17 Secrets Real-estate Insiders Won’t Tell You
Here's what professionals in the real-estate and residential services businesses preferred you didn’t know.

By SmartMoney, 06/24/2010
http://realestate.msn.com/slideshow.aspx?cp-documentid=24680323&Gt1=35000

It’s likely the biggest purchase of your life, but there are some things the professionals in the real-estate and residential services businesses preferred you didn’t know. The list starts with the lack of strict licensing controls in many professions to the ways architects and contractors cut corners. Thought you could at least trust your home inspector? Think again. (They’re only obligated to check for defects they can see – i.e., no looking for leaky pipes, termites and warped floor boards.) For a roadmap on how to deal with the pros, we uncovered the 17 secrets that will help make you a smarter home buyer, seller and owner.

1. Homebuilder:  “I’ll build your house on marshmallow.”

Population growth and urban sprawl mean there’s not much residential land left in many areas— and what there is may not be ideal. Shortly after John Duffy and his family moved into their $234,000 home in Highlands Ranch, Colo., long cracks started showing up in the walls, and the porch started pulling away from the house. After badgering his builder for the soil report, Duffy learned his lot was a hot spot for potential swell. Writer Homes, the builder, was ordered to pay Duffy $544,000. John Palmeri, Writer’s attorney, says the company offered to fix the house, but “they were bent on going to court.”

The Duffy family isn’t alone. In fact, a number of homes today are being built on “expansive soil” — earth that swells when it rains — without adequate safeguards. How common is the practice? About 50% of homes in Southern California are built on expansive soil, according to Patrick Catalano, founder of The Law Firm of Catalano and Catalano in San Francisco and San Diego, which specializes in real-estate and construction defect litigation. [See Soil Issues for Residential Construction in Texas.]

2. Homebuilder:  “I won’t just cut corners — I’ll sever them.”

Substandard work has always existed in homebuilding, but the collapse of the housing market and the increased costs of construction are making the problem worse, says Jonathan Alpert, a retired Tampa, Fla., attorney who represented homebuyers. Alpert says he’s handled cases in which builders didn’t seal roofs, in which two-inch concrete slabs were used instead of the four-inch slabs specified, and in which sewage pipes were cross-connected to drinking-water pipes.

In some cases, builders are skipping steps dictated by municipal building codes. In one Sarasota, Fla., gated community called Turtle Rock, four families cut open their houses in 1998 to ferret out the source of some mold growth. What they found, in addition to wet lumber, were several code violations, including missing hurricane straps, which are steel plates that tie the wood frame together and connect to the concrete base. Says Brian Stirling, the structural engineer hired by the homeowners to investigate: “If we’d had a strong storm, they would have had some serious problems.” Like what? “Like losing their top floor.” In 1999, the builder, U.S. Home, agreed to buy back the four houses and said it would make county-supervised repairs on 12 others in the subdivision. “We dispute the extent of the problems,” says the builder’s attorney, Fred Zinober. But by settling the case, he says, “U.S. Home did the right thing.”

3. Homebuilder:  “Your warranty may be worthless.”

Many homebuilders tout 10-year warranties as protection against future problems. But these home warranties are often extremely limited in coverage, particularly after the second year. “It gives people a false sense of security,” says Brent Lemon, a Dallas attorney who represents homebuyers. “Most of these basically require that the house fall down on top of you before they kick in.” Consider the warranty offered by Denver, Colo.-based Home Buyers Warranty. It lists 71 exclusions and, like many, states that the home must be “unsafe, unsanitary or otherwise unlivable” to get structural-defect coverage. Em Fluhr, the warranty company’s CEO, says, “If (homebuyers) detect any worsening of the situation, they can submit another claim.”

The root of the problem with warranties is that builders characterize them too broadly when they say they’ll help protect homeowners who discover a structural problem, says Anne Stark, a Dallas attorney specializing in homebuyer complaints. “Structural-defect coverage often covers only catastrophic failure,” Stark says. “Builders will say you’ve got a great warranty, but then you wake up in the third year with cracks all over your house and you call the warranty company and they say, ‘Sorry, it’s not a structural failure.’” Some states, like Texas, are aiming to alleviate the problem: In 2003, it created the Texas Residential Construction Commission to help builders resolve disputes without litigation. “We require a warranty whether the builder wants to give it or not, and that warranty needs to meet the minimum level of state standards,” says Duane Waddill, executive director of the commission. “Even if the builder goes bankrupt, the buyer has additional protection.” [That's incredibly misleading and an example of why the Legislature abolished the TRCC in 2009.]

4. Contractor:  “My license is laughable.”

When you hire a general contractor to build an addition onto your house, you probably assume you’re getting someone who has spent years learning his craft, giving him the proper credentials to saw a hole in the side of your den. In reality, you could be getting a madman with a toolbox who answers to no one. That’s because only 27 states have any state-licensing requirements — and where regulations do exist, they vary. In California, one of the stricter states, aspiring contractors must have four years’ experience, prove their financial solvency and pass a written exam to become licensed, whereas in South Carolina, they need only two years of experience along with an exam and submission of financials. Maybe the disparity helps in part to explain why the Better Business Bureau received 1.1 million inquiries in 2006 from people seeking “reliability reports” on specific contractors — to ensure they were trustworthy enough to hire — ranking them third among industries for that request, according to the Council of BBBs.

5. Contractor:  “I’ll be back when I feel like it.”

So you found yourself a good contractor. Terrific — but here’s the bad news. When contractors are busy with multiple jobs, as the best in the business inevitably are, you can pretty much expect the schedule for completing your job will go out the window. “If the contractor’s got too many jobs going,” Pendleton says, “the workers might only be in your house for two hours when they should have been there all day.”

One way to guarantee that your job won’t stretch to Wagnerian lengths, he says, is to hire a contractor with a lead person or project manager, “a working supervisor who is on the job from beginning to end.” If the job drags, the contractor still has to pay that person, so it “becomes in the contractor’s interest to finish the job,” Pendleton says.

6. Contractor:  “If it looks good, I don’t care if it’s done right.”

Unless you have X-ray vision or the time to spend days watching your contractors in action, all you may ever know about your job is whether it looks good in the end. Evelyn Yancoskie, director of consumer affairs for Delaware County, Pa., knows of at least one family in her area who got a new roof that, indeed, looked just fine. But the roof was lacking a key element: an ice shield, a three-foot- wide rubber lining that’s crucial for a roof in this part of the country. “The contractor figures that nobody will miss it anyway,” Yancoskie says. “But if you get a cold winter, any water that gets into the gutters will freeze, back up onto the roof, and go underneath the shingles.”

Contractors may also cut corners by skimping on insulation, but packing it with care so that it looks filled in; leaving out plumbing lines and pumps that give you hot water fast; and using low-quality wood, but laying it beautifully so that you don’t notice. “Guys will use substandard plywood, shingles, siding,” says Mark Herr, former director of the New Jersey Division of Consumer Affairs. “In situations where homeowners aren’t likely to ask what’s going on, contractors use subpar materials.” Or just do a subpar job.

What can you do to prevent this sort of behavior? Check with your state’s department of consumer affairs to see if, like New Jersey, it requires its contractors to be registered —meaning they’re insured, must use certain approved language in contracts, agree to list specifics about materials being used, provide start and end dates for a project, and generally operate with full disclosure about their practices. Otherwise, you should always get multiple estimates on a project and never settle on a contractor without checking references carefully.

7. Real Estate Agent: "My fees are negotiable."

Agents like to make it sound as if their fees are engraved in stone, but that's rarely the case. During the housing bubble, as the number of real-estate agents sharply increased, so did the competition for listings. One agent says he lowered his fee a full percentage point just to give himself an edge. But even in the wake of the recent crash, you have a good chance of negotiating a better deal; that same surplus of agents is still out there competing for even fewer listings.

The real-estate agent we spoke with, who asked not to be named, has some suggestions for the best conditions to induce brokers to lower their fees: "If somebody's willing to commit to me for selling one place and buying another," or "If you're in a particularly desirable neighborhood with a house that will bring a lot of traffic" for an open house. And with a lot of smaller brokers, he says, "all you need to do is ask and they'll lower the commission."

8. Real Estate Agent: "You can probably do this without me."

Agents like to create a lot of mystique about selling homes, insisting that the process is complicated and best left to professionals. Not so, say homeowners who have sold their homes themselves (about 20% to 25% do so each year). William Supple, publisher of the sale-by-owner real-estate magazine Picket Fence Preview and author of "How to Sell Your Own Home," says that "properly priced and advertised, a house sells itself." Supple adds that sellers should plant a yard sign and post online ads for the property on local sites aligned with print publications (call current advertisers to see if a site is effective).

Just be sure you price your home well. The way most self-sellers hurt themselves, Supple says, is in setting either an unreasonably high or tragically low asking price. "Hire an independent appraiser for $200," he suggests, "and he will tell you (the parameters of) what to charge."

9. Real Estate Agent: "I know zilch about zoning."

Real-estate agents love to suggest big ideas to prospective buyers — say, removing trees to enhance a view or squeezing a rental unit out of a roomy garage — meant to happen once the deal is done and they're out of the picture. But just because it sounds like a good idea doesn't mean it's legal.

"We had a client who bought a dilapidated house with a beautiful piece of property on a marshland," recalls New York City-based architect Mary Langan. "The broker told him that he could fix the house up however he wanted, insisting that this was a sleepy little town where nobody would care what he did." Langan says that the client built a $15,000 shed in the backyard, took down some trees and had some of the marshland filled in — only to have the town insist he put things back because of environmental zoning regulations. The moral of the story: Before you buy into your broker's creative thinking, check with your local zoning commission about what you can and cannot do on a given piece of property.

10. Real Estate Agent: "Your idea of a home inspection isn't necessarily the same as mine."

You've found the home of your dreams. But cautious consumer that you are, you want a home inspector to take a look at it before you buy. That way, you'll be forewarned about any defects or problems, right? Not necessarily. A home inspector's job is to conduct a visual examination of the physical condition of the house and certain systems within it. The key word here is "visual." That means home inspectors don't have to remove carpets to make sure the floors aren't warped, or drill into walls to check for insulation, for example.

Most homes have imperfections, and inspectors probably won't catch everything. They're looking for major defects — electricity that's not grounded, air-conditioning or heating systems that are operating in an unsafe manner.

There are things an inspector can't do. "You can't see what's buried under insulation in the attic, you can't check the pipes that are underground," says Barry Stone, a certified home inspector in San Luis Obispo County, Calif., and known as The House Detective.

11. Home inspector: "I'm not climbing up on your roof."

Amazingly, the visual examination rule applies even to the roof. The American Society of Home Inspectors, a professional organization whose guidelines have been adopted as the industry standard, says its member inspectors must "observe" the roof, but it doesn't say they actually have to go up there.

Even some veteran home inspectors think inspectors should closely check the roof. "A really bad roof can look good from the ground. When you see it at an acute angle, you don't always see the defect. But when looking straight down, you can see it better," Stone says. An inspector can make excuses for not getting to the roof, saying it's fragile or slippery. But there are often ways around those hurdles. Stone says you could set up a ladder to look at the roof without actually walking on it. Or if you stand far enough away from the house, you can get a better perspective by using high-powered binoculars.

12. Home inspector:  "I've been known to cause more damage than I find."

It can happen to anyone — you bump into the china cabinet and Grandma's plate falls down. Some might say that causing some damage in a home is an occupational hazard that comes with being a home inspector. Technically, the inspection consists of a visual examination of the home, but that's not entirely realistic. "We have to touch stuff," says Bruce Ramsey, a home inspector in Raleigh, N.C.

True, a thorough house checkup requires hands-on poking and prying — and a little cosmetic damage is a small price to pay for knowing what shape your dwelling is in. But an inspector who damages woodwork or light fixtures should offer to pay for the repair.

"You're kind of like a guest in the house," says Harold Heimer, owner of Heimer Engineering, an engineering firm that performs home inspections in the New York and Long Island area. Inspectors generally shouldn't be taking things apart, but someone might need to move things around.

13. Landscaper:  “My sprays are real killers, all right.”

Sure, you want your lawn to be as green as Yankee Stadium’s outfield. But does your landscaper need to poison it in the process? Gloria Megee knows what harm grass-protecting pesticides can do. Several years ago, after a landscaper had sprayed pesticides on her Arlington, Va., housing development, Megee’s bichon frise, Monique, started to nibble the grass. Seconds later the dog was vomiting; she would experience seizures throughout the night. Monique eventually became riddled with skin cancer and tumors. The cause? Megee’s vet blamed it on the pesticides. “The poor dog’s paws were totally raw from walking on sprayed grass,” Megee says.

Indeed, research has linked pesticides to Parkinson’s disease, Hodgkin’s disease and liver cancer.

Rather than chemicals, some landscapers now use bug-eating birds, kelp spray and insects that prey on vegetarian pests, the ones that harm trees and plants. Says Steven Restmeyer, a landscaper who has practiced such techniques: “When landscapers deal with pesticides, they deal with liability and health issues, and they are replacing the natural process of the soil microbes that feed the plants.”

14. Landscaper:  “Don’t expect a refund if your garden croaks.”

A month ago your landscaper planted new shrubs in your front yard. They looked great — for a day. Now they’re dry as a wheat field. The landscaper blames you for failing to water them enough, and you blame the landscaper for buying bush-league bushes. Who’s right? It doesn’t matter — the plants are dead, and don’t expect your landscaper to cheerfully reimburse you.

Jeff Herman, the owner of a landscaping company in Fair Lawn, N.J., says landscapers get no money-back guarantee from the nurseries on the plants and shrubs they buy for homeowners. While you’ll have little chance to get a refund on such things as rose bushes (they’re prone to bugs) or ground cover (ivy, for instance, which will die quickly if not watered), you should demand some kind of payback from the landscaper if it’s obvious you properly cared for the plantings. “Show your landscaper the grass around the dead plant,” says Hugo Davis, former president of the Kentucky Nursery and Landscape Association, a trade organization for landscapers and nursery owners. “If it’s green and thriving, well, then you did all the watering you needed to do.”

15. Landscaper:  “What I’m doing won’t necessarily make your home more valuable.”

Debby Bright, a real-estate agent in Gilroy, Calif., estimates that homeowners can recoup 150 percent of their landscaping costs when they sell. But there’s a hitch: You need the right landscaping. Oleander bushes, for example, look great, but they’re poisonous and a turnoff to botanically knowledgeable house hunters.

Bright’s ideas for home enhancements include trees that block noise and shrubs that create a sense of privacy; you don’t want just a large, house-exposing lawn. While Bright points out that lattices and high hedges are more appealing than brick-and-cement walls, one quaint touch to avoid is climbing ivy. “It attracts roaches and termites,” Bright says. “You’ll think your landscaper’s ivy is very nice until you are about to sell your house, you have a termite inspection, and wind up spending $8,000 to resolve the pest problem.”

16. Architect:  “You may not need me at all.”

Hiring an architect can add thousands to the cost of a home-improvement project, which is a lot of money when your project is relatively small — converting a garage to a game room, say, or expanding your kitchen.

Architects will argue that they offer expertise that will make any addition, however small, flow better with your house. But many experts say it’s often overkill. “If the project is entirely interior to the house, as long as you’re not moving windows or adding to the footprint of the house, you may not need an architect at all,” says Chris Sullivan, founder of C. C. Sullivan Strategic Communications, a communications-consulting firm for the architecture and construction fields.

The ultimate authority, however, is your local municipality’s housing department; some may require architect-stamped drawings in order to get a building permit, while others might let you give your drawings directly to a contractor. For small projects, you may be able to use an interior designer or, if you’re doing just one specific room, a kitchen-, bath-, or even basement-design specialist. To find a qualified designer near you, check out the web sites of the International Interior Design Association , the American Society of Interior Designers or the National Association of the Remodeling Industry.

17. Architect:  “My drawings aren’t really builder-ready.”

Before you can start shopping for a contractor, you’ll need your architect’s finished drawings. But “finished” can be a subjective term. Tony Crasi, owner of Cuyahoga Falls, Ohio-based design and building firm Crasi and Co., says that one of the biggest problems in working with other people’s architects is that he sees “incomplete drawings, inaccurate drawings, drawings that have no chance of being built for the price the owner would like.”

Part of the problem can stem from an architect’s lack of residential design expertise, but it can also be the result of a homeowner not knowing what kinds of drawings to ask for. Unless you’re doing a very small project, be sure to request drawings that contain enough detail to adequately convey your intentions. Ideally, these should also include “specifications,” which describe finishes and quality of workmanship. And discuss as many details with the architect as you can, down to the type of faucets you want in the bathroom. It may add to your fee, but the right drawings make it easier to estimate costs, preserve your wishes, and even determine liability if something goes wrong. “I don’t think you can put enough information in a set of plans,” Crasi says.