Buyer Beware

My prior posts have highlighted some of the best offerings in homes for sale in Berkeley. This time, I want to put on a consumer-advocate hat and help educate prospective buyers when houses are listed by out-of-area agents.

First, let’s start with Berkeley agents. Berkeley agents are, on the whole, among the most ethical, best trained and educated of the entire East Bay area. One of the reasons for this is that our housing stock is older than many of the surrounding areas and with older homes come problems not seen in newer construction. We need to be savvy about the expected service life of turn-of-the-century concrete foundations, about brick foundations, about drainage, about how certain brands of circuit breakers are potentially unsafe, and of course, about earthquake and landslide zones.

One of the jobs of a listing agent is to recommend pest control and other inspections for the seller to include in the “disclosure packet” that is handed out to buyers. An out-of-area agent is more likely to recommend the inspectors that they are most familiar with, who may be similarly out-of-area. These inspectors may not be as good at identifying problems as inspectors who see our kind of issues every day.

So when a good Berkeley agent is representing a buyer and comes across a property listed by an out-of-area agent who brings in out-of-area inspectors, that Berkeley agent knows to apply an extra level of scrutiny to any claims made.

I came across such a listing this last week. The pest inspection company was from a city over an hour and a half drive away. And whereas our most reputable local pest inspectors would most certainly point out a brick foundation, and probably call for its replacement, this inspector didn’t think it noteworthy to even mention that the foundation was brick. He did note, however, that “termites were entering the foundation.” But his recommendation for repair is downright bizarre: “Drill a series of holes and treat with a registered termiticide. Fill holes with a suitable mortar.” Get it? This guy wants to take a brick foundation that is already soft and crumbly with age and drill a bunch of holes in it! And get this: the listing agent has written in the disclosure binder about the termite report: “No repairs called for.” A buyer who believes this is going to be pretty upset when their good Berkeley agent insists that they get a local pest company inspection and it comes up with something like a $50,000 price tag instead

Another anomaly of this property’s disclosure packet is the inclusion of a seller paid appraisal (even where the appraiser is local, as in this case). I’m not referring to a one-page diagram showing an appraiser’s measurement of a home’s square footage. I’m talking about a full 24-page deal. A good Berkeley agent would never do this, even if the appraiser was local. Why? Because we know that appraisals are NOT OBJECTIVE, and they are purpose-driven. An appraisal for a purchase can be different than one for a refinance, and different than one for a divorce or a probate. And regardless of the very real concern over partiality, they are functionally useless to the buyer because the buyer’s lender will make the buyer pay for their own, arms-length appraisal.

When shown this appraisal, one of the longest-practicing loan brokers in our area had this to say about it: “The property may ultimately appraise at that price and may sell at or above that price, but this appraiser took an unprecedented approach to their value conclusion...”

The appraisal really serves only one purpose, and that is to allow the out-of-area agent to state that the asking price is below its appraised value.

Not all out-of-area agents use out-of-area inspectors or include questionable appraisals. Just beware the ones that do!

Brett Weinstein is Broker and Co-founder of Realty Advocates, a full-service lower commission brokerage serving Berkeley since 1986. Brett has also collected an archive of all the murals he's found within Berkeley. Click here to see his collection.

This blog post was updated at 10:45pm.