Caveat Emptor...Let the Buyer Beware

 Do you realize that not all the States have a FULL DISCLOSURE law in real estate transaction for residential properties?  That's right those documents, sellers are required to complete and provide to buyers and buyers are required to sign and initial, are not a standard in all states.  To those states who do not have the full disclosures the buyer is required to do their own research.  The seller is not required to inform the buyer if there is an issue with the property.  

Take my first real estate transaction when I moved to Hawaii after graduation from college.  The house MLS listing stated "sewer", "yes".  Not all houses in Hawaii and in this case Kailua in Oahu had sewers, but septic systems.  Months after my purchase the toilet backed up.  I called the city and was told I was not connected to the sewers.  The prior owner did not pay for the hook up. How much...WOW, I just borrowed money from my widowed mother to buy this house to supplement my savings.  

I called the agent and complained.  "You never asked if it was connected" was the response.  I took him to Small Claims court and lost.  Caveat Emptor the judge explained.  I was responsible to research before I bought the house.

How many buyers know what to do?  Termites inspection, home inspection, fault lines, flood zones, toxic waste the list goes on.  Did the owner tell you the neighbors were party people until late hours, or the train comes through at 1 in the morning, the dishwasher intermittently stops, the house is not level and needs a new foundation, or the roof leaks.

California created Full Disclosure laws in and around 1986.  For agents it is a pain; as it is for sellers.  For buyers in is a blessing.  

The consequences are severe.  for example a well known agent, at the time, failed to disclose that her client failed to disclose the house was on the San Andreas fault line in Portola Valley.  La Pietra came and the house split in two.  Agent out of business, broker out of business, seller with judgement and buyer made whole.

We are faced every day with Caveat Emptor.  The media is an ongoing sales promotion with articles slanting certain beliefs of the writer and or their employer.  In doing so, before you buy, research. These media promotions do not have a Full Disclosure rule.

When I write this letter or Blog, I look at every commentary that comes before and try to see the application to our markets.

One of the greatest source of my research comes from pricing properties for lenders and insurance companies.  It is called "Broker Price Opinions", or BPO.  From Los Altos Hills to Belmont and Redwood Shores I work on 20 or so pricing a month.  I see trends that are later confirmed by MLS Listings, State and Local Realtor Associations and the Media.  

Cindy, my wife and research assistant, sends me links on a daily basis.  This is one of them. Her comment was this is what you have said in the past.  The BPO work has allowed me to see underneath the market trend while it is developing.  Let me give some insights here

1. Mom & Pop Landlords are under pressure.  They are either liquidating their holdings before the tax change to eliminate 1031 exchanges end, or they are trying to get a larger mortgage to cover their increase costs.  

2.  Buyers are shifting out of once standard select markets to outliers.  Markets that once were not looked at as premium sectors.  As Landlords sold permanent buyers either came in and remodeled or investors bought fixed and flipped.  Menlo Park has seen a decline in average price in past 6 months; were  as, Redwood City has seen an increase.  this week there has been an over abundance ot over bids on Redwood Properties from $1-2 million.

3.  The Black Swan that many are expecting may not really occur; other than, a slow down and over bidding stops and over pricing are met with cuts, cancels or withdrawn or expired listings.  for an example look at Woodside, Atherton, Portola Valley to see the removal from the market.

4.  Sellers are Baby Boomers now wishing the smaller home in communities or downtown walking distance to the shops they normally drove to.  Equity is unleashed and many homes being sold need updating or severe updating.  Those are bought by Gen Z.  Flush with cash from IPO's these buyers want their home and will pay to buy it.  Price is not significant.  BUY, BUY, BUY is their motto.  Portola Valley has been a source of selling on large 1-2 acre parcels with 1950's Ranchers.  Los Altos Hills is another source of sellers.  both of those markets have seen double digit appreciation in the past 6 months.  Among the buyers are the investors, the Fix and Flip crowd.  You see them every day, on your TV, your emails on the radio.  We will buy your house and you pay no commission, as is, no inspections.  Of course there is a discount, to some of the uninformed it sounds good and they sell. 6 months later it is on the market for the Generation Z buyer to move into.

We live in a very fluid market place with many people with different objectives.  There is a transitional change as generations begin to change.  People live longer and they want to enjoy their longer lives.  Medicine keeps on advancing and the longer life's become longer.  Populations shift from locale to locale.  Some out of the area, some out of the state, and some return.  To all those who flocked to Lake Tahoe, are you sure you want to live there?  To the progressive and liberal minded who moved to Texas, are you sure you made the right decision?  Fluidity takes all shapes and forms.  How will the Pandemic phase out?  They all create opportunities and risks....SO Let the Buyer Beware! Caveat Emptor!

On a closing comment here is another flash from my Research Assistant who wants you to know who is eXp Realty