Bad things happen to good people
I received a call this weekend from a past client – on behalf of a friend who bought a home last summer, but who can no longer afford it.
The only thing you can be certain of in life – is uncertainty
This lady – we’ll call her Julie – was renting a home with a married couple as room-mates. They all got along well, so when the landlord decided to sell the property – Julie stepped up to be the buyer. With her room-mates kicking in each month, the payment was no problem.
Although I had never met Julie, she knew of me. My client always brags to his friends about what a great deal I got him on his house – and how he is eternally grateful to me. But when she told her landlord that she wanted to use a Realtor – he told her that if she brought a Realtor into this, he would not sell her the house.
Well, she liked the house… and didn’t want to move… so she proceeded without the assistance or representation of a buyer’s agent.
The sale closed last August for $175,000 and Julie was officially a homeowner for the first time. I am sure she was very proud and pleased with herself and her accomplishment.
But there’s always calm before the storm
The room-mates developed marital problems that were quickly resolved by the wife moving out – followed by a speedy divorce.
Then the remaining room-mate was diagnosed with an inoperable brain tumor and, at this point in time, is not expected to survive his current stay in the hospital.
Julie had been out of work for a while – and was looking forward to working in the restaurant that her room-mate was planning to open… prior to the divorce and brain tumor. Now she had no money left – behind on mortgage payments – and getting ready to start a new job that won’t come close to earning her enough money to keep the house. She needed out – and quick.
Most of us Realtors take on charity cases. We don’t advertise that we take them… but most of us have worked for free (intentionally) or for very little compensation… to help out those who needed us pro bono. This looked like it was going to be one of those times.
So I took down her info and went to the computer
And sat in horror as each piece of information I was gathering was leading me to the conclusion that Julie got taken. Taken hard.
From my cursory review of the comps, it appeared that she paid around $20,000 too much for her home. There’s no amount of pro bono in the world to make up for this sad reality.
We met last night, and I inspected the house. The landlord/seller painted over rotted wood and defective siding. Flashing and door seals were either missing or improperly installed, thus causing water intrusion when it rains hard. Faucets were shut off from the plumbing problems. Bamboo flooring – still in boxes in the garage – that the seller promised to install… but never did. The list goes on and on.
Then, to make matters worse, Julie apparently watched too many episodes of HGTV and thought she could do the stuff that she saw the common homeowner do on TV. Uh…. no. Sorry, Julie. Do not ever attempt to try this at home – ever again. I am sure you are talented – but not in the home remodeling field.
Her paint colors were not good – but that can be corrected. More difficult to correct, however, was slopping paint on the natural wood trim that is found throughout the house. Now, the only thing the next owner can do is completely paint over the trim, as she screwed it all up. Big mistake.
She was also just as successful at failure in painting over the natural stained cabinets in the kitchen. Some of the worst I have seen, bless her heart. She wanted to make her home so nice – yet was killing it room-by-room.
Her basement was finished – sort of. Not the way I would have done it. For the most part, not the way most people would have done it. One big rec room on the wall with the windows… and one big bedroom towards the front of the house with a bathroom and closet. Unfortunately, since this arrangement doesn’t include a window in the bedroom… we can’t really call it a bedroom. All of the flooring was linoleum. Yuck. It probably wouldn’t have hurt to route some heating and air conditioning ducts in there, either. But I digress.
And I had to be the one to break the sad reality to her
Not only is she NOT going to get out of this unscathed, but she is going to pay a price. At best, the lenders will allow a short sale (accepting less than what is owed) and will not seek a deficiency judgment against her. Julie will be forced to show the loss as income on her taxes when she files next year. At worst, they will not allow a short sale – foreclose and sell the property – then seek a deficiency judgment for the loss.
Either way, it’s not a pretty picture. And it all could have been avoided if she had only called me for advice. Although I might not have represented her, I could have given her some friendly advice that would have prevented her from making the purchase without some significant changes to the price and terms.
Julie thought that since the mortgage company was ordering an appraisal – she didn’t need to fear overpaying for the property. Apparently mortgage fraud is a topic that doesn’t get discussed in her circle of friends.
I will eventually document this horror show on my website, as I believe there will be something for a first-time home buyer to learn… and perhaps others, as well.
To quickly recap what we should have learned here:
- Do not make a purchase without representation or personal expertise
- Before making a purchase, view other homes for sale and compare value
- Always get a home inspection by a licensed, professional home inspector
- Do not believe how easy everything is on HGTV – it’s TELEVISION
Danilo Bogdanovic says:
One thing you should add to the recap list is “Know what you know and know what you DON’T know.”
People should use that in all facets of life, not just buying or selling real estate. But then there’s that darn thing called an ego that always gets in the way…
March 20, 2007 — 1:25 pm
Beau says:
Definitely good advice for first time, second time and third time buyers. Seek professional advice and opinions!
March 20, 2007 — 2:59 pm
Sam Chapman says:
I hate hearing stories like this. I always recommend to a buyer that they get representation. I avoid the intermediary situation almost at all cost. Too many things can go wrong otherwise. Especially with a first timer.
March 20, 2007 — 3:15 pm
Dave Barnes says:
Julie did not need “representation”.
Julie need to have her act together.
Your 4 points in the article were valid. But, none of them require a “real estate agent”.
Julie is an idiot.
1. She bought a house she could not afford. Depending upon “renters” to carry the load is retarded.
2. She bought a house without an inspection. Stupid.
3. She bought a house without having a clue about comparable values in the neighborhood. Doesn’t she read the local newspaper? Obviously not.
4. Watching too many HGTV shows and believing that Clive knows how to get you “top dollar” is moronic.
Julie is an idiot.
March 20, 2007 — 9:17 pm
Jim Frey says:
Thanx Doug – Great advice & knowledge for all. “US” in the biz realize the pitfalls. We are here as Advocates. Negotiators. Friends.
March 21, 2007 — 8:55 am
Lucy says:
How terrible! Thanks for this post. Most homeowners only think of using an agent for the “sale” process, not the “buying” process. Shows how we need to be reminded of the problems we can face when we don’t use a “buyers agent”.
March 21, 2007 — 11:34 am
Rick Armstrong says:
Good post. It does seem that this woman made a few very basic mistakes. Much of this lies in the fact that people think that real estate transactions are easy or simple. I have even had young agents tell me how easy it is going to be to be a real estate agent. I have been doing real estate transactions now for almost twenty years and I constantly find myself coming across new problems and questions. It is also important to note that geographic areas – states and counties can have major differences. I have often used good brokers to represent me in places I am buying properties – their experience is worth the price.
January 16, 2008 — 5:25 pm