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

Check it out first, dammit

[KiloByte]

If you buy something as expensive as a house without even bothering to take a look at it beforehand, you can't blame anyone but yourself. This is not a piece of bread -- you can't just shrug and throw it away.

Re:Check it out first, dammit

[ROOK*CA]

Damn right. In fact, any money spent online that doesn't go to well-established companies should always be money that you are willing to lose.

Great point, I think I would take it even farther, when dealing with anybody less than a well-established company on the net, you should EXPECT to get ripped-off and take appropriate measures to protect yourself BEFORE you buy. Way too many people just assume that the government (or some other 3rd party) will protect them from fraud on the net, which IMHO is just plain foolish.

Re:Check it out first, dammit

[drwho]

Damn right. In fact, any money spent online that doesn't go to well-established companies should always be money that you are willing to lose.

This is an idiotic statement. There are plenty of good companies and individuals which are 'less well known'. Your ultra-conservative sentiment means you'll often end up paying more, getting less, and wondering why there's practical monopolies in the economy. Beyond this, even well known brands can be rip-offs - Radio Shack for instance, has knowningly sold completely defective products and left the consumer in the lurch. Enron and Parmalat were household names. Your statment is similar to the one "You get what you pay for" - which is also untrue and even dangerous. You pay what you negotiate, through some method or another.

This isn't to say that your sentiments aren't useful. If you and others spread the FUD about small companies, there will be less competition on ebay for the really good deals.

PLEASE BE HELPING ME

[LiquidCoooled]

i have 50 million of your american dollers stored in bank account.
my bank manager (mr arran) tells me i need an american to sign them over.
if you can help me to withdraw it from bank i will give you 40 percant.
yes, thats right i said 40 percant. you will get a whole 15million american dollers for helping me.
sinerity yours
mr wamo

Darwin in action

[Ancient_Hacker]

If you drop $100K on something sight unseen, you deserve whatever you get.

Even a picture isnt enough-- there was a house in our neighborhood where the owner kept over 100 rabbits. With free run of the place. The house looked okay from the outside, maybe worth $260,000. But my friend the real-estate appraiser valued it at -$22000. That's how much it would cost to tear down the house, minus the value of the land.

Re:Darwin in action

[acvh]

I read this article yesterday - the guy bought a house for THREE THOUSAND DOLLARS! Come on, you can't buy a good used car for that. All this article really tells us is that a leech who was trying to flip houses for a quick profit got burned by a bigger leech.

Sight unseen

[Southpaw018]

Buying items from a reputable, well-tested online company like (for example) Newegg or Amazon is one thing.
Buying collectibles off eBay is one thing.

Buying a big ticket luxury item - ANY such item - cars, real estate, houses, deeds...that's misguided at best unless you live in proximity to the seller and can see it (inspect it) yourself presale. We have a term for people who will buy things like this with full and total trust in the seller. It's called "sucker."
Or, if you're a proponent of our legal system, "plaintiff."

Too good to be true

[Opportunist]

If something sounds too good to be true, it most likely is. Why do people stop thinking when greed becomes a factor?

Someone sells you something for FAR less than what it should be worth, provided they're not lying. Bonus question for $1000: Why should they? Would you sell your house without at least getting a rough quote from some online service how much your hut is worth? Hey, we're talking a few 1000 bucks at the very least here, it's not like I'm selling some old junk that might be someone's treasure, a house is a house, and by its very nature, it has value! And everyone, literally everyone, knows that.

So why should you think someone does NOT know that a house is worth more than a few 1000 bucks, especially when it's somewhere in downtown?

Just like with used cars. When the year old car that's been driven only by a cute old granny, always just to church and back goes for less than 1000 bucks, would you buy it?

I wouldn't even buy the story, and certainly not the car!

Barnum was right

[ROOK*CA]

from the article:

"Mr. Hoyt said he had repeatedly appealed to eBay officials, asking the company to make specific changes, like informing sellers that they must comply with New York State disclosure laws and requiring a copy of written sales contracts. But Mr. Hoyt said he had received little cooperation from the company.

"What eBay is doing, in my opinion, is immoral," he said. "They have a responsibility to not facilitate activity like this."

Wait a minute, eBay has a seller rating system, eBay has an escrow service, so who in there right mind buys a HOUSE sight unseen, from an unrated or negatively rated seller, without using escrow? I think this is a problem with some people, they make stupid buying decisions and then turn around and want the listing agent (or the government) to take some sort of responsibility for it.

I'm not trying to relieve any of the responsibility for this off unscrupulous sellers (it is in fact immoral to intentionally rip off buyers), however at some point buyers need to have enough common sense to do at least a modicum of due diligence don't you think? Apparently people think that caveat emptor doesn't apply on the Internet, when in fact it's probably the most important consumer protection mechanism, especially when most of the tools you need to do your due diligence are at your fingertips (MLS services, city records, etc..,)

Also from the article, this one IMO is a true "gem"

"Mr. Krug said Mr. Tanner had asked him the same question. "I told him the first thing he did wrong was buy a computer," Mr. Krug said."

Amen Mr. Krug, Amen.

JRGhaddar

[JRGhaddar]

They don't tell you you're going to be across the street from a crack house. Yeah but if you get 3 more crack houses you can then upgrade to a bordello, and that's where the money is...

Re:In other news: water is wet.

[baryon351]

> This really surprises anyone? I thought terms like "ideal for a DYIer!" have always meant "about to collapse" ?

It surprises many people. There are plenty of people who, when faced by something that looks like a bargain, or looks like they're getting a good deal & ripping off the buyer will jump at a business chance without thinking things through, because the scammer has successfully planted an image in the buyer/victim's own mind. Imaginations are a powerful thing, and work against the victim.

A relative of mine (no relation apart from by marriage) came across his first nigerian scammer email a couple of years ago. He spent days thinking over the options and planning how to rip nigerianscammerguy off of all his money, instead of just getting 10% of the $50million promised.

I gave the guy a handy hint, advised him it's a scam and these guys will just try to take money from him and keep promising but never delivering. That's when he said he knew it must be a scam, and unveiled some 'foolproof' plan to get the money from the nigerianscammerguy but not reveal who he was or send them much money at all.

Eventually, he ended up losing about $2500 to the scammers getting played right into their game. Why? While he knew it was a scam, he made the stupid mistake of believing the $50 million actually existed. It clouded his vision, and all he could see was a mental image of his bank statement with 7 digits in the black. Same with real estate, the buyers make an image in their mind of what they're buying, and don't lose it - even buyers of property who get to inspect it will see what they want to, unless there are major differences between description and reality.

Re:Buffalo, NY

[CrazyTalk]

As someone who grew up in Buffalo, I can sum it up in one word - jobs. OK, maybe two words - jobs and snow.

Eh?

[ErikZ]

The guy spent 10k. On THREE houses.

A deal like that, one would expect them to be on the edge of an active volcano.

At this point, you level those houses and rebuild on the property. 3k doesn't get you a house, it gets you land with house shaped debris on it.

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.

Diversity?

[QMO]

"Diversity" means one thing : CRIME and WELFARE

Interesting that you put "diversity" in quotes.

When we moved to our current apartment my wife looked up some crime stats for various neighborhoods.

With 100 as the national average:
Some areas of Newark, NJ were 400 or more.
The small town where I went to high school (about 2000 pop, 50 miles from nearest Mc Donald's) was about 25 or so, IIRC. The town has significant Mexican (ex-pat) and Navajo populations.
The town where our apartment is, rated 4. That's right, single digit, 4.

This is the most diverse place I've ever lived, or visited. On my short block (duplexes and single-family homes) there are at least 6 native languages.
My daughter's first grade class had a variety of Christians along with Jews, Muslims, Buddists, and I don't know what religion the kid from Mongolia follows. The school has maybe 20 students that would qualify for free or reduced school lunch.
When I'm in church on Sunday I talk to people from Nigeria, Jamaica, Haiti, Mexico, Chile, Peru, Germany, Philipines, Eastern Europe, etc.

We happened to drive through one of those very high crime areas of Newark and my daughter had a question. "Why is everyone the same color?"

Result: In my (perhaps not statistically significant experience) it is the lack of diversity that has a positive correlation with crime and welfare. So, I think it's interesting that you put "diversity" in quotes.

The trouble is that I doubt that I'll ever be able to afford to buy a home in the town where I live.