Sometimes the house-shopping process leaves you buying more than you bargained for. Litigation. Lawsuits. Paying $60,000 in extra costs. Or even limitations on how you can use the property because of the surprise caveat you knew nothing about.
Most of the time, these things happen to two kinds of people; those who decided to buy without the help of a real estate agent, (which is about as risky as representing yourself in court), and those who didn’t cover all the due diligence bases they should have. Either way, these huge losses and frustrations could have been avoided. Today I want to talk to you about one key way to fool-proof your house purchase.
Before I tell you the ‘one key’ to fool-proofing your house purchase, I want to tell you what happened to two buyers who avoided the aforementioned tragedies.
Buyer #1: What was advertised was land; what they would have bought was no land.
I worked with a client on their purchase of a condominium. They’d found one they adored and offered on it, so I put on my Columbo trench coat and began the deep-dive due diligence to make sure everything was as it should be. Because, “I worry. I mean, little things bother me.” (Columbo)
What my investigation revealed was very interesting. The condo was listed as a Freehold, which means you’re buying the unit as well as sharing interest in the title of the land the entire building is on. My research, however, turned up a discrepancy; the condo was, in actuality, a Leasehold property, meaning there was no ownership in the land at all, it was only the unit itself my client was buying.
Every condo until then had been listed and sold as Freehold, which they were not.
A small detail, not necessarily. It could have had significant effect in the future as when the original land lease term ends the cost of a new lease could have increased the monthly condo fees.
Buyer #2: The Mysterious Caveat
I showed my client a property in the country this past summer. After their expressing an interest in buying, I dug deeper into something I’d noticed in the listing remarks about a caveat. Historical information from when that seller purchased the property gave some additional details of which when I’d asked the current agent about it, they said they’d never received details from their seller, so they could reference the existence of a caveat, but couldn’t give me and my client any more information.
“I requested more information, but the sellers weren’t totally clear on all the details. I was told they had just bought the house with that caveat in place.” All the agent was told is it was for a future road at the back of the property.
That wasn’t going to pass the mustard for me in representing my buyer client. I said, “If that caveat was in place at the time of their purchase, those owners would have received information about it in closing package from their lawyers. It would have outlined the caveat and included the caveat copy. The details would be there.”
We ended the call with the agent promising to look into it. I never heard back.
I presented all this information to my client and even offered to pursue the caveat information through the municipality office, but my client decided caution with such a seller was likely wise. After all, if they were unwilling to provide such basic (and important) information, what else might they be willing to avoid providing?
That agent and his sellers lost a sale that day.
The Key to Fool Proofing Your Home Purchase
These two clients (and scores of others) were protected from the consequences of misinformation, the costs of which we’ll thankfully never know. In each case, the thing that protected them was that unsung hero, that underappreciated and unassuming key, due diligence. Call it an eye for detail, a stickler’s perspective, or an investigative bloodhound’s deep dive research. Whatever you call it, it’s the due diligence that kept these buyers out of trouble. When that key element is missing, o E most certainly can expect trouble.
What’s the Big Deal
Here’s the thing: real estate agents are required to adhere to a code of ethics and provincial licensing requirements that are highly regulated and enforced. Private home sellers are under no such obligations. Buying and Selling through a licensed real estate agent offers further public protection via either a bond or errors and omissions insurance, buying and selling without areal estate professional leaves one to seek compensation solely through the courts.
And, when buyers decide to dash into the house-buying frey unrepresented, and just decide to let the agent who has the house listed for sale be the one they talk to… well, guess who the seller’s agent is loyal to. They’re contractually obligated to report every detail about you, your circumstances, your budget, and anything else you say which in negotiations can be used against you. They must treat unrepresented buyers honestly and fairly but that is it.
It gets even worse when people decide to buy a house privately from their neighbor’s uncle’s cousin’s co-worker’s niece, and neither the buyer nor seller wants or perhaps has a real estate agent involved. Now BOTH parties are unrepresented, and NONE are bound by the professional guidelines of the industry, or are even aware of the legal issues involved. Yes, lawyers get involved but by that time the terms of the purchase and sale are already defined and accepted by both parties forming contract. Talk about tempting fate!
Real estate agents and brokers are not only heavily bound by the professional standards of the industry and government regulator, but are also obligated to undertake education every year to maintain their license on current topical issues. They’re obligated to perform Due Diligence on behalf of their clients, and know very well how to execute such. And, in the event of a mistake (we are human, after all), they also have as earlier discussed, a bond or insurance. Our government as well as our industry want to make sure you, the buyer and seller, are well protected.
Have you ever hit a big snag in a real estate transaction?
Was it related to Due Diligence?
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