Recently we met with a couple looking for some help with a building project. They bought a parcel of land upon which they planned to build their dream home but due to a lack of planning and a little claimed deception on the part of the seller found themselves mired in a potential disaster. What takes this from bad to worse is the seller is a licensed (non Realtor) real estate agent.
What do you do when you don't know what you don't know? The seller, who happens to live next door, told them the ground in the area was good. Based in part on his statements the buyers didn't bother having a subsurface soils investigation done. They had no idea that could even be done.
Contrary to what some will say, you can not tell diddly about the soil without having the lot in question drilled. The type/size/age of trees or other vegetation won't tell you anything. The only ground you won't find permafrost under has palm trees growing up from it, as the old joke goes.
It wasn't until they hired a local company to excavate for the foundation and septic system that they discovered trouble brewing. Five feet down and no gravel.... 6 feet... 9 feet... 12 feet and still no gravel. Plenty of muck - wet clay that you couldn't build a dog house on, let alone a 2,200 sq. ft. house. Dig, dig, dig was the order of the day all the way down to 19' when they hit gravel... beneath 4' of water.
Having two test holes dug and examined would have cost $2,500. They are now facing a $30,000+ expense to bring in enough gravel to fill a 20' hole the width and depth of the foundation. We talked briefly about building the house on steel pilings but after looking at the plans we'll need roughly 25 pilings, which at $1,400 each plus a floating steel deck floor in the garage adds roughly $35,000 to the cost of the foundation.
They are understandably sick. I feel for them but at this point I'm not sure what can be done. They can't simply cut their losses and move on either as they paid, in my opinion, too much for the property. They could never resell it for what they paid and certainly not with the knowledge of the soil condition (at least in that spot). I'm not sure what options outside of litigation are available and even that's going to be a messy road to try and travel. The seller will simply hide behind caveat emptor as there are no disclosure requirements in the State of Alaska where undeveloped land is concerned.
If you're buying undeveloped land in Fairbanks or the Interior, have the property drilled. It could save you from making a very costly mistake which you could certainly end up regretting later.
|
Thinking about buying or selling real estate in Fairbanks or Interior Alaska? We know Fairbanks real estate – Think of us as your local experts.
Search Fairbanks homes for sale, sign up for free new listing notifications, view Fairbanks market statistics or browse our virtual relocation package. Have questions? Contact us online or call us at (907) 699-6024. We would love to hear from you. |
The premier real estate team in the Golden Heart City; we provide results oriented buyer and seller representation.
Fairbanks Relocation Package - Fairbanks, Fort Wainwright & Eielson Air Force Base
No Greater Love - Fairbanks Church Directory
Caring For Mind, Body & Spirit - Fairbanks Health Care
Alaska Recreation - Camping in the Interior
Fairbanks Homes - Neighborhood Spotlight - Doyon Estates
Help me welcome a new AR member
Welcome to the Alaska - Real Estate In The Last Frontier Group
ActiveRain Corp. is not responsible for the accuracy of the site's content (which is written by members of the ActiveRain Real Estate Network) and does not endorse the views of the real estate agents, mortgage brokers, and others listed here.
Powered by the ActiveRain Real Estate Network
© 2008 ActiveRain Corp. All Rights Reserved
Ouch. Double ouch that the couple was allegedly scammed by a realtor.
Wow, These people really got taken for a ride. It pays to do your homework. Ouch!
Good advice for all areas, not just Alaska!
These type of foundations can be very costly for sure. I hope they are going to try and take the Agent to court based on his statements.
Jesse,
That is good advice no matter where you are. Do your homework, it may cost you a little in inspections but save you loads of $$$$ in the long run.
Don R.
Oh boy-- they are stuck. I would at least have to pursue the seller, especially since he was a real estate agent (makes me angry that he is so low)... but I would have to make the best of it. Certainly can't sell and "pass on" the problem.
No matter how you look at this "It`s Fraud" and should be treated as such..
What an education! I have not heard of such a thing. I feel for those buyers.
Wow - that is one heck of a lesson to learn! As the others above have mentioned - please do your homework.....it is a minimal cost up front that could save you BIG in the long run!
Hi Jesse,
Great post.
It is unfortunate that a lot of people that want to build their dream house, end up with a nightmare house or nightmare situations.
In the planning stage, even before buying land or breaking ground, you need to have thought of every detail and not necessarily have the anwser but know the questions.
Having worked in the UK residential subsidence market and the UK Rail industry there are some many instances of people not understanding the relationship between the land their home sits on and other enviromental factors.
Oh wow.
What a mess! Let's hope that other potential buyers learn from this mistake and use a REALTOR too.
Doesn't it seem you hear these stories over and over again when people don't have proper representation. See, you think you "saved money" because you didn't have an agent involved. I am sure the fee would not have been as much as the disaster and could have saved them big headaches to boot. When will people start to see our value??!!
Jessee, the seller being a Real Estate Agent is liable. She not only was selling but as a professional they relied on her opinion. I would NEVER ever tell someone the soil is good, it is not my call. You can have a good perc on one lot and a deep hole on the next one. This is a tragedy. They should get a refund or fight it in court. As realtors we are held to a higher standard.
Obviously the buyers should have checked first. But the Realtor, seller should not have said that and they relied on her information.
Jesse: OMG--how sad for these folks. I feel for them but, like you said they really can't put the blame on anyone else. The RE agent who lives next door, probably felt that since his/her soil was 'okay' that this was the same. Maybe he/she would consider buying back the property?
Many clients want to avoid, even the $350, inspection fees and have to be convinced that it is DUE DILIGENCE and this MUST be done! Even if the soil testing/drilling IS $2,500, that's a small price to pay considering the outcome.
Jesse,
I guess you have the right take on the issue. I do not think it is an easy thing to sue the Seller, because first, if the Seller disclosed that he/she is a licensee, he/she may not have any obligation to disclose. Then, you have to prove that the Seller had the knowledge, and we may wrongly assume that they had. Telling them that grounds in the area are good could mean that there were homes built in the immediate area, so he/she could assume that it should be good. I guess, unless they gave the statement that the grounds are good, they may be not liable. Then "good" is not a cear term. If all it means that the lot is buildable, well, it is... Costly is a different story. There are so many ways to build even on permafrost (I've seen 5-storey buildings on concrete pilings with the space under the building, so that you do not affect the temperature underground, etc.).
Was it FSBO thing? Here, in Palm Coast when they were preparing their Master Plan nearly 40 years ago, they just leveled a lot of land, and now you need to drill to see if there are trees under the surface to make sure you would not have to pay more to set the home there. So, even when you have palm trees there, you may still need to drill (though you are not going to hit an ice lense, as they called it in the Russian Arctic).
Jesse,
I couldn't help myself. After searching the Alaska Real estate Commission's website (the equivalent of our Department of Real Estate here in California)...I found their Transfer Disclosure Statement here:
http://www.commerce.state.ak.us/occ/pub/rec4229.pdf
The problem is that it covers only Residential properties, which by definition states:
Residential real property means any single family dwelling, or two single family dwelling units under one roof, or *any individual unit in a multi-unit structure or common interest ownership community whose primary purpose is to provide housing. AS 34.70.200(2) and (3).
I feel for your clients...I really do...but I also feel bad for anyone who walks up to a blackjack table, plunks down $10,000...and gets beat by the dealer's 17. This really is just a grave example to all consumers when buying real estate to protect themselves in every conceivable way possible....or better yet, find someone who can do that for them.
But it's hard to plead ignorance in a court of law. Heck, watch an episode of People's Court, and you'll see numerous cases where nothing is in writing...and one party accuses the other of telling them "this or that" but never getting it in writing...and watch how quickly the judge tosses the case. It happens on the purchase of PEZ dispensers off of eBay....and it obviously happens in real estate transactions in Alaska. I don't think they'd stand a chance of winning in court.
"Did you ever ask the seller if the property could be built upon?"
"Well...not actually...but when we told him what our plans were, he said it sounded great".
"Mr. Seller, did you ever say to the buyers that their plans to build a home sounded great?"
"Yes, your honor. They do sound great. But I never implied or stated they'd be able to build on it as-is. Heck, for that matter, all I ever did on the property is fish....so how would I know whether you could build a 2,200 square foot home on it without any added expense or not?"
"Aren't you a licensed real estate agent?"
"Yes, but we're only liable for things that are conspicuous in nature, or that we have prior knowledge of. Twenty feet underground is not conspicuous...and I personally never was interested in building a home there...and consequently never performed the necessary studies."
The judge would simply tell your clients they should've done their homework.
And while it really is a shame that your clients learned this lesson the hard way..."I didn't know better" is a terrible excuse, especially when investing a lot of money on something.
Just my two (or three) cents....
Dave
Jesse, There is no free ride in life. These buyers should have gotten a third party involved. I wish them well.
I'm with Susie, OUCH! Unfortunately this happens often with vacant land because too many agents have no clue what they're doing with it and buyers don't either. I've always told my land buyers to make sure their builder (or an experienced developer) is available to help evaluate the property, but they rarely want to spend the money. Pay now or pay later!
Pulling out my crystal ball, I'd say I see a new disclosure form in your future, Jesse. Even if you have to draw it up yourself. :)
Whenever I see signs of potential trouble brewing -- for example, an older home that has many trees in the back yard -- I suggest that buyers pay for a sewer line inspection. It can cost $3,500 to $6,000 to replace a sewer line in Sacramento, for example, and an inspection is only $125.
Two of my transactions last week involved having the seller replace all or part of the sewer line. The buyers were very grateful I insisted they get that inspection.
Know any good ground drillers? LOL. Isn't there a company that performs inspections like this in Alaska? Or is that a dumb question?
I agree with Jon on this one. Good is a very ambiguous term. You can build a house on most soils, but whether or not you can afford it is another story.
What an ugly situation...
Hello Jesse, here on the Oregon Coast it is always best to do your due diligence with ocean front properties especially. Have a geologoical done to make sure the banks aren't sloughing. My advice to buyers to to have everything checked out! Water , septic, building inspections, the whole 9 yards. It's always better to be safe than so sorry!
Luckily, this is something I don't have to deal with...I fall under that palm tree exemption!
For new construction, if you don't have a soils anaylsis of the property done, all I can say is: "you get what you pay for." Kind of like buying a new house without a home inspection----you better be a home inspector:)
Susi - Ouch is right. I feel bad for them on a number of levels.
Michael - You said it. There's a whole boatload of work to be done before breaking ground.
Dennis - Very true... this would apply everywhere.
Chip - Agreed... their foundation costs just went up 230%. Ouch. I'm not sure what they're going to do but hopefully it will involve going after him.
Don - Penny wise, pound foolish comes to mind in this case. In this case they buyers didn't even know to do a soils investigation. Hard to imagine how they were going to get through an entire construction project.
Retha - No, they can't sell and pass on the problem. It's possible there's some good ground on another part of the lot but the prime building site is, while not useless, certainly not a spot I would build on.
Scott - I wasn't privy to the original conversation but it certainly sounds fishy... I'm pulling records on the agents house to see what I can find... his well log should tell a lot, if I can get my hands on it. It is possible he's sitting on great ground.
Mel - Me too. I tell every land buyer to drill... I don't always follow my own advice but I do bring a backhoe in and dig a test hole... it isn't high tech but it tells me what I need to know. These folks didn't even do that.
Leesa - $2,500 up front vs. $30,000 or more.... seems like a no brainer to me.
Alan - We see it a great deal here; folks jumping into the role of general contractor without the slightest idea of what they're doing. This situation had disaster written all over it - no representation when they bought the land, no due diligence, no construction experience, etc... Folks just don't know and that's where problems come in.
Monika - I would hope this would reinforce the need to use a Realtor as well... more than likely the seller would have paid the sales commission and $2,500 out of pocket would have saved them $35,000. Heck, our services are bargain priced! :)
Audrey - The really, really sad thing here... the cost of the buyers rep fee would have been a lot less than the $2,500 drilling costs. All of this could have been avoided for a measly $1,500 or so. Talk about tragic.
Missy - Obviously there's two morals here - never, ever make any sort of representations about things you know nothing about and always use the services of a professional Realtor. You're exactly right about the perc test... who knows whether even 50 or 100 feet one way or the other what the ground is like. You'll never know until you drill.
Debe - That's the one unknown in this... what are the soil conditions like under the sellers house. It could very well be solid ground under him. While I tell folks gravel is generally pretty shallow, in this particular area I would never go so far as to represent where it was. My X-Ray vision is non-functional. :) The finished house would have had a market value of roughly $315,000ish... $2,500 is a drop in the proverbial bucket.
Jon - You nailed it. Good is all too ambiguous. What is good soil? I can build on anything...it's just not going to necessarily be inexpensive. This lot is buildable... it will just cost a lot more than they planned.
They did buy the lot FSBO from the seller without any representation and he did disclose the fact that he was a licensee... he didn't provide them the state required licensee disclosure statement up front, but it's in the purchase agreement.
No, I would think there are no ice lenses in Florida... but as I recall you do have sinkholes and other assorted building challenges.
David - The AS 34.70 (state disclosure statement) doesn't cover raw land. Right now there are no disclosure statements. They aren't really our clients... they called because we're building a house near them and they pass the site every day. He happened to stop in one afternoon while I was on site.
The dialogue is right on. I don't think they could prevail without evidence the seller knew what the soil conditions were like. It's very possible he hit gravel within a few feet. I'm building a house about a mile away as the crow flies on land that looks very much like their lot and we hit gravel at 5'. The agent should have never made that representation but he may have made it in good faith.
Frank - There is definitely no free ride in life. I'm sure that's painfully evident at this point if it wasn't before.
Colleen - No, folks never want to spend the money... but they always should. I don't always drill lots I'm thinking of buying to build on, but I do bring a backhoe in and dig a couple of test holes, which tells me what I need to know. Pay now or pay later... as Frank said, there is no free ride.
Elizabeth - I have one of those forms actually... It's a ‘don't blame me for doing it your way and not listening to my brilliant advice' form. :) These folks came to me after the fact though, so I wasn't there in the beginning or they wouldn't be in this mess. $125 vs. up to $6,000? Pretty sure that's an easy choice, huh?
Melina - Bingo. Engineering is a marvelous thing. We can build anywhere on anything. The $$ it will take to get it done might stop their heart though. ;)
Lori - ... and that's why we get paid the big bucks. :) If they had been represented by a professional buyers agent they would more than likely be watching the floor joists be laid today rather than wondering how to climb out of this mess.
Jeremy - haha. That's a good thing. Actually I wouldn't mind seeing some palm trees today. How's that new baby?
Charles - Absolutely... They started this project without even knowing the questions to ask. That can't lead to anything but one mishap after another.
Too late now BUT.....when we built our home, we wrote into the sales contract that we would hit clay within x no. of feet OR the developer would have to pay...oh yup...when we got to the attached garage...down we went and the developer DID pay for the zillion quad axels of stone. In retrospect, we should have done what friends of ours did and gotten spancrete and put more basement under the garage....don't think there will be a next time....but for everyone else...it's a lesson.
Thanks for the post - I appreciate learning more things to watch for in regards to buyers!
Alaska sounds amazing - one of my clients lived there and has lots of moose stories :)
Oh MAN that really stinks... Truly horrible. Our area has a lot of WETLANDS and you have to be very, very careful about what is or is not a buildable lot. Very tricky. People (unfortunately) DO build on wetlands, but there are limits.
Good point Jesse in you don't know what you don't know. It always pays to go slow with land purchases and check things out.
Jesse: Very interesting post.. I would hate to be cought up the creek without a paddle
Yikes!! Caveat emptor indeed. I don't think the buyer has aleg to stand on. This story is a perfect example of why folks need representation unless they have experience in these matters. I truly hope a solution can be found so they can build their dream house.i
Jesse, I feel for the couple. I'm guessing they will be sold on a Realtors service from here on.
Great advice for the novice home builder. Too bad they didn't know sooner.
Jesse,
And who says real estate isn't local!!! Thanks, Fran
That's a pretty sad story for the buyer. In our area, we tell them they MUST do a perk test to see if the land will hold a septic system but you have to go further than that in your area. Nice blog.
My heart goes out to those folks........they must be sick just thinking about the extra expenses involved.
Wow. I feel bad for them, too. What a hard and expensive lesson to learn. I hope they'll be able to make it work.
Jesse, Congratulations on the STAR.
Sally & David - It pays to be prepared doesn't it?
Dawn - My pleasure... thanks for reading. We have a cranky old cow moose that hangs out in the woods behind our house.
Ruthmarie - They do that here too... just bring in fill until they have a pad. haha. That's gonna backfire on them too at some point.
Gary - Yes, sir. Due diligence is a good thing.
Roland - Same here buddy... I would prefer a small outboard but at least give me a paddle.
Bryant - Me either. There's no evidence of the seller having drilled the lot, so it was an uneducated guess at best. They acknowledged this could have been avoided if they had hired an agent. That's something.
Duane - I think so... a couple thousand would have kept all this from happening.
Russ - Agreed. People need to do more research before jumping off the proverbial cliff. Too much money is at stake.
Fran - haha... tell me about it. No permafrost issues in Pa, huh?
Barbara - Land here can be bought without any tests being done whatsoever... they just didn't know the questions to ask or steps to take.
Diane - I'm sick thinking about the extra expense. At best they could probably sell the lot for 1/2 of what they paid for it as a cabin lot and take a $20,000 - $25,000 hit. Any way you slice it this isn't a pretty picture.
Doreen - We're working on it. The (not so) funny thing is they only dug in one area... the foundation is roughly 70x50... the soils could be much, much worse at the other end... and it will cost them about $7,000 to excavate just to find out. No easy solutions whatsoever.
Michael - Thank you my friend... good to see you.
And I thought this was a Maynard update!!!!
LOL... sorry Laura. I haven't heard a thing from poor 'ol Maynard. He's probably in Hawaii by now sipping umbrella drinks thinking Alaska wasn't all that special after all. :)
OOPS! I read the blog title and thought this was a post about Hilary Clinton...sorry...
LOL - Shannon, that was hilarious. It would seem to apply to Hillary tonight wouldn't it?