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Unpleasant Surprises for Online Real Estate Buyers 240

Posted by Zonk
from the caveat-emptor dept.
prostoalex writes "Buying expensive items online from the people you've never met without any guarantees on the seller's part might seem a bit risky even for an experienced Internet shopper. The 'hotness' of the real estate investment market apparently influences some cash-heavy investors to look for opportunities online. When the entire transaction is done via a click of the mouse, and the deed for newly bought real estate arrives in the mail, some unsuspecting buyers might discover that a cozy house near the bus line in the middle of a busy street might imply a criminalized neighborhood and proximity to crack house. The New York Times investigates negative experiences of people buying investment real estate online."
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Unpleasant Surprises for Online Real Estate Buyers

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  • Buffalo, NY (Score:2, Insightful)

    by Anonymous Coward on Monday March 13, 2006 @07:45AM (#14906310)
    "Buffalo has been particularly hard hit by online flipping, as the city's persistent population decline and high foreclosure rates have created a glut of some 20,000 vacant houses."

    Lots of fresh water, summer temps don't go above 90, winter temps above 0, sports teams, cheap housing...
    I never could understand why Phoenix is gaining population and Buffalo is losing population.
  • by KiloByte (825081) on Monday March 13, 2006 @07:45AM (#14906311)
    If you buy something as expensive as a house without even bothering to take a look at it beforehand, you can't blame anyone but yourself. This is not a piece of bread -- you can't just shrug and throw it away.
  • by ereshiere (945922) on Monday March 13, 2006 @07:45AM (#14906315)
    Real estate, of all things, is something that someone should look at first. Is the entire world becoming a shut-in?
  • Do your DD (Score:2, Insightful)

    by Average_Joe_Sixpack (534373) on Monday March 13, 2006 @07:46AM (#14906318)
    These speculators are no different than penny stock "investors" ... who could possibly feel sorry for them.
  • Sight unseen (Score:5, Insightful)

    by Southpaw018 (793465) * on Monday March 13, 2006 @07:47AM (#14906324) Journal
    Buying items from a reputable, well-tested online company like (for example) Newegg or Amazon is one thing.
    Buying collectibles off eBay is one thing.

    Buying a big ticket luxury item - ANY such item - cars, real estate, houses, deeds...that's misguided at best unless you live in proximity to the seller and can see it (inspect it) yourself presale. We have a term for people who will buy things like this with full and total trust in the seller. It's called "sucker."
    Or, if you're a proponent of our legal system, "plaintiff."
  • by Opportunist (166417) on Monday March 13, 2006 @07:50AM (#14906335)
    If something sounds too good to be true, it most likely is. Why do people stop thinking when greed becomes a factor?

    Someone sells you something for FAR less than what it should be worth, provided they're not lying. Bonus question for $1000: Why should they? Would you sell your house without at least getting a rough quote from some online service how much your hut is worth? Hey, we're talking a few 1000 bucks at the very least here, it's not like I'm selling some old junk that might be someone's treasure, a house is a house, and by its very nature, it has value! And everyone, literally everyone, knows that.

    So why should you think someone does NOT know that a house is worth more than a few 1000 bucks, especially when it's somewhere in downtown?

    Just like with used cars. When the year old car that's been driven only by a cute old granny, always just to church and back goes for less than 1000 bucks, would you buy it?

    I wouldn't even buy the story, and certainly not the car!
  • Barnum was right (Score:5, Insightful)

    by ROOK*CA (703602) * on Monday March 13, 2006 @07:51AM (#14906342)
    from the article:

    "Mr. Hoyt said he had repeatedly appealed to eBay officials, asking the company to make specific changes, like informing sellers that they must comply with New York State disclosure laws and requiring a copy of written sales contracts. But Mr. Hoyt said he had received little cooperation from the company.

    "What eBay is doing, in my opinion, is immoral," he said. "They have a responsibility to not facilitate activity like this."


    Wait a minute, eBay has a seller rating system, eBay has an escrow service, so who in there right mind buys a HOUSE sight unseen, from an unrated or negatively rated seller, without using escrow? I think this is a problem with some people, they make stupid buying decisions and then turn around and want the listing agent (or the government) to take some sort of responsibility for it.

    I'm not trying to relieve any of the responsibility for this off unscrupulous sellers (it is in fact immoral to intentionally rip off buyers), however at some point buyers need to have enough common sense to do at least a modicum of due diligence don't you think? Apparently people think that caveat emptor doesn't apply on the Internet, when in fact it's probably the most important consumer protection mechanism, especially when most of the tools you need to do your due diligence are at your fingertips (MLS services, city records, etc..,)

    Also from the article, this one IMO is a true "gem"

    "Mr. Krug said Mr. Tanner had asked him the same question. "I told him the first thing he did wrong was buy a computer," Mr. Krug said."

    Amen Mr. Krug, Amen.
  • by ROOK*CA (703602) * on Monday March 13, 2006 @08:02AM (#14906385)
    Damn right. In fact, any money spent online that doesn't go to well-established companies should always be money that you are willing to lose.

    Great point, I think I would take it even farther, when dealing with anybody less than a well-established company on the net, you should EXPECT to get ripped-off and take appropriate measures to protect yourself BEFORE you buy. Way too many people just assume that the government (or some other 3rd party) will protect them from fraud on the net, which IMHO is just plain foolish.
  • by acvh (120205) <geek AT mscigars DOT com> on Monday March 13, 2006 @08:04AM (#14906387) Homepage
    I read this article yesterday - the guy bought a house for THREE THOUSAND DOLLARS! Come on, you can't buy a good used car for that. All this article really tells us is that a leech who was trying to flip houses for a quick profit got burned by a bigger leech.
  • by Average_Joe_Sixpack (534373) on Monday March 13, 2006 @08:10AM (#14906413)
    It's the penny stock investor mentality. They see these properties listed for 10k and think "Wow, what a bargain!" and then they don't bother to check if the property has any liens or structural code violations. Same thing with the idiots who buy "historic" homes only to be shocked with municipal restrictions when they try to renovate the property.

    This current RE bubble is going to end in such a disaster I can't even contemplate how the US will ever work its way out recession that follows. The whole damn economy is built around suburban expansion and people borrowing against their homes. Anyone have a financial bomb shelter??
  • Re:Hmm (Score:3, Insightful)

    by ROOK*CA (703602) * on Monday March 13, 2006 @08:17AM (#14906437)
    May not be the super nice advertised place hey said, but they could at least give it to a charity working with these type of people (read : homeless, prostitutes, etc.) and let them turn it into a safe house of sorts to supply food to people if nothing else.

    Unless of course the cost of getting the building up to code or tearing it down is greater than the value of the place, in which case a charity isn't going to take it, since they would in effect be paying you to take the property off your hands. I'd imagine that's the goal of some of these Real Estate "flippers", sell it for way less than the value of the land and pass along the incumberances of the house to somebody else, in essence they are making the seller pay for the priviledge of paying the liabilities on the property. Which ends up being a ponzi scheme, everybody in the chain makes money except the last guy (who can't even then give the property away).
  • Re:Sight unseen (Score:3, Insightful)

    by lheal (86013) <lheal1999@@@yahoo...com> on Monday March 13, 2006 @08:46AM (#14906508) Journal
    Particularly if the seller calls you up and says:

    "Hi there, Bob. Can I call you "Bob"? I know we've agreed on $15,000 for the boat, but all of a sudden I've ... I've had some personal ... I don't want to burden you with the details. My daughter is ... anyway, I'm in a fix. I need to either call off the deal, or ... tell you what: could you give me just $12,000 for the boat, but send it to me directly, not through E-Bay?"

    "We'll just tell 'em we cancelled the deal ..."

    You and your $12,000 will be soon parted.
  • by spiritraveller (641174) on Monday March 13, 2006 @08:50AM (#14906519)
    All this article really tells us is that a leech who was trying to flip houses for a quick profit got burned by a bigger leech.

    It's not being a leech to buy something that you think is undervalued by the seller. Quite the opposite. It has the effect of smoothing out pricing in a market and making it more liquid.

    No need to be jealous of those who find good deals before you do.
  • by ami-in-hamburg (917802) on Monday March 13, 2006 @09:07AM (#14906571)
    I believe it's because racism, bigotry, etc.. etc.. are generally fuled by fear. Therefore, cowards are the ones making the comments.
  • by badfish99 (826052) on Monday March 13, 2006 @09:08AM (#14906577)
    I don't know about New Yaok, but I've met lots of people from Thailand who have come to work in London. It may be stinky but it's much easier to make a living there, even though things are more expensive.

    The weather is better too: not so hot.

  • Eh? (Score:5, Insightful)

    by ErikZ (55491) on Monday March 13, 2006 @09:39AM (#14906720)
    The guy spent 10k. On THREE houses.

    A deal like that, one would expect them to be on the edge of an active volcano.

    At this point, you level those houses and rebuild on the property. 3k doesn't get you a house, it gets you land with house shaped debris on it.

  • by Anonymous Coward on Monday March 13, 2006 @09:41AM (#14906731)
    That's not imagination, that's just "greed", plain and simple. The 80s seem to have helped people forget that greed is generally a Very Bad Thing (one of the seven deadly sins and all...)
  • by paiute (550198) on Monday March 13, 2006 @09:45AM (#14906763)
    Really, before you dropped a few thousand on a house you had never seen, wouldn't you at least

    look at it in Google Maps?
    search the local papers for stories mentioning the street, streets nearby, the neighborhood?
    call someone who lived near to it - maybe a business - and ask what they thought of the place?
    check any online information from the city/county/state - assessed values, etc?

    I know jack about real estate, and I would be doing those in the first ten minutes after the thought to invest came to me.

  • by ROOK*CA (703602) * on Monday March 13, 2006 @09:47AM (#14906771)
    I haven't known anybody who HAS NOT gotten scammed from eBay at least once.

    Well I haven't (ever been scammed on eBay) and I've bought literally thousands of items so I'm not "one of those suckers" but apparently everybody you know IS to some degree. My comment regarding escrow and seller ratings were not intended to be all inclusive, in other words based on the article it does not appear that these buyers even went that far. eBay attempts to provide the minimal protections that can be implemented without interfering with the free market nature of their service and I for one think they do a decent job given the intent & limitations. This would be why I specifically pointed out Caveat Emptor and that many of the tools for DUE DILLIGENCE (such as MLS, City Records, etc.,) were at your fingertips, but apparently you didn't read that far.
  • by drwho (4190) on Monday March 13, 2006 @10:29AM (#14907084) Homepage Journal
    Damn right. In fact, any money spent online that doesn't go to well-established companies should always be money that you are willing to lose.

    This is an idiotic statement. There are plenty of good companies and individuals which are 'less well known'. Your ultra-conservative sentiment means you'll often end up paying more, getting less, and wondering why there's practical monopolies in the economy. Beyond this, even well known brands can be rip-offs - Radio Shack for instance, has knowningly sold completely defective products and left the consumer in the lurch. Enron and Parmalat were household names. Your statment is similar to the one "You get what you pay for" - which is also untrue and even dangerous. You pay what you negotiate, through some method or another.

    This isn't to say that your sentiments aren't useful. If you and others spread the FUD about small companies, there will be less competition on ebay for the really good deals.

  • by Anonymous Coward on Monday March 13, 2006 @11:41AM (#14907752)
    If you get a buyers agent make sure that you pay a flat rate or they will have some incentive to walk the price up on you. They are suppose to be on your side, but if they are getting a percentage then they have incentive to raise the price.
  • by EricTheGreen (223110) on Monday March 13, 2006 @11:44AM (#14907781) Homepage
    Excellent advice, except for...

    The buyer's agent normally gets their cut from the seller.

    Run, do not walk, from anyone presenting him/herself as a buyer's agent, but being paid by the seller. By definition, the agent's interests then align with the property seller, not yours.

    The check needs to come from you, preferably as a retainer + post-close commission, rather than set-fee up front.

  • by Eivind (15695) <eivindorama@gmail.com> on Monday March 13, 2006 @11:57AM (#14907931) Homepage
    It's cost benefit.

    On smaller purchases (not houses, unless you're a multi-millionaire) you can afford to lose a few, aslong as the expected gain is still positive.

    I buy used ps2-games online. I *expect* to be ripped off once in a while. That's ok -- compared to the alternative for me, buying new in the shop, I typically save 20->70%, so even if I'm ripped off 1/10th of the time, it's still a huge win.

    But like always: don't gamble what you cannot afford to lose. I *can* afford to lose the cost of a used game. Most people *cannot* afford to lose a significant portion or all of the money they invest in a house.

  • Island (Score:3, Insightful)

    by lazarus (2879) on Monday March 13, 2006 @12:08PM (#14908039) Journal
    I bought a 6 acre freshwater island sight-unseen on-line two years ago. Of course I did call around to make sure that the local planning office knew of the island and would give me a building permit for it. I also checked google satellite imagery to check on the overall shape and location of the island before I bought it. But I had 24 hours to do all of the research and make all of the connections before I signed on the dotted line.

    Result? In my case I couldn't be happier. It is exactly what I was hoping for (well, except for the really bad case of poison ivy I got there last summer...) Bottom line: Use *all* of the technology you have access to if you have to make a decision like that. Even antiquated ones like the telephone.

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