When Home Sellers Lie

Posted by: Chris Palmeri on August 7, 2009

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Los Angeles police chief William Bratton announced this week that he was leaving his post for an undisclosed job in the private sector. What does this have to do with real estate?

Well, a couple of months ago Bratton put his $1.8 million Los Angeles home on the market. Reporters peppered him with questions about why he was selling and if he was leaving his job. According to this account in the Los Angeles Times, Bratton said he had no intention of leaving. He indicated he was selling the house because he was tired of taking care of the pool.

Negotiating a new job when you’ve already got one is a tricky thing. I’m sure Bratton wanted to get his house on the market before the new school year started and the summer buying frenzy cooled. But fibbing to the public?

Bratton’s denying he was leaving town for a new job doesn’t really impact the buyer of his house. In fact, by reminding everyone what a pain pools are he may have even negatively impacted his sale price. The whole episode got me thinking though about whom you can really trust in a real estate transaction. The answer is nobody.

Sure there are certain structural issues, the presence of radon and earthquake fault zones that sellers and agents are legally obligated to reveal to buyers. But with just about everything else you are on your own. You have to do a lot of homework. Talk to neighbors. Come by at night and at day. And never take one person’s word as gospel, not even the chief of police.

Reader Comments

jambo

August 7, 2009 9:19 PM

The real estate agent cares only about his commission. They are no different than a car salesman. Sell, sell and sell at all cost. Lie if u have to. Doesn't matter. Sell, sell. sell.

jambo

August 7, 2009 9:19 PM

The real estate agent cares only about his commission. They are no different than a car salesman. Sell, sell and sell at all cost. Lie if u have to. Doesn't matter. Sell, sell. sell.

Mark

August 7, 2009 9:56 PM

I was an agent for 10 years and am now an appraiser going on 9 years. What you say is par for the course. Truly, one doesn't legally have to disclose any reason for selling. Sellers are selling because they want to sell. That should be good enough regardless of how curious the buyers are. ("I ame selling because I've decided to have a sex change operation and need the equity," should work in a pinch.)

That said, it's still typical for buyers to want to know the reason the sellers are selling. The bottom line is it's not in the interest of the sellers to disclose such information. It hard to see a way how such information could help them sell their property to their best advantage.

A good part of the initial negotiation is psychological in a delicate balance of power equation. Buyers and sellers act in their own self-interest. Caveat emptor!

Andrew

August 8, 2009 6:57 AM

If your assumptions are correct that he had decided to leave his job at that point, wouldn't his employer request that he keep this quiet until they were prepared? It's a political job after all.

And it would probably have helped him sell the house if it was known he was simply relocating for a new job!

tim

August 8, 2009 11:12 PM

this post was a waste of electricity

Ballbuster

August 9, 2009 3:32 AM

Before Palmeri condemns Bratton, he is reminded of that famous phrase, "Those who live in a glass house should not throw rocks at others." Judged by his past dubious writing, Palmeri is not your Eagle Scout when he is required to tell the whole truth. As demonstrated in this article about real estate disclosures, Palmeri is either ignorant or deceptive or both. Where seller or real estate agent knows about "certain structural issues" as well as non-structural issues that affects the habitability, California laws require full disclosure. Example: dwelling is located within the noisy flight path of aircrafts; dwelling is located within one mile radius of lead smelting plant; dwelling is located within area populated by bobcats/mountain lions. Acting cautiously, some real estate agents even investigate whether a sex-offender is within the neighborhood so as to include such data in their full disclosure and due diligence. As an understatement, selling real estate without disclosing any of the above information is really hawking "Hot Property." On that note, what kind of "Hot Property" is Palmeri writing about? Palmeri seems to offer one good advice in the last sentence, "And never take one person's word as gospel, not even the chief of police." He should have included, "definitely not Chris Palmeri."

Chuck Gaffney

August 9, 2009 7:59 PM

Let's also remember that the very values of many homes are still highly over-priced. Their inflated value and recent increase in value again is the biggest lie of them all. The inflation was what inevitably lead to the whole economy's crash since banks underestimated how ridicules the inflation got and thought that people could still pay loans on these over priced holes in the ground. With economy healing up, homeowners are once again creating this lie that higher home prices is a benefit. The media has been propping up this lie and in order for the economy to really heal, owners have to come to terms that their home is only really worth half the $ they and the realtors claim they are. We can't have those lies erode the progress that has been happening in the past few months. Home prices for now need to stay about the same or even go slightly lower in order to keep the recent spike in sales..which by the way is mainly on homes at around $100K, not the 1.8 mill this former chief of police thinks he'll get. Add the fact that many owners are lying about the real conditions of their homes and just like the houses, this economy will stay on shaky grounds.

Clyde

August 10, 2009 11:55 AM

I do not get the opinion that the seller is responsible for the buyer. When you get married, do you want a disclosure report printed out from the parents of your future spouse, so you can sue if you get a dud.

hosey

August 10, 2009 2:04 PM

Sooo true. I am very mistrustful of home inspectors. Many have cozy relationships with the listing agent, who looks for an "easy" inspection so the house passes easily with no closing delays and commission. Home Inspection fine print puts no liability on the inspector who may ignore visable and obvious problems. Too many problems and the realtor will suggest another inspector for the home buyer...

FPICK

August 10, 2009 4:17 PM

Hosey - Truly wrong.

The BUYER chooses a home inspection company, sometimes after consulting their BUYER'S agent.

A listing agent has nothing to do with home inspection selection.

Tomme

August 11, 2009 5:28 PM

Interesting comments... I just sold my home because of the economy and personal issues. For the person who thinks houses are overpriced, I guess you’re young and have never owned one… I was the general contractor when we built this house 10 years ago and barely made a 2% annual gain. If I had bought it already built I would have lost money…. Now to the real issue, honesty in sales…Georgia, my home state requires very stringent disclosure, it’s about six pages. The potential buyers hire inspectors as part of their due diligence. I had my home professionally inspected before I put it on the market so I would know any potential problems. I found a couple that might have caused problems with closing.

Real Estate sales isn’t any different than any other type of sales. You have ethical buyers and sellers and unethical, nothing new here. I generally find those that distrust the other party the most are the ones you have to watch the closest. People who think they are going to get cheated generally try to cheat first to make up for any potential loss. When I hear someone complaining about generalizations, to me it means they are building a case to do something unethical and feel better about it. After all if you were going to hit me, why wouldn’t I out of self defense hit you first… right…

The last house we sold, the buyer knew we were building a new house and we were up against a deadline. He came to the closing with a couple of completely outrageous demands. He thought I wasn’t in a position to turn him down. I did. I told him I would lose my new house before I would let someone cheat me. He was amazed and as I walked out of the room, called me back. It’s all about integrity… you either have it or you don’t. You can’t have it sometimes and not other times…

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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