So-called “lemons” are consumer goods that fail quality and performance standards soon after purchased. Lemon laws (or warranties) protect consumers who buy defective products by offering a replacement or refund – but real estate is a different matter. In a market with many foreclosed, short-sale and unoccupied properties, buyers risk choosing a “lemon” in their search for the perfect home.
From mold to meth lab contamination, termites to title defects, and lead-based paint to latent sinkholes, defects and damage can be hard to identify prior to purchase. But shoppers who do their homework and enlist the right resources can prevent falling into a money pit and suffering buyer’s remorse, the experts say.
The good news is that stricter seller disclosure rules, home inspection regulations and government disclosures for hazardous properties provide more protection to buyers today than in the past, says Sam DeBord, managing broker with Coldwell Banker Danforth in Seattle.
The bad news is that, with more distressed and short sale properties on the market today, home hunters face a greater risk of claiming a lemon.
“Any investment has inherent risk. Homebuyers should exercise as much research and caution as possible when purchasing a home so they feel comfortable at the close of their transaction,” DeBord says.
For starters, enlist a knowledgeable real estate agent who is familiar with the neighborhood, says Bruce Ailion, real estate agent with Remax Greater Atlanta in Marietta, Ga. “An inexperienced [agent] might not know why the home is discounted,” he says.
Next, don’t rely solely on the appraisal report, title search or agent’s comparative market analysis to uncover any serious defects. Hire a licensed and experienced home inspector. According to the American Society of Home Inspectors, a typical inspector’s report will cover the condition of the home’s heating and air conditioning systems, interior plumbing and electrical systems, roof, attic and visible insulation, walls, ceilings, floors, windows and doors, foundation, basement and structural components.
If the inspector discovers any problems, your agent will help you negotiate with the seller as to how they can be resolved. Sometimes the seller will pay for and complete the repairs before closing, or a repair “allowance” may be added to the contract to help the buyer pay for the repair.
You may also want to contact a contractor or remediation specialist to get accurate estimates of repair costs. Additionally, consider separate termite, mold and radon gas inspections.
Be aware, however, that “an inspector can miss things, and generally their contract limits their responsibility and liability and may limit their exposure to the cost of the inspection,” Ailion says.
For greater peace of mind, be prepared to conduct your own research. This includes talking to neighbors, using an Internet search to find news and records on the property, visiting the neighborhood at different times of the day and investigating the original builder. Also, consider opting for a homeowner’s warranty with maximum coverage amounts you can afford.
Remember that sellers are required to disclose all known home defects. If you discover an undisclosed defect after buying the property, the seller could be liable for damages if there is proof that the seller knew about it. However, pursuing legal action can be expensive, and many jurisdictions favor the “buyer beware” principle, meaning the buyer cannot recover damages from the seller for property flaws.
“Proving a seller had knowledge of a defect usually is not an easy process,” says Jim Hood, agent with Remax Elite, Mason, Ohio. “Consulting an attorney is the first and best route.”
Lastly, be especially careful before signing any “hold harmless” agreement or committing to purchase a home “as is,” which can be conditions required by sellers of distressed properties. Consult carefully with your agent and property attorney under these circumstances, and be sure to have the home thoroughly inspected by professionals.
© CTW Features