Austin Real Estate Blog

Potential home buyers might be inclined to run screaming from two small words: “As Is”. This phrase can signal anything from a house that’s falling apart to one where the seller is just not in a position to make disclosure on an otherwise perfectly good property. An article by Dian Hymer attempts to take some of the fear out of this tiny phrase.

“As is” can have several different meanings. It could be the property was inherited and the heir is unable to inspect and make disclosure on the house. The label on an inherited property is put there to protect the heirs from liability.

A bank foreclosure is usually sold “as is”, as the bank is not in a position to inspect the house. However, a homeowner who has not been able to make mortgage payments, may not have had the funds to keep up with maintenance either.

It could also be subject to regional regulations. California, for instance, advertises most homes in “as is” condition. This only means the seller won’t warrant the condition of the property and it’s strongly suggested that the buyer retain a professional inspector.

It could also pertain to a property that needs major repair. In the current buyers’ market, the purchaser is not as willing to accept the “as is” condition without a significant drop in price.

The bottom line is a potential buyer could get a good deal on an “as is” home, but he or she should conduct a thorough, professional inspection of the property and be prepared to make what could be major repairs. Buyers are also encouraged to make sure they have the option to withdrawal from a sale without loss of deposit should the property need more attention than they’re willing to give.

Most home owners don’t question the ethics of the flooring they tread upon, but recent heightened awareness of environmental concerns have us taking a second look at what we’re walking on.

This article in Realty Times outlines some examples of different flooring materials, their origin, and ways in which a home owner can choose the environmentally responsible materials to build new or rebuild the flooring in their home.

Reclaimed wood from demolished barns, hotels, and railroad cars is becoming more popular, but can be pricey - ranging from $6 to $20 per square foot. 

Linoleum is made from recycled or sustainable materials, but cannot be recycled itself because of the glue used in installation, so the home owner should be aware it’s not entirely ecological. Still, linoleum can be inexpensive and is popular for not only homes, but public buildings such as school and offices.

The bark of the cork tree is not just for stopping wine bottles anymore. Cork, it turns out, makes an excellent flooring material. It’s naturally waterproof, sound proof, and cushioning to both feet and fragile items as well.

The most environmentally sound flooring materials is proving to be the fast-growing bamboo plant. Bamboo is actually a grass, not a wood, but this plant produces a substantially higher usable yield than hardwood trees; about 2500 percent. It matures in a far shorter time - about 4 to 5 years - and the plant itself can continue to produce after the usable material is harvested. Bamboo doesn’t expand or contract as badly as the traditional hardwood, either.

Recycled flooring can be an economical and beautiful material. Old hardwoods will have mellowed with age and use. Cork can have many different and subtle shades which enhance its utility and bamboo floors are among the most exquisitely beautiful.

The real estate industry has long been susceptible to price inflation, fraud, and other unsavory practices. Making it illegal to coerce an appraiser would be a good thing, but I hope that most appraisers wouldn’t see that as a way out of talking and reviewing agent recommendations when there is an issue with an appraisal.

I’ve not had any problems with an appraiser doing that, but I’ve heard stories about appraisers not taking input. Lenders seem to be the culprit in most cases of coercion that I’ve heard of.

You can read the summary of the Federal Reserve Proposal below in the first quoted area.

Additionally, in the news recently, is an appraiser that is suing WaMu for breach of contract, unfair business practices, interference with her ability to earn a living, fraud, conspiracy and slander. The bank is accused of pulling business from an appraiser who refused to make the appraisals favorably to the bank. Man, o, man. That’s bad news for the bank. What do you think about inflated appraisal? Send us a comment and let us know.

Federal Reserve Proposal Addresses Appraisal Coercion
Excerpt from Appraisal Institute’s Appraiser News Online Vol. 9, No. 1, January 15, 2008

The Federal Reserve Board recently proposed prohibiting creditors and mortgage brokers from coercing real estate appraisers to misstate a home’s value on all mortgages. The announcement was part of the Fed’s December 18 proposed changes to Regulation Z (Truth in Lending), which would restrict certain practices and require certain mortgage disclosures to be provided earlier in the transaction.

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In addition to prohibiting creditors and mortgage brokers from coercing appraisers, the Board also proposes to prohibit creditors from extending credit when creditors know or have reason to know, at or before loan consummation, that an appraiser has misstated a dwelling’s value. The regulation would apply to all consumer credit transactions secured by a consumer’s principal dwelling.

In its discussion on the topic, the Board said, “Pressuring an appraiser to overstate, or understate, the value of a consumer’s dwelling distorts the lending process and harms consumers… Inflated appraisals of homes concentrated in a neighborhood may affect other appraisals, since appraisers factor the value of comparable properties into their property valuation. For the same reason, understated appraisals may affect appraisals of neighboring properties. Thus, inflated or understated appraisals can harm consumers other than those who are party to the transaction with the inflated appraisal. Moreover, these consumers are not in a position to know of the practice or avoid it.”

The proposed regulation defines the term “appraiser” as a person who engages in the business of providing - or offering to provide - assessments of the value of dwellings.

The commentary to the proposed regulation gives examples of acts that would violate the regulation: implying to an appraiser that retention of the appraiser depends on the amount at which the appraiser values a consumer’s principal dwelling; failing to compensate an appraiser or to retain the appraiser in the future because the appraiser does not value a consumer’s principal dwelling at or above a certain amount; and conditioning an appraiser’s compensation on loan consummation.

The commentary also lists examples of acts that would not violate the regulation: requesting that an appraiser consider additional information for, provide additional information about, or correct factual errors in a valuation; obtaining multiple appraisals of a dwelling (provided that the creditor or mortgage broker selects appraisals based on reliability rather than on the value stated); withholding compensation from an appraiser for breach of contract or substandard performance of services or terminating a relationship for violation of legal or ethical standards; and taking action permitted or required by applicable federal or state statute, regulation, or agency guidance.

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The Nation’s Housing

Appraiser’s Lawsuit Puts Lenders on Notice

By Kenneth R. Harney
Saturday, January 26, 2008; Page F01

Real estate appraisers have complained for years about demands from loan officers that they fudge and inflate numbers to allow mortgage deals to close.

Now a California appraiser has sued the country’s largest thrift institution, Washington Mutual Bank, charging that she was blacklisted for refusing to provide favorable appraised values despite declining market conditions.

The lawsuit, by Jennifer Wertz, comes just two months after the state of New York sued an appraisal management company, First American eAppraiseIT, for allegedly giving in to pressure from Washington Mutual to inflate property values for loan applications — contributing to mortgage-market losses. EAppraiseIT and LSI, a unit of Fidelity National Information Services, were also cited in Wertz’s suit as contractors to Washington Mutual.

Wertz said in her complaint that she began performing appraisals for Washington Mutual in 2001 and earned “in excess of $100,000 a year” from her work for the bank. But last May, according to the suit, a Washington Mutual manager upbraided her for describing local property values in an appraisal as “declining.” The manager “insisted that [Wertz] change her report to indicate ’stable’ conditions so that the loan could be approved.”

All the relevant data suggested otherwise, however, and Wertz refused. The manager then allegedly told Wertz that she would be banned from all further assignments from Washington Mutual if she did not cooperate. Wertz declined to do so — citing federal, state and professional rules requiring her to provide objective and accurate reports free of outside influence. According to the lawsuit, Wertz was then cut off from Washington Mutual business through the appraisal management companies.

Wertz’s lawsuit, filed in California Superior Court in Sacramento, charges breach of contract, unfair business practices, interference with her ability to earn a living, fraud, conspiracy and slander, among other alleged violations.

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Here’s another possible case of someone with money and power (and in this case a whole lotta time) filing a lawsuit against someone because they don’t like what that person thinks. Yep, the excerpt below from the Miami Herald, summarizes the lawsuit that a developer filed against a real estate agent who blogged about his opinion of a development. The broker, in typical broker fashion, immediately dumped the agent and said they only want to show the positive news. If I were a client at that broker, I’d be out the door faster than (something really fast).

I for one hope the EFF or some other similar entity helps this poor agent out. He doesn’t deserve a guy using the American legal system as a weapon. See how others have abused our legal system for their own twisted often narcissistic purposes at www.iamlawsuitabuse.org. Suppor the Electronic Frontier Foundation and bloggers’ rights.

Realtor fired over Hollo blog post
BY PATRICK DANNER

Developer Tibor Hollo has filed a $25 million defamation lawsuit against a Miami real estate agent who blogged that the octogenarian went bankrupt in the 1980s and is headed for a fall with the upheaval in the condo market.

Hollo last week sued agent Lucas Lechuga and the Coral Gables brokerage Esslinger-Wooten-Maxwell alleging they have engaged in a smear campaign against him and his Opera Tower condo development on Lechuga’s Miami Condo Investments blog.

On Monday, the postings cost Lechuga his job.

”We just don’t condone making statements, especially negative statements, about anyone, so we have terminated our relationship with our associate,” said EWM President Ron Shuffield. Its agents are independent contractors, not employees.

Lechuga, 29, predicted on the blog that at least half of the buyers in the 635-unit Opera Tower at 1750 Bayshore Drive would default and the units would be taken over the project’s lender.

”My opinion is that this development is doomed,” he wrote on Jan. 10.

That followed this Nov. 25 post: “This developer went bankrupt in the 1980’s and I think we’ll see a repeat performance within the next 6 months. What do I know, though? I’m no real estate oracle.”

An angry Hollo said neither he nor any of his companies ever filed for bankruptcy.

”I guess when you’re running a blog [you] think [you] can say anything about anybody, and that’s just not true,” Hollo said. He called the postings “plain, unadulterated lies.”

The suit was filed in Miami-Dade Circuit Court. Hollo declined to say how he arrived at the $25 million damage claim.

Lechuga said he was exercising his constitutional rights in musing about Opera Tower.

”Like any other blog out there, it’s a collection of my unbiased opinions and thoughts,” he said. “I have buyers all over the world who go to my blog. They know I’m not going to sugarcoat the market.”

Lechuga removed the Nov. 25 post after learning of the lawsuit, but later reposted it without the reference to Hollo going ”bankrupt.” He said he would have removed it sooner had he known it was wrong. He said a few people who told him about it may not have meant Hollo literally filed for bankruptcy, rather that Hollo had financial troubles of some kind.

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”Courts understand [blogs] are written in unedited, unvetted fashion,” Jarvis said. “There’s a lot of hyperbole. That’s why it’s so difficult to win defamation lawsuits.”

Plus, Jarvis said Lechuga could argue Hollo is a ”limited public figure” — making it harder for Hollo to claim he was defamed.

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Well sometimes everyone makes a mistake… But to misrepresent the school district that your new home is being built in is either evidence of a very slimy representative or an extremely incompetent one. Either way it’s not something that you’ll want to add to your resume.

Kathryn points out some great tips at the end of the snippet below. Mainly, make sure that you have an agent working in your best interest. In Austin and the surrounding areas, buyer agents are typically paid for by the seller, but represent YOU. It’s also hugely important that if a salesman looks like the guy in the photo above that you seriously reconsider signing at that time!!!

One item that’s not in the list below that is always a good idea is including the builder’s representations in the contract. If they won’t allow that, then it would be best to have the builder’s representative sign the documents so that you have a copy of the papers that confirm the representations. In Texas we have a very strong (well it seems strong to me, but I’m no lawyer) Deceptive Trade Practices law. Think treble damages and lots of other scary things that could happen to people who are found guilty of deception.

Excerpt from Charlotte Observer.

Homebuyers say builder misstated school district

2 Pecan Hills buyers released from contract

KATHRYN THIER

kthier@charlotteobserver.com

Alisa Frady put down $20,000 in earnest money for a new home in Mooresville in the Iredell-Statesville Schools, the same district her children now attend.

But it turns out that the Pecan Hills subdivision is in the Mooresville Graded School District.

Frady and others say Ryan Homes, builder of Pecan Hills, gave them wrong information.

…

Tips for homebuyers

• Call the school district to confirm which district serves the home you intend to buy. You must provide an accurate address.

• Remember that individual school attendance zones may change. But district boundaries rarely change.

• Engage a real estate agent to represent you. Don’t rely on the seller’s agent to represent you.

Remember all of those stories back in 2000 about people who invested their life savings in Pets.com? Or the stories about successful businessmen who gave it all up to be daytraders? Well the collapse of the real estate bubble has largely lacked those same kinds of implausible anecdotes…until now.Realtors and lenders are increasingly reporting on a trend that’s a sure indication as to just how far we’ve come. It’s called “taking the inside of the house with you” and it’s what happens when disgruntled homeowners trash their foreclosed homes before abandoning them. Think of it as a reverse housewarming gift for their bank.

Pigs left to trash house: Police believe homeowner left pigs in this home without food or water, hoping they would trash the place after he was forced out by foreclosure.

How crazy is this? I was watching the debates tonight when I heard some comentary from Glenn Beck. He was talking about the mortgage crisis and mentioned these photos from his website and I couldn’t resist. As an active agent who occasionally works REOs and HUDs, I have seen some dumps before, but this takes the cake. I understand how angry, demoralized, and scared people must be when going through a foreclosure, but when people start destroying other people’s property something needs to be done. We all end up paying for the damage in the end in the form of higher interest rates or less flexible terms.

What’s the worst damage a property has sustained from people losing their home to foreclosure that you’ve ever seen?

The worst I’ve seen was a home that had all the major AND all the minor appliances removed. Holes in the walls and ceilings where said appliances used to reside. Additionally, the owners must have gotten their rebuilt their motorcylce in the living room because the carpet in the living room was covered with 10W30. I can understand that, but dripping the oil throughout the house must have taken some time because it was on everything. I wonder if that would be a potential source of fire since they always tell you never to leave oily rags lying around? Anyway, it was a damned shame.

I was watching an HGTV real estate show yesterday and I finally got around to posting about oneof the things that the sell this house-type shows do, that are kind of hokie. In this particular episode, the sellers were getting ready to sell their condo. The condo was terribly dated and had low end appliances. The designer came in and proceeded to cover the appliances with a stick on faux stainless steel veneer. In the show, the owners did replace the stove and microwave vent hood with real stainless steel appliances, but when they had the open house they let the prospective buyers comment on the wonderful stainless steel appliances and didn’t correct them or inform them that only two of the appliances were stainless steel and that the dishwasher and refrigerator were actually covered with the veneer.

Granted it’s a tv show, but I think that some people out there might think that it’s acceptable to use this stick on and then advertise stainless steel appliances when they are actually not stainless. I’m not a lawyer, but if the appliances looked like stainless and were advertised as stainless steel and after the sale closed the buyer found out the appliances were covered with veneer and not really stainless, I’d be seriously worried as a seller or listing agent. I think the veneer is a neat product, but if you play above board you’d have to advertise it as something like “faux stainless steel” appliances. In the last 5 years of selling residential real estate, I’ve not run across anything like that, but I know I’d really pause if I read “faux stainless steel” on a brochure. I think it might work for some properties and it may look great, but some research will show that it is only heat tolerant to 122 degrees Fahrenheit. 122 degrees is not very hot and I think dishwashers and stoves could damage the faux finish because they may get hotter than that.

Bottom line: If you try this technique to update your appliances be sure to disclose what you did to the prospective seller and avoid misrepresenting the appliances. It could be a costly mistake.

If any agents, brokers or owners have used the veneer and have feedback or know more technical information about it, I’d love to hear from you.