Bay Area Real Estate Investigation Gets Real

photo89In a seller’s real estate market, the burden is even greater for the buyer to do due diligence and decision making lightning fast. Bar none, buying a house is the biggest financial decision you make in your life.

Choose wisely and not only do you enjoy the space and neighborhood where you and your family live but over time you will reap financial rewards from your investment. Choose poorly and every day you will invest energy in planning your exit and may suffer a big financial loss, headaches and other assorted despair.
I’m writing this because I just avoided a recent real estate disaster. My wife and I were looking for a new house and praise my instincts and training that I investigated the deal. That’s right: SPY BEFORE YOU BUY. 

Aside from a real estate downturn in 2008, the San Francisco Bay Area real estate market does nothing but heat up. The market will always be hot for sellers as long as the job prospects are good and more people want to move here than leave. My wife had just taken a job in the South Bay and we needed to get her closer to her work and avoid the nasty 3-hour daily round-trip commute. 

I will take you through steps and measures that identify problems and what you can do to possibly avoid them. If everyone was honest I wouldn’t have a job and I wouldn’t be writing this. A big part of why I blog is to educate and explain.

  • Think logically. There are numerous reasons for an owner and real estate agents NOT to disclose problems and potential problems. Real estate is big business. Though we have disclosure laws and the process of disclosure, not everyone is going to be honest when big money is at stake.
  • Start your investigation and due diligence before you even think about making an offer. If you like the place and consider a bid, start your investigation soon because the process moves fast in a hot market.
  • A warning flag is when the seller has not done property or pest inspections. It means they might be avoiding or hiding problems and want you to pay for it. Have renters been living in the house? If so, the owner might be out of touch with the condition of the property. Has the owner let things run down? In our case the owner did no inspections, renters had lived there and the roof needed replacing.

Pay attention to your instincts and to small details. When we looked at the house at 5557 Roosevelt, the house next door at 5541 Roosevelt place had handmade San Francisco ’49ers posters on the front walk way. What kind of sane person has ‘Niners posters up….in April? The lawn looked ratty. The house itself at 5557 Roosevelt looked great, new kitchen, landscaping, nothing superficially wrong.

We made an offer on the house and our bid was accepted. But, being cautious, we kept contingencies of all kinds on the offer for a week. These contingencies saved our bacon because it gave me time to investigate and to inspect.

On the day of some our inspections I did what I should have done about four days before making the offer: I walked the neighborhood and talked to people. I saw a guy walking his St. Bernard and bee-lined to him.

“What’s the place like across the street?” I asked. His reply:
“It’s been a fucking nightmare. It’s a half-way house for developmentally disabled adults. Police were called out here for them breaking windows in the place. Some guy from the house ran down the street smashing car windows.” I gulped and got mad, real mad. “Why do you think the fence in the back yard is so high?”

Come to think of it, the week-day morning of our official inspections there were more cars parked on the street next door then I had ever seen during the open houses. They apparently were cars from staff working at the 24-hour facility. Had someone asked them to move their cars for the open houses???

I started my investigation in earnest and killed the deal on the spot.These were my additional steps and here are some suggestions. This problem house was 10-feet away from the property I almost bought.It’s not like it was a retirement home or a care home.

  • Keep knocking on doors, find the nosiest neighbor who has lived on the street the longest. He or she will know everyone and everything, I found that person. His name is Howard and he lives on the other side of 5541 Roosevelt. He gave me an earful about the problems next door, noise, police and emergency vehicles, screams at night and weekends. Not only did Howard know about all the problems but he had told a representative from the seller’s agent at their first open house about the problems. The seller, named Lemos, and their agents, Sylvia Wong and Patricia Dirilo of Coldwell Banker, failed to disclose a material fact.
  • Go beyond real estate web site crime information by doing a Public Records Act request for the neighborhood. You may have noticed that Trulia gives crime stats for houses in cities but these entries typically only go back about two or three weeks. Call the records department of the local police department and ask them how far back they can go for calls for service/police blotter type information. When I made the request the police department responded in about three business days.
  • A lot of nuisance problems won’t come under police jurisdiction but may fall under Code Enforcement. Make a Public Records Act request to the code enforcement department requesting info on: blight, noise complaints, any complaints.
  • Do the neighborhood visits during a week day, a weekend night and a weekend morning. Sit in your car and watch or even better just walk and talk to people.
Police log calls for service 5541 Roosevelt Place