A Cautionary Home-Buying Tale: Look Before You Leap

Here in Seattle it seems like we’re ground zero for real estate search websites, with Redfin, Estately, John L. Scott, Windermere, and many others constantly competing to add newer fancier features that make it amazingly easy to find a shiny new home in Seattle from the comfort of your old and busted hovel anywhere in the world.

Of course, just because you can complete the entire home-buying process remotely through your internet connection doesn’t mean you should. Here’s a cautionary tale of the risk you take by relying solely on what you see online and the word of a real estate “professional” (warning, disgusting photos of dead rats): Windermere Watch

For the ultimate and absolute life-ruining real estate nightmare, just imagine this: You move back to Seattle, a city you loved when you worked there years before. You’ve been financially responsible and conservative, arriving with zero debt and a little cash to start a new business. You’ve got a large down payment for a home, and even your car is paid off. Your life is in boxes, you go shopping for your new pad, and you find one in Shoreline that’s right in your price range. It’s on a great lot, too.

The house itself is a little bit old, but it’s been painted up nicely with what the Windermere guy’s brochure says are “Martha Stewart colors.” [Agent names redacted.] You’ve got great credit, a big cash downie, and pre-approved everything. Your agent recommends an inspector who has a neat business card with a logo saying he has insurance and belongs to an inspector’s federation. He gives you a nice little report with digital pictures saying the place is crackerjack and just needs a couple minor fixes. So you slap down nearly $47,000 and sign the papers, tickled to get the place.

Then the day you actually get possession and wander around inside your new home a bit, you start getting sick, and swelling up, and eventually you start having a full-blown allergic reaction. Then you find rat droppings, a rat hole torn in a closet ceiling, a rodent bait station behind the refrigerator in the kitchen pantry closet. A closer look around reveals durable wire mesh screening nailed in-between and over various holes and gaps around the house.

Yikes! The purpose of the website is to get people to boycott Windermere, but I think there’s an important lesson here for all potential homebuyers, whether you’re planning on using an agent or not. If you’re considering the purchase of real estate in someplace other than the city you live in, fly out and check it out yourself before buying. Sure, plane tickets are expensive, but I’m sure most people would rather spend $600 on a flight than $30,000+ on unexpected home repairs.

One thing I think the housing bubble has taught us is that when it comes to a transaction involving such large amounts of money, you simply cannot trust that all parties involved are going to be honest, and you certainly can’t count on them acting in your best interests. Verify everything.

Hat tip: Marlow Harris of 360 Digest (Incidentally, a Coldwell Banker Bain agent)

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About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

35 comments:

  1. 1
    gortnerp says:

    Tim,
    That person could be me! As I sit here in Europe, trying to decide where to live when I move back home to Bellevue in 6 months, this topic fits me to a tee. I’ve been scouring the MLS listings, RE websites, and RE blogs trying to figure out where to find a place to live.

    The only difference is I plan on coming to Seattle for a look-see 2 months prior to the final move back home. I’ve already bought the plane tickets.

    I guess this is a “Word to the Wise,” and I plan on being wise. Keep on educating us, Tim!!

  2. 2
    gglockner says:

    Shame on the sellers, but the buyer forgot lesson #1: caveat emptor. Take a look at the home. Come along during the inspection. If you’re particularly worried, get a second inspection. Kudos to Seattle Bubble for linking to this story.

  3. 3
    robroy says:

    I’ve bought a few things over the internet and Craigslist. What I’ve discovered is that you “don’t know what you don’t know”. People have absolutely NO idea just how many things can go wrong. An item can have a reputation for being incredibly good but one in 1,000 has this odd not-so-obvious unfixable problem. And guess what, that’s why the guy was selling the one you just bought!

    People who buy houses unseen are living proof of the old addage, “it is morally irresponsible to allow a fool to keep his money.” Fortunately, people learn from this sort of thing which is why it is said that with age comes wisdom.

    It’s best to learn on cheap stuff though…

  4. 4
    Lionel says:

    Speaking of rats —

    http://www.laweekly.com/2008-07-31/news/rathouse-of-the-palisades/

    I have a buddy who lives across the street from these maniacs. Yikes.

  5. 5
    david losh says:

    Thank you for the essence of why we use a Real Estate agent, a real agent, rather than the person who just got a license so they can make big dollars “selling Real Estate.”
    People shop at home all the time. Home buyers see the picket fence, colors, web site photos, or what the house could be. Agents see what the house is.
    Marlow Harris is a great agent. I have used her services myself on more than one occasion, and referred her, without exageration, twenty times in the past three years.
    She’s an expert worth every penney of the commission you pay her.
    Rats? I hate rats. I bought a rat infested house that cost me sixty thousand to repair. It was two bedrooms one bath 1000 square feet. You have to take it all apart, there’s no choice. Any agent can tell you if there are rats. Do they, or will they, are the questions.
    As far as inspectors, don’t get me started.
    Every one, myself included, can benefit from having an agent represent you. You need a good agent. When you are paying those thousands of dollars in commissions there are agents that are worth the investment. They are very few and far between, but they are available to you for that fee.

  6. 6
    brad in seattle says:

    Not to be mean, but what kind of idiot plunks down a $47k “downie” on the good word of a real estate agent and the agent’s inspector pal? ALWAYS look at a house yourself before you buy it. You need to be in it to know that it feels like a home to you. Don’t trust a Realtor(tm)(r)(k) to guess what’s “right” for you unless they’ve known you for a long time.

  7. 7
    Christina says:

    What doesn’t make sense to me is that, presumably, there was a real estate “professional” monitoring this transaction. While the buyer was absent, I don’t understand why the agent was so careless–don’t agents care more about their reputation?

  8. 8
    sunsplint says:

    Duh…

  9. 9

    RATS

    If you have a doggy door on your house, rest assured, the neighborhood rats go in and out of your house getting food and essentials [like socks for their outdoor nests]. They’re quiet and stealthy; even your dog won’t know.

  10. 10
    Christina says:

    Perhaps some real estate agent(s) could respond to my original question. Sunsplint’s response was less than helpful.

  11. 11
    Christina says:

    Perhaps some real estate agent(s) could respond to my original question about reputation. Sunsplint’s response was less than helpful.

  12. 12
    WestSideBilly says:

    Sucks to be that guy, but I’m struggling to feel sorry for him. Buying something sight unseen is no different than gambling – you should assume that there’s a good chance you will end up with nothing. There’s no way you should ever buy a home without ever setting foot in it! $500 for a plane ticket is not that much to pay. Renting a place for 3-6 months isn’t all that bad before jumping in.

    That said, legally speaking, the guy has a pretty good case… and a lousy lawyer. And Tim’s closing comment about blind trust of anyone with a financial stake is spot on.

    David @ #5 – I don’t normally take exception to your self promotion, but let’s be honest here – it’s very difficult to discern who is being honest and who is not. Both of the groups you reference – the long time RE agents and the new kids on the RE block – have a vested financial stake in the buyer signing. Unquestioned trust of either is foolish.

  13. 13
    cosmos says:

    The real estate industry is fraught with scoundrels, even though most people in the industry are suppose to be in fiduciary roles (protecting you). In any case, never, ever use adjunct services recommended by an agent or broker. Find your own independent inspector, mortgage company, escrow service, etc. Ask people you know who they used, and/or check the BBB or Angie’s list or some similar resources.

  14. 14
    HomeLoser says:

    Also, when you have made a purchase offer, get an inspector in no way associated with the real estate agent. It seems obvious, but unless you have one identified prior to looking at houses, you might find yourself in a time crunch where you have 5 days to get the insepction done and are unable to find an inspector you trust or who can meet your time line, so you go with the realtors recommnedation. Not to say that most inspectors recommnended by a reputable agent will outright lie, but they are likely to understate some of the small issues like a missing piece of siding or gap between drywall and an heating duct in the basement. All these small things add up.

  15. 15
    redmondjp says:

    Sounds just like my house before I moved in! But I KNEW what I was getting (and realtor didn’t misrepresent it–it was listed as a fixer). I even took time off from work to shadow the inspector when he looked at the place (even donning coveralls and going down in the crawl space with him).

    I spent three months before moving in to clean up the kitchen (rats could get over the microwave and inside cabinets, underneath the refrigerator and dishwasher), and then dealt with the rest of the house later (took about 2-3 years to discover all of the secret places that the buggers were getting in). I’ve kept them from getting inside for the last few years so I call that success.

    There is a permanent underground (literally–underneath a tree) colony of rats at my neighbor’s house that feed on dog food, which the neighbors insist on feeding the dogs right at dusk (meaning there is some food there all night while the dogs are asleep and the rats can come in and steal it away)–I have talked to them about it to no avail (feed your dogs in the MORNING). So I have to continually deal with young rats looking for a new home. The like to hang out underhood at night keeping warm on the car engines also.

    Rats are everywhere, but most people don’t know it until they come inside THEIR home, and then it’s crisis time!

  16. 16
    Anonymous Agent says:

    I worked with several Windermere agents a few years ago. I witnessed “top” seller’s and buyer’s agents tell inspectors to downplay or omit problems with the house in order to get the sale closed. It was disgusting, but a closed sale was money in the bank for everyone (except the buyer). The managers/owners of Windermere knew exactly what was happening. That family didn’t even give lip service to prevent it. They love the money that came in from those offices. They encouraged that behavior implicitly. Only a few buyers made serious complaints when they found out the house was a disaster, but it was surprising how quickly they went away when a small portion of the commission was “refunded.”

  17. 17
    Lukasz says:

    Another disaster from Windermere: http://www.renovationtrap.com/

  18. 18
    John says:

    The buyer’s mistake is an obvious one: “…agent recommends an inspector who has a neat business card with a logo saying he has insurance and belongs to an inspector’s federation.”

    Whenever a realtor’s lips are moving, he is lying.

  19. 19
    david losh says:

    #8, self promotion.
    Funny.

  20. 20
    singliac says:

    there’s a really good discussion on KUOW right now. They’re discussing WaMu’s future. One guest has an admitted financial interest in their success, so his comments are more entertaining than useful. The other guest is pretty rational.

  21. 21
    Silver9 says:

    Funny you bring this up. Frankly I am astonished with how little due dilligence many (most?) people do when buying a home. Im amazed that friends I know have gone out with a realtor they trust, looked at maybe three homes, and then picked one.

    My wife and I just did our 12th move since college. I have lived all over the country. You just dont know an area until you have lived in it. It is like vacations. Sure it is a nice place to visit but if you were here 24/7/365, would it still be so nice? You just dont see the details until you live there.

    Having been a home owner, I always rent in a new area before I buy. The idea of moving to a completely new city and buying a house immediately (ie making a huge financial investment) seems insane to me.

  22. 22
    Lake Hills Renter says:

    Wow, that rat story is unbelievable!

  23. 23
    MacAttack says:

    I’d never buy a place without a contingency of satisfactory inspection by an inspector of my choosing. And it’s also always subject to financing at a fixed rate of X% for 30 years.

  24. 24
    Phil says:

    wow, if this is a true story, this guy has been sorely taken advantage of by his real estate agent, then by his own lawyer. what can you do when the system fails you like that

  25. 25

    I had a nightmare purchase (a few purchases ago before I was in mortgage) where I used the agents inspector. I guess all the agents love this guy because he never kills a deal. I move in, single mom, to dryrot in the floors of my bathroom and a home infested with carpenter ants (just to name a few of my issues). The home inspector and agent just shrugged it all off.

    I wrote to Elizabeth Rhodes and my situation was published, recommending that I contact an attorney. When this was published, even though names were omitted, the agent was furious with me….I wonder how he knew it was about him?

    On our last home purchase, we used a “deal killer” for a home inspector. :)

  26. 26
    david losh says:

    8 WestSideBilly
    There is another site at http://www.360digest.com listed in the comments called http://www.renovationtrap.com
    It illustrates your point that it is indeed hard to know who to trust in the Real Estate business.

  27. 27
    jjl says:

    Wow. As a Realtor my question is why in the world would you want to sell a client a home like this “just for a deal”?

    When selling a home to a client – I would never even show a home that I would not personally consider buying myself. Why – because I expect this client will come back to me when it’s time to move again and hopefully will list with me. I would never recommend purchasing a home that I wouldn’t want to have as a listing in the future.

    Just yesterday we had an investor find a house he wanted to buy. We took a look at it without the investor and because of a leaking roof, water problems, slab foundation and baseboard heat – told him that this was not a good re-sale home and talked him out of it.

    I can repeat this scenario multiple times for multiple clients.

    I’m in this business as a lifetime career. I expect to be selling homes for another 15 years until I retire. Every sale I make now is hopefully a repeat customer in the future. That is how a successful agent stays in the business.

    I also would hope that my clients trust me enough to use my “deal killer” inspector. We’ve recommended and used the same inspector for over 10 years and cringe when someone uses a different one because our “deal killer” inspector knows that we expect him to find the problems. In representing a buyer, going back to the seller with a list of problems is like “taking another bite at the apple”. Working for the buyer to get more reduction or consessions from the seller. Any buyer’s agent worth his grain of salt would not work any other way.

    So Christina #10, we are agents who place a high regard for ethics, it’s just unfortunate that there are bad ones out there that don’t. Also, keep in mind that the good ones do out number the bad ones.

  28. 28
    mikemcc says:

    I couldn’t find any reference to this guy having his own agent on this deal. So he buys a house he hasn’t seen, without representation?

  29. 29
    david losh says:

    That’s the way I read it also. I thought the person bought through a web site. When reading it again they could have purchased through the listing agent. Either way they seem under represented or that would be the focus of the lawsuit.
    As a point of self promotion I always think about my liability in a Real Estate transaction. There are several avenues to ruin an agent in the business and we are seeing a couple here. I list or sell what I believe in.
    There are other ways, better ways in my opinion, to make money in Real Estate than selling something.

  30. 30
    Bob says:

    This buyer was stupid to buy a house without visiting it in person. I could not imagine doing that. Whenever I have moved to a new city (3 times in 18 years), I typically rent for 6 months to 12 months. That provides enough time to learn the region and figure out where you want to live long term.

    Nobody should be buying a house the way that person did it.

  31. 31

    That story (cited above) of the Renovation Trap – that story is ours. Truly, when dealing in an area where you know little, you usually rely on an expert. That is true of medicine, finance, law, — and real estate. Such experts are usually licensed by the government, and they hold a special position in relation to their clients called “fiduciary” — meaning, “someone you can trust.”

    In fact, that is the theme of an ad campaign financed by the Board of Realtors a few years ago. You can find the Board of Realtor’s ads at http://www.realtor.org/pac.nsf/pages/television

    When a person defined in law as a “fiduciary” does you wrong, a whole different set of laws apply. Merely “failing to disclose” a fact that the fiduciary “had a duty to disclose” can be escalated to a finding of Civil Fraud by the courts.

    But that is not to say the Court is always your friend. In the story on the web site Windermere Watch, we find the highly believable narrative of an innocent (and legally ignorant) litigant abandoned by his lawyer, trying to present his case at a summary judgment hearing, and finding the whole case thrown out of court – facts be damned, public interest be damned – because the ordinary citizen cannot compete with the corporate pocketbook in a lawsuit.

    Washington needs to institute punitive damages. We have been nibbling around the edges with the Consumer Protection Act and the Insurance Fair Conduct Act (IFCA). Now we need to bite the bullet and realize that just “making whole” is not enough. When some corporations behave outrageously, abuse the public trust, make a profit, and lose a lawsuit only now and then, dishonest business becomes profitable. And the result is not nice to behold.

  32. 32
    david losh says:

    Thank you!
    Yes, I agree. Washington is not a buyer beware state, but our laws are certainly stacked against the consumer in real estate transactions. Honestly though hospitals and doctors use the very same techniques.
    I’ve talked with the Attorney General’s legal counsel about Real Estate swindles because it seems to me we have more Lemon Laws concerning cars than houses.
    Your case is one of contractor law. Your dispute is with the contractor doing shoddy work at excessive billing. You were referred by the Real Estate agent. My question is why the Bonding Company, your home owners insurance, the Contractors Insurance, were not involved?

  33. 33

    Your case is one of contractor law. Your dispute is with the contractor doing shoddy work at excessive billing. You were referred by the Real Estate agent. My question is why the Bonding Company, your home owners insurance, the Contractors Insurance, were not involved?

    Well, actually . . . our case is not primarily concerned with contractor law.

    The Windermere agent brought the contractor into the house before we decided to buy it. The agent presented the contractor as an expert who could evaluate the renovation potential of the home. Could we afford to remodel the house to suit? Remember, we did not want to live in the house in as-is condition.

    In fact, the contractor functioned as part of the agent’s sales team, and the agent functioned as the contractor’s salesman.

    But the agent did not tell us he was one of the original incorporators, 20% shareholder, and Vice President of the contracting company. The agent had “referred” more than 30 other clients to that company over the years, and not once did he reveal his connections.

    And not once did the agent reveal to his clients that the contracting company was not licensed, bonded, and insured as required by state law.

    As well as being VP of the contracting company, the agent was a business partner with the primary owner of the contracting company in another deal. This was a land speculation joint venture to turn six acres (immediately adjacent to downtown Sammamish) into a shopping mall.

    The contracting company was operating from that land, and the agent took out a loan in his own name to develop the land. The agreement was that the primary owner of the contracting company would make payments on the agent’s loan as he could.

    Just about the time we were considering the house, the agent was in arrears on the payments. As soon as we agreed to buy the house and hire the contracting company, the contracting company itself began making payments on the real estate agent’s loan. All this was happening without our knowledge.

    Our trial is scheduled for October 24 in the Superior Court, King County (Seattle) courthouse. We hope you-all can be there.

  34. 34
    david losh says:

    OK, you restated your case.
    Where was your home owners insurance? What does your insurance company say?
    A matter of disclosure would be about the agent as a contractor. There are many instances where an agent can have an ownership interest in Real Estate services that don’t require disclosure. Agents owning an interst in a Title Insurance Company comes to mind.
    The land or payment on the land is a murky point, I don’t get it.
    You had a contractor do work on your house for what you are saying was a reduced price.

    “Could we afford to remodel the house to suit? Remember, we did not want to live in the house in as-is condition.
    In fact, the contractor functioned as part of the agent’s sales team, and the agent functioned as the contractor’s salesman.”

    The question is if you could afford the remodelling? Did you take other bids? Did you stop the work in progress if it was different than what you agreed to?

  35. 35
    HV says:

    Story sounds more scary than it is. Why didn’t he also hire an exterminator remotely? I am a cleanliness freak – and I would hire one even if the house was “looking” clean if I were to visit it personally…

    That would have solved his problem… (just to take the poor buyer’s side…)

    Once he got his house cleaned – he must be better off…

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