If
there is a possibility of several things going wrong, the one that will
cause the most damage will be the first one to go wrong.
If
anything just cannot go wrong, it will anyway.
If
you perceive that there are four possible ways in which something can go
wrong, and circumvent these, then a fifth way, unprepared for, will promptly
develop.
Left
to themselves, things tend to go from bad to worse.
If
everything seems to be going well, you have obviously overlooked something.
John's house had been on the market for
three months and he hadn't gotten a single offer to
purchase. Finally one day Henry drove up and offered John a
long-term rental agreement. Henry was a traveling salesman
and needed to move to this town to be centrally located
within his sales area. Henry was very nicely dressed, drove
a respectable car and talked very professionally. Because
Henry was on the road so much of the time, he wanted to
simplify the move for his family by paying John a security
deposit and six months' advance rent. He also wanted to sign
a three-year rental agreement. Needless to say John was
excited. He didn't really want to sell and a three-year
rental agreement from such a professional was a dream come
true. Henry signed the agreement, advanced the money and
John headed to the bank. That is when the real estate horror
story began.
As soon as Henry gained control of the
house, he placed a for-sale ad in the paper, advertising the
home for an unbelievably low price. In fact the price was so
low Henry received hundreds of calls. Henry scheduled dozens
of showings. Each time, he would give the person a real sob
story about how he had lost his wife and family in an
accident the previous year. Henry told everyone that he was
being forced to give up thousands of dollars of equity in
order to pay bills resulting from the accident. He then
convinced the buyer to give him a $2,000 earnest money
deposit to hold the house. The buyer's greedy nature told
him he would never find another deal like this and he gladly
forked over the $2,000. In fact, 30 buyers put up $2,000
each. With $60,000 in cash, Henry split, leaving behind 30
Agreement for Sale & Purchase for sale on John's house. Can you image the
horrible situation John faced when the buyers' attorneys
tracked him down? What do you do? I'm sure the title
companies are having fun with this one. How could you stop
Lesson
Learned
If someone wants to advance you a large
up-front deposit and pay the rent in advance, be very
suspicious. Ask for three credit references and check them.
Get referrals from the renter's previous landlord and verify
that he is moving in immediately. Make sure the water and
utility accounts are transferred into his name. Ride by your
property often and inspect it. If you see a lot of unusual
activity, investigate. Just remember that if something
sounds too good to be true, it almost always is.
An older couple, we'll call them John and
Mary Jones, purchased a house in the Toronto area. They
didn't know nor were they advised by their agent to have a
home inspection, even though the house they were buying was
over 30 years old. The couple did not even know they had the
right to a final walk-through inspection. Apparently, their
agent had better things to do than to help these clients.
After they closed on the house and moved in,
Mary was emptying the water in the kitchen sink one day and
it started backing up. The next day, the washing machine
overflowed. John took a look under the house and found
several leaks, so the Jones's called a plumber. The plumber
came out, and as he was tapping on a drain, the entire
bathroom floor fell in.
Later, the dryer door was not closing
properly so the couple called a local repair company. The
person they spoke to told them that they had been to the
house before and had told the previous owner that parts were
no longer made for that particular dryer.
The big problem started when the air
conditioning wouldn't work properly. The service person
discovered that there wasn't a filter in the unit, which
caused it to malfunction. The repairman decided to go into
the attic to investigate further and discovered a family of raccoons
that were covering the eves, preventing proper
ventilation in the attic. But here's the nasty part:
-gallon containers of raccoon guano - yes, that's what you
think it is - had to be removed from the attic.
The Jones's sued everyone involved, but some
sharp defense lawyers caused them to have to settle for much
less than the actual damages. The couple ended up moving out
of the house - still making the payments - and living in a
house donated by their church.
This is a very sad story that could have
been avoided if the Jones's had had access to a little more
information about choosing the right Realtor.
Lesson
Learned
What could the Jones done to avoid such a
horrible situation? 1) Have a professional Home Inspection
making the contract subject to this inspection. 2) Completed
a final walk through checking all items in the home the day
before closing. 3) Demanded a written property disclosure
from the seller. 4) Visit the neighbors around the property
to see if the neighbors know anything about the house or
conditions. It was found in this case that the neighbors had
knowledge of the raccoons. When buying investigate,
investigate, investigate.
Meet Susan and Bill. They made an agreement
of P&S, for a house in a nice subdivision outside
Toronto. Everything went well, from the loan approval
process on through the closing. The next day the movers
accompanied Susan and Bill to their new house. As soon as
they opened the front door, they noticed a musty smell and
upon entering the kitchen they discovered the source of the
odor.
The sellers of the property had not properly
capped the icemaker line that attached to the refrigerator
and water had leaked onto the hardwood floors in the
kitchen, dining room and living room. All the boards had
curled and large gaps had developed between the hardwood
boards. Susan and Bill called in a contractor to give them
an estimate on repairs. His answer was over $5000
The anxious new owners are still trying to
sort this one out. Should the sellers' insurance take care
of this problem? Or the buyers'? Regardless, the couple had
to decide whether to move in now or wait until the repairs
were completed. If they waited, they would still have to pay
the movers and reschedule. They had already sold
their old house and their buyers were moving in the next
day. Susan and Bill were devastated. What a nightmare and
this could have been avoided so easily.
Lesson
Learned
Susan and Bill could have avoided this
situation by doing a final walk-through inspection a couple
of hours before the closing. You mustn't do the inspection a
week before or even a day before closing. It's vital that
you do it the day of closing. Your agent
should accompany you and bring along a checklist that will
help you remember everything. Some of the tasks you should
perform are: turn on all water faucets, flush all commodes,
turn on all showers, turn on all appliances, check the
heating and cooling system. Take a hair dryer and plug it
into each wall outlet to make sure it works. Never finalize
a sale until you have completed a through walk-through. If
you find any problems, you can resolve them before you're
stuck with it.
Four years ago, Henry and Mary bought
their first home. They loved it and planned to live there
about 10 or 15 years and then move out to the lake. But
nearly a year ago Henry's employer offered him a transfer to
another city. Henry wasn't given much of an option. It was
either transfer now or receive no advancement in his present
job. Henry's company did not offer a buy-out provision, so
the he would be responsible for the sale of their home.
Henry and Mary asked three agents to perform
a comparative market analysis on their home. The results
were discouraging. Because they had been in the home such a
short time, the Vendor's had not realized much appreciation
in their home's value, so if they sold through a Realtor
they would have to pay the commission out of their own
pockets. They decided to try the For-Sale-by-Owner route.
Everything proceeded smoothly at first.
Several lookers stopped by, but the seventh family to see
the house fell in love with it and made an offer. The offer
was lower than Henry and Mary had expected, but time was
running out so they decided to accept it. In writing the
offer, the purchasers had used a blank Agreement of Purchase
& Sale form they'd found in an office supply store. The
Seller's never thought to have an attorney review it. If
they had, the attorney would have advised them to add a
financing contingency clause, which would have let the
Seller's out of the contract if the buyers couldn't get
financing within a certain number of days.
The house was to close in 90 days. When
weeks passed and the Seller's hadn't heard from the
purchasers, they began to worry. Henry finally called his
buyers, who told him they'd been turned down by the first
bank. Still the buyers were optimistic they could get the
loan from their credit union. Later that same day a buyer
dropped by because someone in the neighborhood had told him
the house was for sale. This person offered the Seller full
price in cash for their house with a closing in one week.
Once again, Henry called the buyers and told them he'd
received another offer, but the purchasers remained adamant
that they could get financing. They refused to release the
Seller's from their Agreement. Because there was no financing
contingency, the Seller's could do nothing but wait - 60
more days to be exact. Unfortunately the second buyer needed
to find a home within two weeks. The Seller's called the
first purchasers almost daily but they wouldn't give up on
trying to get a loan. Finally the 60 days passed, but the
generic contract contained an extension clause allowing the
purchasers an additional 30 days if financing had not been
finalized by the original close date. Another 30 days passed
and finally Henry and Mary could sell their house to the
cash buyer. There was just one problem. The cash buyer had
already bought a house. The Sellers had wasted four months
because they wanted to save that commission. It was now time
for them to move, so they were forced to list the house
anyway. It's now been six months - that's six months after
the four wasted months - and the Sellers still don't have a
sale on their home. They're renting in their new city
and waiting, waiting, waiting...
Lesson
Learned
What Henry and Mary should have done was to have a
Realtor or attorney review that contract before signing it.
Real estate professionals will keep you out of trouble. In
this case a financing contingency clause would have
permitted the Sellers to move forward immediately when the
buyers' loan was turned down. They could then have sold
their home to the cash buyer. Please ladies and gentleman,
if you're selling your own home there are more than 90
things that need to be done to get your house closed, any
one of which could stop your sale cold if not performed
properly. Consult a Realtor or real estate attorney before
playing with the largest investment you'll ever make.
Over-Priced Home
The problem
In this story, our man
Sam had his house listed with a
Realtor for nearly a year with no offers. The Realtor never
suggested a list price. He put the house on the market at
the price Sam said he needed to get. Naturally, it was
overpriced. Well Sam finally came to us and we did a
comprehensive market analysis for him. We told him what the
house was really worth and Sam agreed to list it at that
price. A short time later, Sam got an offer for close to his
asking price. We were able to negotiate a good deal and both
sides were happy.
On his property disclosure,
Sam indicated that the house was on Septic System and that the heating and air
conditioning system and septic system were covered under an annual maintenance
plan. and a water problem that was still visible was taken
care of and that it was years old. The Buyers moved in and
at the first heavy rain fall the basement flooded. Total cost to repair, about
$2000. When our closing
coordinator called Sam's Insurance company, the person
indicated that Sam had let his maintained plan expire just a
few months earlier. Sam thought he had a plan but in
reality he only had a warranty for the new equipment as per
the service contract. It turns out Sam's system had not undergone routine maintenance after all
and needed over $1,000 worth of work. Sam ended up having to
pay several thousand dollars out of his proceeds from the
sale to have these two problems corrected.
Sam had already signed a contract on a new house and was
counting on the money from this closing to make his down
payment. If he had told us before contract acceptance that
his service agreement had expired and that his heating and air
system might have some problems, we could have been a little
tighter on the price. Now Sam is having difficulty procuring
the funds to close on his new home. This has truly been a
real estate horror story for Sam.
Lesson
Learned
What's
the moral of this story? First, don't list with the Realtor
who quotes the highest price. Some Realtors will tell you
anything to get the listing. They know you'll eventually
have to lower your expectations. Unfortunately, after a home
has been on the market for such a long time, it gets harder
and harder to sell. People want to know what's wrong with
it. Trust the Realtor who offers you solid comparable
figures, relying more on what has already sold than what is
on the market now. If you'd like to read more about setting
a realistic asking price, Next, be completely up front
and honest with your Realtor. The agent who has all the
facts can do a better job for you and meet all your needs.
Selling a home is a complicated process with the potential
for many pitfalls along the way, but hiring an experienced,
professional Realtor and being completely honest with him or
her up front greatly minimizes the chances that you'll fall
into one of those holes.
Henry and Marcia had an unfortunate experience the first
time they bought a house. Not only were Henry and Marcia
inexperienced, their agent was too. The couple was excited
about their first house and closed on the morning of
December 12th. As soon as the final papers were signed,
Henry and Marcia took some friends over to see the house and
discovered disaster.
The sellers' relatives, who were doing the moving, had
stripped the entire house of anything they could unscrew or
pry off including light bulbs, electrical fixtures (even the
plastic covers on the wall switches), curtain rod fixtures,
cabinet knobs and all the drawers in the garage work bench.
In addition, the seller had siphoned all of the oil out of
the fuel tank after the gauge had been read for the closing
adjustment. The sellers had replaced the new appliances with
older models that didn't work. The carpet had several large
holes in it and the area underneath the sellers' couch had
been completely cut out. Several areas of carpet in the
bedrooms had large bleach spots. Many of the windows had
broken seals and would need to be replaced.
The total cost to repair the damage was almost
$5,000.
This $5,000 mistake occurred because Henry and Marcia did
not have a home inspection and had not performed a final
walk-through inspection. Also, the sellers had moved out of province, so guess how much luck the couple had in recovering
the cost of repairs.
Lesson Learned
Do the final inspection as close to closing time as
possible. Turn on all the appliances and make sure they
work. Run the furnace and air conditioner. Check ALL of the
stove burners and the oven. Run the water (and make sure the
hot water is hot), flush the toilets, try the lights, check
the basement and make sure it isn't full of water. Take a
hair dryer and plug it into each outlet to make sure there
is power. Inspect the carpet, especially the areas that were
formerly covered by furniture. One additional note, find out
where the electric garage door openers are. Half the time
they are in the glove compartment of a car that's on its way
to Florida
David wanted to be a homeowner rather badly. It was his
first home-buying experience. He read some books on real
estate and decided he could get a better deal for himself by
buying directly from a seller rather than by hiring an
agent. That was his first mistake. David found a home he
liked. It was a lovely home, new construction, but it had
been on the market for a little over a year.
"Great," thought David, "I can get a deal on
this house because it's been on the market for so long. Plus
I'll be buying it directly from the builder, which will save
me even more." David decided not to have a home
inspection in order to save money. After all, it was a brand
new home. What could be wrong with it? Plenty, it turns out.
Soon after moving into the house, David started having
problems. To begin with from day one David could not sleep
at nights. At first all David could hear now and then a
roaring sound and he did not get what it was. The next night the same thing
happened. And the next. And the next. David's new home was
located beneath the flight corridor to the Pearson Airport. Just
managing a plan every 10 to 15 minutes. And every one of those nights, David would
be awakened.
In the meantime, David began to notice a terrible odor,
but he couldn't pinpoint where it was coming from. It got so
bad he couldn't stand it, and he couldn't find the source.
Finally, he was forced to move into a hotel to the tune of
about $70 per night. A health inspector from the Ministry of
Environment came out to investigate the problem.
They ended up having to sink probes into the slab foundation
where they found a decomposing animal. The builder had just
poured the slab over the animal and small cracks that formed
around the animal allowed the smell to seep into the house.
Tearing up the slab, removing the animal and reconstructing
the slab and floor cost David a whopping $2,000.
A couple of months after that, David started his first
fire. Before he could get a good blaze going, smoke began
billowing into the living room. David's fireplace wouldn't
draw. He had a chimney sweep come out to take a look at the
fireplace, and not only was there a structural problem that
prevented it from drawing, but the fireplace was separating
from the exterior wall of the house. Major work was required
to repair the problem. Another $10,000 to be exact.
David's problems were not over. He decided to have a home
inspection to find out the extent of the structural problems
in his house. The results of the inspection were shocking.. The builder placed support walls too far apart in
some cases, placing excess stress on the walls in place. The
whole roof was in danger of crashing down on David's head.
Some of the building supplies were substandard. David was
looking at repair costs almost as much as he had paid for
the house.
He sued the builder, but by then the builder had filed
for bankruptcy. David was left holding the proverbial bag.
His dream of homeownership had turned into a nightmare. What
could David have done to protect himself before he closed?
Lesson Learned
What could David have done to avoid these problems?
Several things:
He should have ordered a home inspection by an
inspector who had plenty of experience with new
construction techniques.
He could have talked with the neighbors to see if
there were any unusual noises or disturbances in the
neighborhood. If you are buying a new home, ask: How
close is the nearest train track? Are you close to an
airport corridor? Do you ever hear planes especially at
nights? Very important for those buying within
30/50 KM from the Person Airport. Which is one of the
busiest in the world.
Get nine references from the
builder if the builder is not a well known brand. Three from
people who the builder built for two or more years ago.
Three from people the builder built for one year ago or
less and finally, three people the builder built for
within the last three months. What you're trying to do
is get a pattern. From the references over two years you
need to find out if the house has had any unusual
problems. From the customers who have used the builder
recently you want to know if the builder corrected any
problems that are common to new houses.
Ask the builder for three trade references. When you
talk to the builder's suppliers, ask these questions:
Does the builder pay on time as agreed? Would you have
this builder build your mother's house?
Never close until the builder has repaired all
problems discovered during the home inspection. Make a
written claim to the builder and the Home Warranty folks
and keep records for years in a safe place. never know
when they may come handy even after the expiry of the
New Home Warranty.
Finally, make sure to get
some type of an insurance besides what the New Home
Warranty covers. and make sure that the builder is registered
with NEW HOME
Here's a horror story that will chill your bones. The
Knights closed on a beautiful Victorian house in December in
downtown Toronto. They had fallen in love with the house the minute they
walked in the door. It had beautiful restorable woodwork and
each room had a radiator that added to the look of the
house. It was going to take a lot of elbow grease to restore
the house properly, but they knew it would be well worth the
work.
There were a few delays on closing because the title
search had not been completed. Finally, the day of closing
arrived and immediately afterwards, the Knights took some
friends to the house to give them the grand tour. As soon as
they walked into the house they knew something was wrong.
The temperature outside was above Zero and it was even
colder in the house. They discovered that all of the
utilities had been shut off and the entire heating and
plumbing system had frozen up. They called the Realtor to
let her know what had happened. She avoided their calls for
a week. Finally, she came out to the house and said,
"Oh it's not that bad." She had expected to see
water everywhere. The Knights explained that she didn't see
water because it was frozen. The Knights turned their claim
over to both their insurance company and the seller's. Both
companies denied the claim. About a month later the Realtor
turned it over to her insurance company, which also denied
the claim. Meanwhile the pipes thawed, which caused even
more damage. Now the Knights need a new heating system, a
new plumbing system, new hardwood floors, new ceilings, some
new walls, new wiring, and new toilets. They are looking at
around $20,000 worth of damage on an $289,000 house. No one
is willing to help cover the damages so they have to sue all
of the parties involved. The Realtor did have her attorney
contact the Knights. He made them a ridiculous offer of $500
to release the Realtor of all liability. Now the lawsuit
will take months and it could take the Knights years to
recover any money. If they do win the lawsuit, it will take
several months after that to complete the repairs.
Now the Knights have to move out of the place they are
renting. They can't move into their house, so they have to
find another place to rent. They don't know how they are
going to afford rent and a mortgage payment.
Lesson Learned
How did this happen? The Knights' Realtor didn't advise
them to take a final walk-through just prior to closing. If
they had walked through the house, the Knights would have
known about the problem before ownership transferred to them
and they could have stopped the closing.
Never, never, never close on a house without performing a
final walk-through inspection the DAY OF CLOSING. The
Knights' Realtor was highly negligent not to have insisted
on this. Let's hope the courts see it that way. But no
matter what happens, the Knights are in for a long, messy
court battle.
John Thomas (not the real name) purchased a home
in Brampton. Several months after moving in, he
decided he wanted a workshop out back where he could pursue
his hobby of building furniture. John started building a 20-
by 30-foot workshop and had completed it within a couple of
months.
Shortly afterward, John received a letter stating that he
had built his shop without getting a review of the building
plans by the City. The letter further
stated that his building was not suitable and was to be torn
down. John was upset but just ignored the letter, thinking
it was the work of a few disgruntled neighbors. John hired a
lawyer to take up his case with the city officials. But the
workshop had to come down. That's it no other choice.
John
decided that the house was not for him. Puts a private for
sale sign (FSBO). The very first day a private buyer likes the
house and looking at the workshop instantly fell in love with
it. It turned out to be a perfect home for buyer Ed. You see
classic car restoration was Ed's hobby and he loved to work on
cars after coming home from work as a welder.
John
show what he brought the house for a few months back - Shows
him the monies spent on building the workshop etc. Deal done
and closed.
Guess
what -The new owner Ed was forced to tear down the workshop
and all his dreams of working on his classic cars went sour. This was a very costly lesson for
Ed. The workshop had
cost him thousands of dollars and he would now need to store
his expensive power tools and go back to finding a place to
work on his passion. Ed is waiting it out hoping that the real
estate prices will go high enough for him to sell. This time
he and his family has sworn in the name of seven seas never to
buy FSBO ever - as long as they live. Ed has still not managed
to locate John who seems to have simply vanished in thin air.
Lesson Learned
John should have ad his agent or lawyer obtain a complete
set of restrictions and easements etc. Should have gone to
the city for the permit before building and would have found
about the restrictions before even buying the
property
As for
poor Ed - all that can be said is this Don't for a moment
think that buying a house privately is a easy job. Majority
of the buyers pay more for the property then if they would
have the services of a Realtor. For his own protection he
should have inquired from John and insist on seeming the
work- permit for the work-shop. If he had done so, he
would have known that If you ever find
yourself in a similar situation, get approval in writing and
follow your plans to the letter. While they may be
inconvenient at times, neighborhood restrictions are
actually a good thing because they help preserve the value
of homes in the neighborhood. Don't become a John Thomas.
Research and review your restrictions and make sure to get a
building permit.
Scariest
Home Contest
Dinner
for Two
Shock us
with your past scariest, most chilling Real Estate
related tale. Our expert panel on dreadful misfortune
will select the most grueling stories and post them
in an upcoming edition
Selected
entries will win a gift certificate of dinner for 2 at
the Mandarin Restaurant
Call: Hannif Highclass and
get details how to enter!
Dinner
for Two ! See
Below!
