The collapse of the Miami condo building earlier this year shocked everyone, except the owners. They knew the fix would cost them $15,000,000. A swimming pool had been leaking into the garage below, causing structural rebar to rust. Groundwater infiltrated as a result of construction next door as well. Delay or unwillingness to fix the issue killed 98 people. Dozens of lawsuits totaling hundreds of millions of dollars have been filed.
In the last two years, the real estate market has changed fundamentally, affecting all of us. So, it’s worth taking a look at the state of the market at the end of this year, 2021.
Both the residential and commercial sectors saw robust activity this year, carrying momentum from the previous year. And, in both sectors very strong demand dramatically increased the dollar volume of land sales, as buyers’ needs were not fulfilled with current inventory.
On the surface, buying a piece of land seems simple enough, especially if the land is high and dry–a level cleared pasture. But, a nice-looking piece of land can also have pitfalls that may not be apparent without investigation. To buy raw land hoping to build either a dream home, a subdivision or a new factory requires a significant investment in order to reveal what’s going on under the surface. It is the reason that 104 hours of study is required to gain an “Accredited Land Consultant” designation (ALC) from the National Association of Realtors, by far the most intensive course of study of and real estate designation.
In the world of commercial real estate, it is common for a listing agent to sell a property to a buyer who is happy to represent himself, thus the agent would be entitled to the entire brokerage fee. This frequently happens because commercial buyers are typically savvy about the process, and comfortable with its “buyer beware” environment. But, in the residential world, this is rarely the case, although a surprising percentage of buyers brush aside the opportunity to have a buyer agent represent them, be their advocate, their “bad cop”, and their research resource.
When you buy a house, or even a banana, you are supposed to do this: due diligence. How “diligent” you are lowers your risk in the purchase, and determining what is “due” forms the list of questions that need to be answered. In the case of a banana, your due diligence is simple – if fruit flies are circling, you’ll pass. For a real estate investment, conducting thorough due diligence using trusted experts is a must. Even then, there are always things that can be missed. But, the large items – the roof, HVAC systems, etc. – should be looked at carefully.
Buyers of real estate are empowered by the internet’s ability to view properties in great detail, and this has enhanced if not replaced the real estate agent for the purpose of finding properties to consider, especially in the current social-distancing environment. They often call the listing agent directly to ask questions and schedule showings, which is their right. But, it is a mistake to assume a buyer’s best interests are equally well served by the listing agent whose loyalty is exclusive to the seller.
In 2005, the Maine Real Estate Commission introduced “buyer agency”, a way for buyers to be professionally represented with an exclusive buyer agency agreement. This service is free and levels the playing field between buyer and seller in the process of buying real estate. The seller pays a “co-broke” fee to the buyer’s agent, and for that fee, the buyer agent is duty-bound (with a signed buyer agreement) to keep all information confidential, explain contracts, disclosures, review buying options, and pitfalls and advocate for the buyer’s best interests.