Take my advice… please

An old friend asked I help his son and daughter-in-law with their home purchase.

My friend has done well and planned to give these fortunate kids $150,000 toward their purchase. My friend likes to pay cash, so a mortgage was out of the question.

The couple (20-somethings and expecting) were like kids in a candy store. Every time they saw a property that fit their bill ($165,000 or less in their favored municipality), they were ready to bite. The house that most caught their fancy, and the one they eventually purchased, was a flip. Now, I have a lot to say about flipped houses, primarily based upon the volume of litigation that I have handled arising from the purchase of flipped homes. You can look for that article later. For purposes of this story, let me just say that I was very concerned that my friend’s son and daughter-in-law would later regret their purchase or have serious problems. And so, I embark on my mission, full of advice.

I should tell you, that these kids were also represented by a buyer’s agent. The agent and I were not familiar with each other, and I later questioned some of her advice, but stay tuned for that.

What I knew of the home prior to the Agreement of Sale being signed was that it was purchased by a single man about six months ago. After his purchase, the man made substantial cosmetic renovations to the interior and exterior. The property was serviced by a well and septic system that he had not tinkered with. He knew, however, that the septic tank was broken and would have to be replaced. About three months after his purchase, he died. He was survived by a daughter, who was his executrix and who knew nothing about the home. She could not locate receipts for the repair work he had done. There were no permits issued by the municipality and essentially no records of any kind existed that related to the work he had done. The previous owners who sold the home this man were long gone and there was no trace of a seller’s property disclosure statement that they may have completed.

For all practical purposes, my friend’s family was purchasing this house in the dark, though in the dark, you can shine a light on the subject.  Here, an inspection of the readily accessible and visible areas of the home merely confirmed that there was lots of new paint and granite counters (lipstick on a pig?).

What to do? And this is where I feel I may have walked in your shoes, as I am sure many of you have been in a similar situation. I was full of good advice about the perils of buying a home with no known history and with the possible telltale signs obliterated by new paint and granite. I also realized that, as cautious as I wanted to be (after all this was a close friend’s family), I could not make them take my advice, try as I might.

I, of course, contrasted their purchase of this home and its unknown history and fresh paint versus their purchasing a property from an owner who lived in it for 40 years, with exposed block walls and the bones of the property readily visible. I warned them that unlike the purchase of new construction from a builder, this home was not warrantied. “Oh, but the seller is giving us a home warranty,” they asserted.  Well a home warranty from an after-market company is far different from a builder’s warranty of workmanship, fitness and habitability.

To complicate matters, their inspections not only confirmed the broken septic tank, but also detected a wet wall adjacent to an outside spigot. And the title report revealed that there was no recorded easement over the private road yielding access to the property! I explained that if they were financing their purchase, the lack of a recorded easement would, in all likelihood, preclude their obtaining a loan. This and the other problems found did not scare them.

I suggested we write a corrective proposal that would call for the repair of the septic system prior to settlement. No, my clients were too excited about taking title and starting their interior work on the property and wanted to purchase it and then do the repairs to the septic system! I warned them that the $10,000 estimate they had for replacing the tank was not guaranteed and asked what would happen if the repairs cost $15,000 rather than $10,000? By having the seller only reduce the purchase price by the $10,000 estimated, they would be on the hook for any remaining sums. And what about that wet spot on the wall? When opened for the repairs, after purchase, would they find mold or conditions they did not anticipate, such as a structural defect in the exterior block wall? And, of course, there was the matter of the easement. What would they do when it came time to sell the property if they were unable to secure a written easement by the owner of the land over which their road traversed?

I broached these subjects with their Realtor® and suggested that she beef-up the corrective proposal by either getting an extension of time within which the work could be accomplished or by having additional sums set aside in escrow, etc. The agent’s reply was to tell me that the buyers really wanted to buy this property and they were worried the seller would terminate if they made the request. I found this to be astounding given the fact that the Agreement of Sale provided that the seller could not terminate the contract upon receipt of a such a request from the buyers. The parties would enter into the negotiation period and if the seller refused to do all that was asked, the buyers could then terminate or put in writing the best offer the seller was willing to make. Though I thought I schooled the agent on this very obvious and known formula, she went ahead and put her buyers under agreement because “they really liked the property” and wanted it.

And here is the kicker. After my many detailed letters explaining the process and doing my best to protect my friend’s kids, I became the villain. I learned that they were unhappy with my services because they perceived I was raining on their parade. My friend was well aware that I was treating his children as I would my own; that is to say; I wanted to do everything to protect their interests.

As I reflect on how I became the bad guy, I couldn’t help but wonder how often you experience the same thing. None of us can predict the future for our clients. There is no certainty in this business. There are only educated guesses based on knowledge and experience. We like it when our clients listen to us, even when they choose a course we would not. That is acceptable. After all, our clients bear the risk of their choices so they should make them. It is just that we want our experience and knowledge to count for something. We all appreciate when our clients thank us and avail themselves of the help we offer. Just some passing thoughts.