Unpleasant Surprises for Online Real Estate Buyers

prostoalex writes "Buying expensive items online from the people you've never met without any guarantees on the seller's part might seem a bit risky even for an experienced Internet shopper. The 'hotness' of the real estate investment market apparently influences some cash-heavy investors to look for opportunities online. When the entire transaction is done via a click of the mouse, and the deed for newly bought real estate arrives in the mail, some unsuspecting buyers might discover that a cozy house near the bus line in the middle of a busy street might imply a criminalized neighborhood and proximity to crack house. The New York Times investigates negative experiences of people buying investment real estate online."

Comments

Re:In other news: water is wet.

[Technician]

I just bought a house. (not online) One word of advice.. even if you see the property, hire a property inspector. A good one will tell you about all kinds of things like leaking plumbing in the crawl space, dry rot in the roof sheeting, and wireing splices not up to code. I bought my place knowing ahead of time one of the underground sprinklers was broken, the hot tub didn't work, a bad splice in the attic (twisted and taped), and the sub panel for the shop didn't meet code (3 wire service without a seprate ground in a sub panel is not permitted). It is true the house had a few things needing fixing, but the inspection report got $8,000 knocked off due to the extra expenses needed to bring it up to code in addition to the seller having an electrician update the panel.

Use the online yellow pages and find a home inspector. They will provide photos of everyting from the condition of the gutters to the torn screen window, to the rotting bottem panel on the garage door. It was worth every cent of the $750 I paid for the inspection.

Get a licensed home inspector.

Get a buyer's agent

[HangingChad]

I can sympathize with why people don't like dealing with agents. Many of them are just trying to sell you something, they don't return phone calls half the time and sometimes you're rightly suspicious they're not telling you the whole story. But working with the worst agent in the area is better than dealing directly with the seller online. There are a whole raft of safeguards you give up without agency representation.

But at least working with an agent in most states you have specific legal protections that are lacking in online transactions. It's a lot easier to take action in most states against a crooked agent than a crooked seller. Most times they're mandated to have E&O, the real estate agent's professional liability insurance. State oversight boards are notoriously brutal and inflexible. Real estate agents had such a bad reputation that many states laid the hammer down. As a spurned buyer your chances of getting justice from the state real estate commission or the courts are extremely high if your agent might reasonably have known about a potential problem.

The buyer's agent normally gets their cut from the seller. 90% of the time it doesn't cost you anything to have an agent if you're a buyer. In some areas buyer's agents charge up front fees, so ask first.

Truthfully, even if I had to pay them out of my pocket I'd still use a real estate agent for buying property, especially if it's out of town. If something is really wrong they've got a fiduciary duty to inform you about anything material to the value of the property. If they don't they're risking their license and an E&O claim against their broker. I've found the combination of internet research and a good local agent to be the best combination for my property purchases. Trust but verify what they're telling me.