Saturday, September 29, 2012

Renegotiation A Problem?

In a recent Market Watch article (The Wall Street Journal), writer AnnaMaria Andriotis discusses the real estate recovery.  According to the article, which quotes the National Association of Realtors (NAR), 36% of real estate agents report "some kind of problem" between the buy-sell agreement and closing.  One item mentioned is "renegotiations of the sale terms."

Renegotiations typically result from new information revealed during the appraisal or home inspection.  The article specifically states "appraisals have been derailing home sales in cases when the appraised value of the home comes in lower than the purchase price the buyer and seller had agreed to."  What Andriotis fails to mention is that this often occurs when the appraiser is actually doing their job, and refusing to inflate the value of a property as was often done in the past, and was a primary cause of the real estate collapse.  The same may be true in the case of home inspections, where the home inspector properly and honestly reports the true condition of the property.

What Andriotis fails to address is the real issue, that the majority of properties on the market at present are in far worse condition than sellers or real estate agents are willing to admit, and when the actual value or condition is revealed to the buyer, buyers are now more willing to insist on renegotiating the buy-sell agreement or walk away.  As is said in negotiations, no deal is better than a bad deal.  Buyers are waking up to that reality.  The twist of the article seems to be that this is a bad thing.

The truth of the matter is that it is a good thing when a buyer attends to the details, which include researching proper permits for work done on the property, having an appraisal done by an honest appraiser, and having a thorough home inspection performed by a competent and professional home inspector who answers only to the buyer.  This is a reminder that, even in this day of high technology and open information, the warning "buyer beware" still holds true.  Honestly, it is more true today than it was in the past.

If you are purchasing a home, pay attention to the details.  It may save you more money than you could imagine.  Surround yourself with professionals with integrity who will focus on your interests only.  And still, beware.

Tuesday, September 18, 2012

Michigan Supreme Court Ruling

The Detroit News reported on 17 August 2012 that installers of appliances have no legal duty to warn homeowners about observed safety hazards.  The case involved installers of an electric dryer.  While installing said dryer in the home of a Clinton Township (Michigan) resident, the installers observed an uncapped natural gas line.  Some time later, the home owner opened a gas valve supplying the uncapped line.  An explosion resulted, severely injuring the homeowner and her children.

In a 4 to 3 ruling, the Michigan Supreme Court ruled that the appliance installers had no legal duty to warn the homeowner about the danger.  The court apparently did not comment on the installer's moral or ethical duty to warn the homeowner.  Nonetheless, the appliance installer could have avoided a lawsuit, and done the morally correct thing, by putting in place a policy that any uncapped natural gas lines be capped when installing an appliance.