Oh, I also want to point out (if nobody has yet) that real estate is one of the most regulated industries. Sellers are required BY LAW to disclose any issues that would make the property unsafe. If something comes up during inspection that they haven't disclosed, or anytime afterwords, you can get out. Of course, if you've already closed, you'll have to sue.

So, another way to protect yourself is become familiar with federal, state and local housing regulations. A good real estate agent should be able to explain them.

 

Knowing the Law before you go in is critical to coming out with your scalp still attached.

Needing a lawyer afterwards is what I call a Worst Case Scenario.

 

Oh, I also want to point out (if nobody has yet) that real estate is one of the most regulated industries. Sellers are required BY LAW to disclose any issues that would make the property unsafe. If something comes up during inspection that they haven't disclosed, or anytime afterwords, you can get out. Of course, if you've already closed, you'll have to sue.

So, another way to protect yourself is become familiar with federal, state and local housing regulations. A good real estate agent should be able to explain them.

It most definitely is highly regulated and is heavily slanted in favor of the buyer.

However, if you sue the seller for something that wasn't disclosed then, after closing, your ability to win the suit generally rests on your ability to prove that the seller was aware of the deficiency and failed to disclose it since the Disclosure documents only require them to disclose conditions to the best of their knowledge. If you sue the inspector for not identifying it, then you have to show that it was unreasonable for a competent and diligent inspector to have missed the deficiency.

But certainly anything new that comes up prior to closing that should have been disclosed had it been known, becomes an out for the buyer whether the seller knew about it or not -- provided the seller does fix the problem (even after closing they can do that). I've never actually done this, but I've often thought that a good failsafe strategy would be to go through the Disclosure documents and try to find something, hopefully significant, that wasn't disclosed but that you are willing to live with and then keep your mouth shut about it. Then if things go south and you want out, you have your way out -- unless the seller wants the deal to close bad enough to fix the deficiency at their own cost, but that usually won't happen.

The surest failsafe way to get out for most people is the financing deadline, which is usually only a few days before the closing date. Most standard contracts let you cancel the contract if you fail to get the necessary financing (and get your earnest money back). If you decide you want out but all of the other escape deadlines have passed, it usually isn't too hard to make the financing fall through at the last minute.

 

Also, hire a real estate attorney to review your contracts. A year from now, you won't miss the $500 you spent on the review. On the other hand, if you don't get someone on your side to review it, you could be kicking yourself for years to come.

I didn't do this.

Also, when (if) you hire a home inspector or attorney, hire one on your own. Done take the guy the agent recommends. The recommended inspector will never find an issue that will slow/stop the deal from closing.

I didn't do this. I used the inspector that my realtor recommended.

don't pay for an inspection until you have a face-to-face conversation with the seller and ask about the septic system. Don't let her keep you from talking to the seller. Agents have every story in the book to explain why you can't/shouldn't talk to the seller. Don't listen. Tell her she is fired if she doesn't arrange the meeting. She is obviously not working in your best interest.

I didn't do this. I did talk to the seller, but after I had already paid for the inspection. She said that she would not be paying for any septic repairs because there was nothing wrong with the septic system. The issue was that the septic was an older type which is no longer allowed. All systems must now be aerobic type, and when the system needs maintenance in the future, I would be forced to upgrade.

Also, your agent didn't list the septic system in the original offer because she wants you to spend money on this house for a full inspection. Once you spend money, then you have skin in the deal and you are less likely to let go. From her point of view, it is brilliant. From your point of view, completely stupid. ... Even though she is a friend or your sister's friend, she is still playing you. She wants this deal to close and she hung you on the hook.

Very clever, and I think you are absolutely right. I'm a fool for having not seen it myself.

... real estate agents all know the same thing - closing a deal fast is best! Any deal, no matter who gets screwed (buyer or seller), just get the deal closed because that is when their check gets cut and that is why they are working. Any delays means someone might change their mind, they have to work longer to make the sale and the commission.

I see this now in every aspect of the whole deal.

Finally, if you hire an attorney, don't tell him the name of your agent. Just have home review the paperwork. Best if you can sit with him for 2 hours while he reads it. Make sure he works only for you and has no incentive to get the deal closed fast like your agent.

good idea, I will do this next time. Thank you for your advice.

I'm reading between the lines here -- and keep in mind that real estate procedures and forms are a state-by-state issue and they do vary significantly from one state to another -- but is sounds like what you have at this point is merely an Offer Letter and NOT a Contract to Purchase Real Property. [...]

Yes, I believe you are correct here. This is the conclusion I have also come to, after reading much about the process.

Above all else, do something that so few people do. READ THE CONTRACT!

I didn't do this, at least not to the degree you described.

Also, don't use an agent because they are your sister's friend.

As already stated, that's exactly what I did.

As for mineral rights (and I know that Texas is very different than many states and that they take mineral rights law very seriously), in many parts of the country the mineral rights have long since been divorced from the surface rights. Around here Union Pacific owns almost all of them and the law is such that if they decided that they needed to sink a shaft in the middle of your living room then they have the right to do so because mineral rights are senior to surface rights and you cannot prevent them from exercising them -- and they don't have to pay you for loss of ability to use the surface rights. In practice, you would sue them and probably force them to devise a plan that minimized their impact on you, but that's about the best you can hope for. Now, that's here in Colorado.

My conversation with the seller revealed that the reason they were so adamant about the mineral rights is because is under the property, and the seller is in the process of signing a lease with a drilling contractor. She said what I already suspected, that the chance of there being any disturbance to the property was extremely minimal, as it is only 2 acres and no room on it for an oil rig. The property is surrounded by large farms which are part of the same oil patch, and that is where the rig would mostly likely be set up, and the property would be tapped via directional drilling. I really didn't have much concern about it except for disturbance of the water table.



So in summary, it appears I have royally screwed the pooch here. I made every mistake possible. I see that I have set myself up for a very expensive failure. So I pulled out. I lost $100 option money + $450 inspection + $400 lender processing fee + a bunch of gas money and vacation time on this. Expensive lesson learned, but cheap in big picture.

 

Considering all that I have learned from this expensive hands-on workshop on "how not to buy a house," I have one question burning in my mind: Why should I even have a buyer's agent? It seems both buyer's and seller's agent want the same thing, and are equally likely to screw you over to make it happen.

There was a house before this house that we made an offer on. It was so far the only house that both my wife and I really fell 100% in love with and could find nothing wrong with. We looked at the house, the seller's disclosure, and an inspection report (from a previous buyer) and made an offer in the same day. The seller's agent said that there was already an offer on the house; it was a "contingent" offer, meaning that the buyer had to sell their house before they could move forward with the purchase, and they were only 2 days away from the deadline of when the house would be back available for offers. We waited the two days and followed up, and found that the seller had granted them a 1 week extension on the contingency. We waited the 1 week and followed up again, same story, 1 more week extension. Then a 4 day extension, then it was gone.

We found out that on that house, the buyer's agent was also the seller's agent. That agent was going to get both commissions, and that's why she worked so hard to make the first deal work. I doubt the seller ever saw our offer.

So it seems it may actually be advantageous to go without a buyer's agent. Knowing what I know now, I don't see any "protection" that a buyer's agent offers, or any "industry knowledge" that a buyer's agent brings to the table (unless it's in their best interest).

I've got my eye on another house now, and I'm thinking I might just go without a realtor. I bet the seller's agent will be "all over it" when a "newbie" first-time home buyer approaches her with no agent, and a conditional approval letter.

 

@strantor
I'm glad I could help or hinder the process.

Also, buying a house is like buying a used care. If you go into it thinking everything will be perfect, then you are mistaken. Plan to spend 5 to 10% of the home's price to get everything up to your standards.

That being said, you either have to find people and processes you can trust OR assume you cannot trust anyone so you will not be disappointed when they try to screw you (or just happen to screw you as they help themselves).

Owning a home is great and, if you can do electrical, plumbing and repair a roof, you can take care of most everything yourself so any mistakes are not too costly - unless earth moving equipment will be needed.

I hope you find something and, you might want to call your bank to see if the loan fees can be applied to another home when you find one.

 

Considering all that I have learned from this expensive hands-on workshop on "how not to buy a house," I have one question burning in my mind: Why should I even have a buyer's agent? It seems both buyer's and seller's agent want the same thing, and are equally likely to screw you over to make it happen.

There was a house before this house that we made an offer on. It was so far the only house that both my wife and I really fell 100% in love with and could find nothing wrong with. We looked at the house, the seller's disclosure, and an inspection report (from a previous buyer) and made an offer in the same day. The seller's agent said that there was already an offer on the house; it was a "contingent" offer, meaning that the buyer had to sell their house before they could move forward with the purchase, and they were only 2 days away from the deadline of when the house would be back available for offers. We waited the two days and followed up, and found that the seller had granted them a 1 week extension on the contingency. We waited the 1 week and followed up again, same story, 1 more week extension. Then a 4 day extension, then it was gone.

We found out that on that house, the buyer's agent was also the seller's agent. That agent was going to get both commissions, and that's why she worked so hard to make the first deal work. I doubt the seller ever saw our offer.

So it seems it may actually be advantageous to go without a buyer's agent. Knowing what I know now, I don't see any "protection" that a buyer's agent offers, or any "industry knowledge" that a buyer's agent brings to the table (unless it's in their best interest).

I've got my eye on another house now, and I'm thinking I might just go without a realtor. I bet the seller's agent will be "all over it" when a "newbie" first-time home buyer approaches her with no agent, and a conditional approval letter.

Be careful, you may have signed an agency contract somewhere along the way with your current agent. Usually a 6-month obligation to use him/her. Unless you can prove (threaten) that they were negligent in not including the septic system upgrade in their offer. Read your documentation.

 

Be careful, you may have signed an agency contract somewhere along the way with your current agent. Usually a 6-month obligation to use him/her. Unless you can prove (threaten) that they were negligent in not including the septic system upgrade in their offer. Read your documentation.

I didn't give the documents as much attention as WBahn suggested, but I did read them to the extent that I know I never signed anything that expressly bound me to the realtor. Just to be sure I went through everything just now and saw nothing like that. Unless there is some law which binds me to her by default after having gone through her to make an offer on the previous two houses, I do not think I am obligated to her in any way.

 

So in summary, it appears I have royally screwed the pooch here. I made every mistake possible. I see that I have set myself up for a very expensive failure. So I pulled out. I lost $100 option money + $450 inspection + $400 lender processing fee + a bunch of gas money and vacation time on this. Expensive lesson learned, but cheap in big picture.

That actually isn't too bad. Earnest money deposits here are typically $1000. Inspection costs should be considered just a cost of doing business when looking for real estate. But I would recommend that you never work with a lender that gets paid anything unless the loan actually funds. No upfront processing fees. Also, you can often get rid of many of the junk fees that they will throw in there, sometimes to the tune of a thousand dollars or more when they are all added up.

The next time I buy a house one thing I'm going to push hard for (and I might or might not be able to pull it off) is that if they "pre-qualify" me for the loan (and I plan to actually get a full pre-approval if possible) that they have to reimburse me for all of my costs (inspection, appraisal, etc) if everything goes according to contract and they choose not to underwrite the loan.

 

That actually isn't too bad. Earnest money deposits here are typically $1000. Inspection costs should be considered just a cost of doing business when looking for real estate. But I would recommend that you never work with a lender that gets paid anything unless the loan actually funds. No upfront processing fees. Also, you can often get rid of many of the junk fees that they will throw in there, sometimes to the tune of a thousand dollars or more when they are all added up.

The next time I buy a house one thing I'm going to push hard for (and I might or might not be able to pull it off) is that if they "pre-qualify" me for the loan (and I plan to actually get a full pre-approval if possible) that they have to reimburse me for all of my costs (inspection, appraisal, etc) if everything goes according to contract and they choose not to underwrite the loan.

My Earnest money was $1000. I get that back though since I pulled out within my 10 day option period.
I got my conditional approval letter the same day I pulled out. So I think I can consider this a "pre-qualification" and throw around a little more weight on the next one.
I just talked to the lender and they said that I will not have to pay the $400 loan fee again, as that is what they use to pay for the appraiser. I pulled out before they sent the appraiser, so I'm still good.
So really I'm just out $550.
I really appreciate you guy's wisdom on this. Saved me a lot of heart ache I think.

 

Strantor,

Just because one spends money on the inspection, doesn't mean you have to follow through with the purchase. If the seller or your agent thought you would, they could be wrong. The first house I looked at had the mineral rights issue. Then when we made the offer, and they accepted, we had the inspector. The things the inspector pointed out caused me to withdraw my offer because of the discrepancies in the inspection. You can always counter with they have to fix everything, an unreasonable expectation, but, it's your money your handing over and if that is your expectation, then they can decline and nullify your deal.

The inspection is cheap when we are talking the price of a home. It also showed us more things to be watchful during our continued search.

We are in our home, approximately two months after we withdrew the offer for the other house. I must have looked at hundreds of homes in this sellers market before settling on this one. All in all we paid for two inspections. It was well worth the price.

 

Around here inspections are typically about $250 and appraisals are about $450 (which seems backwards to me).

So the way I approach it is I get the basic agreement in place before we put the contract together with, in my mind, the three things that can kill the deal being the inspection results, the appraisal, and the loan underwriting. By this I mean that I do not sign the contract unless I truly intend to purchase the home if those three things work out. Then I order the inspection results with the mindset that only if the inspection results reveal significant things that I was unaware of (or unaware of the cost of repairing it) will I kill the deal based on the inspection (assuming the seller refuses to fix the things I didn't know about). Only once passed the inspection will I authorize the appraisal and I order it with the same mindset. I also get a commitment from the lender that IF the appraisal comes in high enough that the loan WILL fund (that assurance turned out to be worthless on this last deal). I tell them that I will not authorize the appraisal until it is the ONLY thing preventing a decision from underwriting UNLESS they are willing to guarantee that they will pay for the appraisal if the load doesn't fund. On this last one I took them at their word that the loan would fund if the appraisal was high enough (which it was) and they then wouldn't underwrite the loan because they decided that they couldn't count my prior year's self-employment income since I was not planning to continue the business at that level and they couldn't count my teaching contract because it was on a year-to-year basis. So basically, just five days before closing, they decided that they couldn't count ANY of my income. Next time I'm getting it in writing.