The Real Story
News and commentary about the real estate market and related topics
Dave Parrish, ABR, CRSA, CSP, GRI, ePRO, Realtor
Caveat Emptor (Buyer Beware)
Caveat emptor is Latin for “Let the buyer beware”. Generally caveat emptor is the property law doctrine that controls the sale of real property after the date of closing. Under the doctrine of caveat emptor, the buyer can not recover from the seller for defects on the property that rendered the property unfit for ordinary purposes. The only exception being if the seller actively concealed latent defects.
Laidlaw v. Organ, a decision written in 1817 by Chief Justice John Marshall, is believed by scholars to have been the first U.S. Supreme Court case which laid down the rule of caveat emptor in U.S. law. Alabama is the last domain of the Caveat Emptor principle, as it applies to real estate… Actually, Alabama employs is a modified Caveat Emptor principle meaning that in the state of Alabama a seller must disclose to a buyer any known health and safety issues. Most notably: the known presence of lead-based paint issues, mold, asbestos … While latent defects are not to be concealed, the seller nor the seller’s agent are under obligation to disclose such defects … Their discovery is the Buyer’s responsibility.
While the modern trend in the US is one of the Implied Warranty of Fitness that applies only to the sale of new residential housing by a builder-seller and the rule of Caveat Emptor applies to all other sale situations (i.e. homeowner to buyer). Therefore, it is the duty of the Buyer to assure his or herself that a real property meets their needs, is fit for the purpose intended and is a suitable investment.
So how are buyers to protect themselves?
Don’t assume anything … Ask specific and direct questions about any issue of importance to you and that effects the terms of your offer or your decision to purchase, request a Seller’s Disclosure, get a home inspection via a professional and licensed home inspector. You may also wish to pursue additional inspections for specific major systems (HVAC, Plumbing, electrical, foundation, roof, etc.), request or purchase a home warranty.
We live in a DIY (Do-it-yourself) world … so many people decide to go it alone for many important decisions including the purchase of a home. They do so relying on their own (often limited) experience, on what they have heard from others or maybe even read. Doing so could be a big mistake. The average homeowner will probably purchase no more than five homes during their lifetime each in a market very different than the market that the previous homes were purchased. The knowledge gap created by such disparately different conditions could be very costly.
For example do you really know how to appropriately and accurately assess the value of a home … Hope you aren’t relying on the free Internet web services to give you a valuation for what for most people is their single largest investment. There are market subtleties that can only be known by the experience and active practitioner. Do you understand what affects value, have access to actual sold prices, know the prevailing terms under which a seller may generally operate or be negotiable on.
Do you understand the Law of Agency in the state of Alabama? For example the agent listing a property works for and owes allegiance (fiduciary responsibilities) to the seller of a property that could well (and often do) run counter to the purchaser’s interests. While all licenses are required to provide the following services to all parties in a transaction:
To provide services honestly and in good faith;
To exercise reasonable care and skill;
To keep confidential any information gained in confidence, unless disclosure is required by law or duty to a client, the information becomes public knowledge, or disclosure is authorized in writing;
Present all written offers promptly to the seller;
Answer your questions completely and accurately.
The listing agent does have fiduciary responsibilities which limit their disclosure ability. Additionally, they have the obligation to let the seller know of anything that they learn that impacts the seller’s interests.
Many buyers in today’s market simply feel that can make a low offer that will cover their risks … Believe me nothing could be further than the truth.
Think of yourself as an expert negotiator … There is more to negotiation than beating up the seller … A true negotiator knows where the soft spots are and where negotiations are likely to be most successful. Selling one’s home is most frequently a highly emotional struggle … I’ve seen more than one seller declare a particular purchaser as unwanted because of the nature of offers made and how they presented. Even to the point of taking lesser offers to prove their point.
I know you’ve heard it before … All Real Estate is local … National Averages and Network news sources provide little useful or practical information for the buyer of real estate. You need local expertise.
Seek representation… Use a Buyer’s Agent to represent you. Preferably an Accredited Buyers Agent (ABR) who has been specifically trained and has transaction history of assisting buyers in this important process. Then let them help you take advantage of this especially advantageous Buyer’s Market!
