Say It in Latin, Caveat Emptor

October 18, 2016 — caveat emptor, fraud, HOA, real estate

cactus in bloom

The Latin phrase caveat emptor means let the buyer beware. This concept is a warning to all consumers that they have less information about the product in normal circumstances than the seller. Common law provides that the seller must deliver the goods, free of encumbrance by third parties, and that the goods must be suitable for the intended use.  This applies to real estate contracts, where the seller may hoodwink an unsophisticated buyer into paying more for the property than it is really worth.

Once the deal has been closed there is very little the buyer can do other than regret the purchase.  Property sold with obvious concealed flaws is difficult to return, and will involve legal fees and court costs.  A couple from Europe bought their first home in our condo village and learned after the closing that the place was full of toxic black mold.  I felt really bad for them because they were stuck with the home and the costly mold removal fee because they could not prove that the seller knew about the mold before the sale.  A good inspector could have saved them before they signed that contract, but after the signatures, they were stuck.  To prove fraud after the fact is much harder than catching it before the unfortunate purchase has been made.

In real estate sales it is common for both parties to employ agents to represent their interests.  The buyer needs to be wary of the true intention of both agents, which is to make a sale from which they will cut a commission.  The first time buyer can be confused by appraisals, financing, points, insurance, inspections, taxation, and by the contract itself. Emotional factors go into home buying that make this important decision very tricky from a financial standpoint.  For many people the investment in housing is the biggest single investment the family makes.  After the last housing meltdown and mortgage fraud this reality became clear to many who lost their homes.

If you consider purchasing a home that is governed by an HOA I urge you to fully investigate the corporation and its standards before you buy.  Some are overly strict and micro manage.  I live in a condo village that has had no management, standard operating procedures, or enforcement of our deed restrictions since I moved here.  The governing board has drained the value from all the homes by neglecting the common areas and failing to properly manage and maintain our assets.  This puts a real wrench in the works for shareholders who have pride of ownership. I would avoid buying any property that is governed by an HOA in the future. The system leaves much to be desired.  I have learned this lesson the hard way.  Have you ever made a disastrous investment due to factors beyond your control, gentle reader?  It is a drag. Inform yourself.  That goes for elected officials too.