Real estate q & a
I have linked to Nationally syndicated columnist Lou Sichelman writing at Marketwatch in the past when I noticed an interesting Question and Answer. Today, I thought was one of the best columns he has written and I’d like to comment on just a few points. Here is a link to the complete article, Surprise! You’ve got a homeowners association.
Scenario: Real estate agent selling his own house discloses that fact that he/she is an agent but doesn’t disclose the existence of HOA. Upon finding out at closing, buyer goes ahead but then files complaint. Response from California Dept. of Real Estate, "when a licensee negotiates with reference to their own interests, their negotiations do not constitute licensed activity, and are therefore not under our jurisdiction."
Buyer, “Wow! I find that unbelievable! If that is true, why would anyone ever purchase a broker/agent owned property? I thought this was something that the public at large should be warned of if, in fact, it is true.”
Lou Sichelman, “This is what happens when the wolf guards the hen house… an all-too-frequent occurrence… I, like you, believe it was the seller's duty to disclose this fact, broker or not.”
Howard Arnoff – A real estate agent can and should be able to sell his property like anyone else and the buyer should not have to fear being taken advantage of. The first thought I had when reading the article was whether the buyer was represented by a real estate agent or did he/she deal directly with the selling agent. In my opinion, if that was the case, mistake number one for both sides of the transaction. If you are a real estate agent selling a property, there is no way you can expect to remain fair to both sides of the transaction which is just one of the aspects of dual agency. How could you not advocate for one side (yourself) of the transaction? A real estate agent selling his/her own property should advise the buyer to obtain representation. If the buyer chooses not to and signs off that the offer was made to seek representation and chose not to do so, the agent has been proper and above board. A real estate agent who is trying to avoid paying a co broker commission and does not make this offer to the buyer is making a mistake that could and possibly should in this case come back and bite him/her. As to the buyer, why didn’t you obtain representation from a real estate agent to negotiate and investigate on your behalf?
There were also several interesting comments in the article regarding mortgages; restructuring the loan to be more affordable, providing an escrow account to pay taxes and insurance and prepayment penalties. Excellent subject matter. Here is my quick take. The buyer is responsible for understanding what they are getting into. If you don’t know, please ask. If you aren’t comfortable with who you have chosen to obtain a loan from, find someone else. If you don’t know of anyone, please ask a real estate professional. As has been demonstrated throughout this year, a lot of unscrupulous mortgage lenders have been exposed and there was too much mortgage fraud. Most people don’t have the discipline to save and it is always an excellent idea to have an escrow account so that money is available for taxes and insurance despite the fact that the monthly payment will be higher. It is forced savings despite being interest free in most states. Finally, I loved the comment aimed at Lou’s bias, “Don't act like borrowers are so innocent to not know they are wanting a home they can't qualify for”. Yes there were abuses by everyone involved in real estate during the past few years, buyers included, along with real estate agents, mortgage lenders, appraisers and others. We are paying for some of these excesses now.
I often get questions via email from clients and prospects and I think in the future that I’m going to anonomize them and answer them in the Charleston real estate blog. I think it will be fun and helpful.