Private Buyers Beware!

Real Estate Agent with Re/Max Real Estate Centre Inc.

In today's real estate market finding the right home can often be a time consuming process. Because of this, buyers who have lost their patience waiting for the next listing to come up in their price range may find themselves considering a privately sold home. Other buyers may feel that they are getting the inside track on a property that few people know about or have found a great deal because the seller isn't paying commission and therefore is able to sell the home under market value. Any of these reasons may be valid but in every case the buyer is exposing himself to serious risk as well.

One of the advantages of buying a MLS listed property with a realtor is that the Realtor or Realtors involved in the transaction are accountable if anything goes wrong. A Realtor's duty to both buyer and seller is to verify the information provided by a seller so that the details about a property that are provided to the buyer are accurate and factual. In a case where an error has been made, all licensed Realtors in Ontario are insured for errors and omissions. Anyway, most Realtors would rather resolve potential problems before they get to the law suit stage. A realtor's success is based on referrals from satisfied clients and repeat business. A lawsuit could really damage a Realtor's professional reputation and hurt him or her financially. Here are stories of people that I have met that bought a house privately. None of them would do it again. These stories are true but the names have been changed for privacy reasons.

 Mike & Tina

Mike & Tina called me to evaluate their home. They owned a bungalow on a 10 acre lot a few minutes out of town. They were planning to sell their current home and buy a house in the city. Their twins were going to start school soon and they wanted to be closer to school, shopping, piano lessons etc.

While they were giving me a tour of their home they mentioned that it was 1750 square feet. I took note of that but as is my usual procedure, I measured it anyway. 1510 square feet is what I calculated. At first I thought that I may have made an error but the more I looked at it, the house really did look more like 1500 than 1750. Mike and I decided to measure it together and came up with 1510 square feet again.

Mike and Tina were shocked. They explained to me that they had bought the house privately after falling in love with it and had compared it with similar sized homes that were for sale at the time. Now they felt cheated. They would have to price their home based on the correct square footage and the difference was going to be approximately $12,000. Mike wanted to sue the previous owner but their lawyer explained that their chances for success were not good because they had no supporting documentation from the seller. They just had the agreement of purchase and sale which didn't mention anything about the size of the house.

To make matters worse, when we did receive a conditional offer on the house, the home inspection revealed that the oil tank was buried underground. This is no longer allowed under Ministry of the Environment guidelines and they had to have the tank removed and  a new tank installed in the basement at their cost. Luckily the old tank wasn't leaking and there was no environmental damage to clean up. That could have been very costly.

Vern & Cathy 

Vern & Cathy were referred to me by previous clients. They asked me to list their home for sale. They were in the midst of negotiating the purchase of a home that was being sold privately in a neighbouring community. The home was being sold by friends of theirs that went to the same church. The house was a 5 year old bungalow with a legal basement apartment. I asked them if they would like me to check the house out for them and make sure that it was priced correctly, but they said no, they knew the sellers very well and the house was in great condition.

We sold their house, they moved to the new house and were very happy with their decision until a year later when Vern accepted a job in Saskatchewan and it was time to sell the new house. The first thing that I discovered when I researched the house for the market evaluation was that the legal basement apartment wasn't legal. It would cost $20,000 to retrofit the apartment to make it legal so they had no choice to sell it "as is". This proved to make the home more difficult to sell. Because of this and other factors it soon became apparent that they had over-paid for the home by approximately $30,000. Vern & Cathy felt that they had no remedy for the situation because they were too embarrassed to approach their church friends about it.

We were able to sell the home but Vern & Cathy lost a good portion of their equity and that made a big difference in the type of home that they were able to buy in Saskatchewan.

Ivan & Svetlana 

Ivan & Svetlana asked me to testify in court where they were suing the sellers of the home they had bought privately the year before. They knew that I had listed the home for sale previously but the listing had been cancelled after only a short period of time. In fact I had cancelled the listing when I felt that the sellers were being evasive with me about certain questions that I had about the property. Ivan told me that after they moved in to the house they discovered that among other things the pool had a serious leak and the pool heater was rusted beyond repair. They also discovered that the central air unit was beyond repair as well. The last time that I spoke with Ivan & Svetlana the lawsuit had not been resolved. Their costs to date were $16,000 before legal bills. 

Bob & Brenda 

Bob & Brenda lived in a 3 year old semi-detached home in the east end of town. While they liked their home a lot, they wished for a detached home on a nice street with a big yard for the kids to play in. When they heard that a neighbour of Bob's parents was planning to sell his house they jumped at the chance. Sure the house needed some work but it had four big bedrooms and was on a quiet street just a stone's throw from Mom & Dad. They had some savings that they could use to renovate the house as well.

Three years later they called me in to evaluate the home. After spending all of their savings and then some, it was painfully obvious that the house needed a lot more renovating than they could afford. The plan now was to sell the house and recoup enough cash for a down payment on a newer home that didn't need any work. A semi in the east end perhaps. The problem was that the house didn't look good in its present condition. There were projects throughout the house that had been started but not completed. The market evaluation promised roughly the same price that they had paid three years ago. "But what about the $80,000 that we put into the house" asked Brenda in disbelief. The truth was that it was difficult to see where the money had been spent. Bob & Brenda had paid too much for a house that turned out to be a proverbial money pit. 

Pauline & Fred 

Pauline and Fred had a young family and were looking to buy their first home. I was showing them starter homes in their price range but it was slow-going. They had seen everything currently on the market so we were viewing the new listings as soon as they came up for sale. I could tell that Pauline was getting anxious and Fred really wanted to get settled. I'll never forget the call I received one Monday morning. It was Fred. He wanted to thank me for all my help but they had gone to a private open house on the weekend, found the perfect house and bought it. It was a semi in a nice neighbourhood near the university. At that point all I could say was congratulations and wish him and Pauline the best. After all, not every buyer you work with ends up buying a house.

What Pauline and Fred didn't know was that their new home was on what I call Fraternity Row. The open house was during the summer so the street was very quiet but by the time moving day rolled around the first semester was in full swing. Their first indication that something was wrong was the group of guys sitting on a couch on the front lawn of their new home drinking beer. Their heads bobbing up and down rhythmically to some loud rap music that seemed to be coming from the adjoining house. When Fred got out of the moving van one of the young men said "hey, is this your house?" When Fred nodded affirmative he said "sorry dude" and they all got up and pushed the couch over the property line and sat back down to more drinking and head bobbing.

What followed has been very frustrating for Pauline and Fred. While most of the students are more or less good kids, they're still students and not aware of the concerns of the young family next door. Pauline doesn't like to let the kids play outside because of the language being used and often they drift off to sleep at night to the pounding rhythm of some distant sound system. They plan to move in a year or two when they have some equity built up. 

In all of these cases a competent Realtor could have helped the buyers avoid the pain, cost and frustration that went with their decisions to buy their homes privately. Does everyone who has bought a house privately have a similar storey to tell? No of course not. But if every Realtor knows five unhappy private buyers like I do then it's more common than you might think. Is every purchase involving a Realtor problem free? Again, of course not but when a problem does arise Realtors are accountable and the mechanisms are in place to get the problem solved to the buyers satisfaction.

Take my advice, NEVER buy a home privately! When buying a home get the professional representation that only a Realtor can provide. Your Realtor will help you to determine the true market value of the property you are considering and help you to avoid any other potential problems.






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Gene perez
Greater Mortgage Solutions & Valley Hills Realty - Santa Maria, CA

it seems like your area is like mine little inventory which frustrates the buyers ,, I wish the banks would just release the inventory ,,, the sooner we can move past this and get rid of toxic assests

Dec 07, 2009 01:56 AM #1
Dean Manton

Few toxic assets here, just a shortage of sellers!

Dec 07, 2009 02:17 AM #2
Chad McBain

Great post Dean!

Dec 18, 2009 10:43 PM #3
Bruce McCallum
DFH Real Estate, Victoria, BC 800-668-2272 - Victoria, BC
Homes In Victoria BC

Thanks for this Dean...recently I represented a Buyer for a private Sale... hope you don't mind if I copy and send this to another Buyer I have...


Jul 10, 2011 09:15 AM #4
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