, you need to watch out now more than ever.

During the downturn, many investors have taken a hands-on approach to house renovations, while at the same time homeowners looking to sell have had a lot more time to engage in DIY improvements. The result is oft-times a beautiful appearing house and yard that emphasizes curb-appeal whilst hiding serious defects that are beyond the capabilities (or finances) of those that did the work. The seller’s motivations are hubris, rationalization, and greed—none of which will benefit the poor soul purchasing one of these money pits.

Additionally, going after a dishonest seller after closing/move-in rarely results in the purchaser prevailing (most flippers are formed as LLCs for this very reason), and additionally purchased home warranties almost always cover a finite set of items on a pro-rated basis. The mortgage company is not going to come to the rescue either—essentially, the purchaser is on their own to fix potentially serious and expensive defects for what they were led to believe was a “turnkey” house.

How do I know what to look out for to avoid buying a home with problems?

The process to market varies greatly for these properties but they universally have common traits, which will serve as good indicators to watch out for. 

• They were all something else before they became what they are today. 

  Searching the internet for photos, permitting and property records, etc., as well as talking to the neighbors will often reveal this information. For example, if a property sold months earlier for a significantly lower price, it could have been purchased as a flip house (turnaround time to market is a critical factor in profit margins). Google images of the property may reveal that a completely different structure (or nothing at all) previously existed on the lot. Previous real estate listings or photos may show a completely different house than the one for sale today. The neighbors may also provide extremely valuable information. In one case, we discovered that the 1940-era house had been recently moved there and placed on a new foundation—a fact that would have been impossible to know without their help (since no permits were pulled and the county records were not updated yet).

• Appearances seem out of place with the surroundings.

  Flippers go all out to maximize curb appeal and install new appliances and fixtures to create the impression of a turnkey home. Most overdo it, which is evident if the home seems unlike the ones near it. For example, a recently landscaped yard that really stands out from the others in the neighborhood as somewhat “over the top.” 

• “As is” is overemphasized.

  If a house has been professionally remodeled, the information about who did the work and when it was completed is easily discovered. This is not the case when it was unpermitted or incomplete work, which is a liability that the seller will try to divert—sometimes to the absurd level. 

• The seller is well known to the courts.

  Use the information available to perform at least a cursory case search to see if there have been related civil cases. Frequently, there are records of past litigation easily discoverable on the internet.  

Of course, hidden defects are exactly that, and some are impossible to discover until after you move in. The best defense to getting duped by a dishonest house flipper or seller is insisting on having a property evaluation by a Certified Master Home Inspector (CMI).

Good news for you, that’s us! Get in touch with our team today to schedule a consultation.