minimize your risk, maximize your earnings!

P R E S E N T S

Minimize Your Risk Minimize Your Risk Maximize Your EarningsMaximize Your Earnings

Understanding and Recognizing the Top 10 Property Conditions* that most often lead to disputes

*According to the NAR Legal Scan

…and a great class!

Continuing Education Providers are subject to audit by the State of Connecticut

Please:Mute your cell phone

Use electronic devices judiciously

Remain in attendance until the end of the class (or we can’t issue your credits)

Thank you!

Your Credits….Are submitted electronically to the State of Connecticut by Tiger Real Estate School

Tiger Real Estate School will email you a Certificate of Completion within 14 days

Please make sure we don’t land in “spam” and be sure to save your Certificate where you can find it

There is a $25.00 fee to reissue a Certificate

What is theNAR Legal Scan and

Legal Pulse?

Legal Scan Published every two years by National Association of Realtors (last edition 2013)

Replaced by Legal Pulse – published quarterly

What is the NAR Legal Pulse?

The Legal Pulse is a quarterly newsletter that analyzes trends in the previous quarter that impact real estate professionals

The newsletter tracks both cases and statutes

The Legal Pulse tracks when real estate professionals are being held liable

It also identifies emerging issues and trends, helping to reveal where additional training is needed

Caveat EmptorThe doctrine of “Buyer Beware” is gone….

Replaced by Agent Beware!Replaced by Agent Beware!Realtors are held to a higher standard

“What do you know about the property” has been replaced by “What should you know about the property!”

Find the full report…

NAR websiteLaw, ethics, policy tabhttp://www.realtor.org/publications/legal-pulse

Here are the highlights for 2Q…

http://www.realtor.org/publications/legal-pulse

Legal Pulse 2Q Highlights

Property Condition Disclosure

PCD is/will be an ongoing source of disputes

PCD ranked as the number 2 most important issue of concern

Disputes are likely to increase over next two years

Significant need for training

Short Sales, “As Is”, Foreclosures…oh, my!

Complex transactionsAdverse Property Conditions – common denominatorSignificant need for training

Case StudyAre there

limitations in an “As Is”

transaction?

The Case….The property is sold “As Is”Property Disclosure Report states there is

hardwood flooring beneath carpetingBuyer moves into houseBuyer discovers there is water damaged

plywood, not hardwood, beneath carpeting Buyer sues seller for negligent

misrepresentation

The Seller Claims…Caveat Emptor

The house was sold “As Is” – it’s the buyers responsibility to inspect the premises

The buyer should have pulled back carpet and investigated drainage issues

“As Is” means “As Is” (so leave me alone)

The Trial…The Buyer chose NOT to have a home inspection

The Buyer relied on the representations in the Property Disclosures

Evidence reveals the Seller was aware of water damage and plywood subfloor

Buyer acknowledges it was an “As Is” purchase

Questions… Did the Buyer adequately inspect the premises? If you were the Buyer’s Agent, what advice would

you give him/her? If you were representing the Seller, what advice

would you give? What would you do if the Seller asked you to

complete the Disclosure Documents for him? Does “As Is” get the Seller off the hook?

The Verdict…The Court held that an “As Is” disclaimer in a

Purchase and Sale Agreement would negate a negligent misrepresentation claim against a seller only if the buyer had knowledge of the alleged defect

The buyer was totally unaware of the plywood subfloor and water damage and relied on the representations in the Disclosure Documents

The seller was ordered to reimburse buyer for cost of hardwood floor and repair of entire properties drainage system

FACT:FACT:80% of claims against brokers E&O insurance

are due to property related conditions

Effective disclosure helps you earn more and keep more commissions

Today’s AgendaToday’s Agenda

• Help you develop an awareness of what to look for (without turning you into home inspectors)

• Highlight warning signs of possible defects• Overview of Top 10 Property Conditions that

most often result in disputes

• Common sense rules of disclosure

Let’s test your “observation skills”

Why is this information important?

Happy, well informed clients, mean more referrals (and no disputes)

More referrals = more earnings

Minimize your risk by having a greater awareness and understanding of adverse conditions

FACTS…According to the 2014

National Association of Realtors

Profile of Buyers and Sellers

FACT:55% of New Buyers rely upon their Agent to point out unnoticed features/faults with the property

50% of Repeat Buyers rely upon their Agent to point out unnoticed features/faults with the property

(This ranks as #2 benefit)

#1 benefit is to help buyer understand the process

Source: NAR Profile of Buyers and Sellers

FACT:90% of homes sold in the

Northeast used an Agent or Broker

YOU ROCK!!Source: NAR Profile of Buyers and Sellers

Buyer Demographic Changes

Profile of Home Buyers and Sellers

2010 Profile

2011 Profile

2012 Profile

2013 Profile

2014 Profile

Median Age

39 45 42 42 44

Gross HH Income

$72,200 $80,900 $78,600 $83,300 $84,500

Household Composition

58% married couples, 20% single females, 12% single males, 8% unmarried couples





Children in Home

35% 36% 41% 40% 35%

Own a 2nd Home

14% 19% 19% 19% 21%

First-time Buyer Share Remains Under Historical Norm


30%36%

50%

33%

%

10%

20%

30%

40%

50%

60%19

8119

8519

8719

8919

9119

9319

9519

9719

9920

0120

0320

0420

0520

0620

0720

0820

0920

1020

1120

1220

1320

13

Agent Use By Buyers & Sellers Remains High

88% of buyers (nationally) purchased their home through a real estate agent or broker Most want help finding right home Benefited from help understanding the process High importance on honesty and integrity

88% of sellers were assisted by an agent Help market home Sell w/in specific timeframe Help price home competitively Reputation and honesty and integrity important

2014 Profile of Home Buyers and Sellers

Agent Assisted Sales High


Satisfaction

Process: 89% of buyers are satisfied with the buying process 88% of sellers are satisfied with the selling process

With the agent: 88% of buyers would use agent or recommend to

others 83% of sellers would use agent again or

recommend to others

2014 Profile of Home Buyers and Sellers

In Summary:Protect Yourself And Your Client By Understanding Their Expectations

and Having a Greater AWARENESSAWARENESS Of Adverse

Conditions

Lovely House

Nice Landscaping Job

Great Grading

Do You See the Problem?

Interior View

Termites, Mold, Damage

Top 10 Property Conditions1. Structural Defects

2. Flooring/Walls

3. Water, Mold, Water Intrusion

4. Sewer/Septic

5. Insects/Vermin

6. Plumbing

7. Roof

8. Environmental Issues – Radon, Asbestos, Lead, UST

9. HVAC

10. Electrical

Structural Defects/Walls & Floors #1 & #2

Walls/Floors

Deck Framing & Support Systems

Structural Defects

Some defects are obvious….

Structural Defects

….and some are not!

Structural Defects

A closer look

Structural Defects

Do you see any problems?

Structural Defects

What’s The Defect Here?

Warning Signs of Structural IssuesSloping or sagging

floorsOverly snug fit to floors

and windowsCracked tile floorExcessive concrete

cracking and separation

Alterations without permits

Sagging beamsFunky

supports/columnsStair riser/tread sizeCrushed sills/joistsSuspicious homeowner

repairs

Structural Issues are the #1 cause of disputes in the Real

Estate TransactionDevelop an awareness of what to look forScrutinize seller disclosures – ask questionsDefer to professionals – have a home inspection

QUESTIONS??

Mold/Water Intrusion#2

Moisture & food source create mold

Leaking roofs, plumbing problems, humidifiers, damp/wet basements, improperly vented appliances and fans, etc

Combine with a food source such as wood, wallboard, or wallpaper to cause the growth of mold

Spores are released and inhaled

Mold & Water Intrusion

What’s the problem?

Crawlspaces

Floor

Attic

Subfloor


Is this a problem?

Damage to Systems


Nice exterior !Any cause for concern?

It’s Just A Small Window Leak…

How Bad Could It Be?

Warning Signs of Water IntrusionPoor gradingInadequate ventilation

in crawlspace or atticCracks in foundationEfflorescenceRoof stains in atticMissing roof shingles

Stains on ceilingsNewly painted

foundation/floorsWater stains

baseboard/furniture legs

MoldSump pump Downspout not

extendedWindow rot

Mold and Water Intrusion are the #2 cause of disputes in the Real Estate

TransactionDevelop an awareness of what to look forUse all of your sensesScrutinize seller disclosures – ask questionsDefer to professionals – have a home inspection

Q U E S T I O N S ???

Are you Ready??Let’s Play..Cosmetic Cosmetic ororConcernConcernMAKE

RS

Here’s how it works:

Name the DefectDetermine the significance – bear in mind cost to

remediate/repair and impact upon structure and other components

Is the defect Cosmetic? Costs less than $500 and has no impact upon structure

Is the defect a Concern? Costly repair, implicates other components/structure

Name that Defect!!

Is it Cosmetic orIs it a Concern??

Septic/Sewer#4

Sewer & Septic

Where does the water go?

Where does this water go?

Sewer & Septic

Backwash?

Sewer & Septic

Laundry & water discharge?

Warning Signs of Septic/Sewer Issues

Slow sink drainsToilet flush fills, then drainsOdor in yard – septic breakoutInternal odorsWashing machine (grey water) drained to outside

Insects/Vermin#5

Bats & Birds Nesting in Attic

Carpenter Bee Stains, Holes, & Damage

Powder Post Beetle Damage

Termite Mud Tubes & Damage in Wood

Welcome to thePeople’s Court

Part 1 – The People’s Court

B R E A KB R E A K

15 MINUTE15 MINUTE

2014 – 2016 (3) Credit Continuing Education Courses

Don’t Let Water Intrusion Sink Your Deal! Smart Energy Updates for Existing Homes Innovation in Sustainable Housing – Green Building Best PracticesThis Old Connecticut House Minimize Your Risk, Maximize Your Earnings Environmental Issues – Evolution to Resolution What to Expect When We’re Inspecting! Mold to Sold! Residential Building Practices

The Verdict

Warning Signs of Insect Damage Termites:

Mud tubes Damaged wood Soft spots or blisters

on drywall

Carpenter Ants: Frass Smooth channels along

wood grain Damaged wood

Powder Post Beetles Frass Small circular/oval holes Meandering holes

through wood

Carpenter Bees Staining Bees hover around

eaves, deck, fence Round holes

Plumbing#6

Plumbing

Anythingunusual?

Some Things Are Readily Apparent

Some Not So Obvious

Missing or Uncommon Traps

Exterior Vent Pipe

Settled Slab

Check Valve

Plumbing

The latest in designer plumbing!

Warning Signs of Plumbing Issues

Loose and missing grout and tiles

Loose toilet

Safety glass at tub or shower enclosures

Water odors (sulfate)

Aged piping

Leaking drain traps

Reduced water pressure

Roof#7

Worn roof with tar Tilo Hurricane Shingles

Aged Roofing Materials

10 Year Old Roof

Roof Framing

See any hint of a problem?

Roof transition Exposed Flashing

Roof Flashing

Roof Accessories (Think Bling!)

Aged Low Pitch Roofing

Rubber Roofing Products

Defective Asphalt Shingles

Wood Roofing Products

Slate Roofing

Warning Signs of Roof Issues

Age of RoofRusted FlashingMissing, cupped or curled shinglesStained ceilingsCracked or missing tilesBuckets in the attic

Winter 2014 – ICE DAMS!!!!

Your Opinion Matters….

Before the end of class, please take a moment to complete our evaluation form…

Environmental Issues

Radon (in air and water)AsbestosLeadUnderground Storage Tanks

#8

What is Radon?

Radon is a gas

It is inert (inactive)

It has a life expectancy

Radon Measurement Units

Average indoor radon is 1.3 pCi/L

Average outdoor radon is 0.4 pCi/L

U.S EPA action level is 4.0 pCi/L

Radon in Well Water

Radon in well water can increase levels of radon gas in the home

Radon is released into the air as water flows

Household activities can release large amounts of radon into the home

Radon in water is expressed in picocuries

Average concentration of radon <1,000 pCi/L

Levels in groundwater have been found above 1,000,000 pCi/L

Highest amounts have been found in the Northeast

Private wells tested in Connecticut indicate an average radon level of about 3,000 pCi/L

What Is Asbestos?Mineral fiber used in

over 3,000 products.Requires a special

type of microscope for identification

Used to strengthen, to provide heat insulation and fire resistance

Friable or non-friable.

AsbestosThe mere presence of asbestos in a home or

building is not hazardous

Damaged asbestos may release asbestos fibers and become a health hazard - friable

Asbestos material in good condition is not a health issue, if left alone – non-friable

Lead in PaintLead was used as a pigment and

drying agent

• One half of all homes built from 1940 – 1960 contain heavily leaded paint

• Two thirds of homes built pre-1940 contain leaded paint

• 1978 U.S.CPSC lowered max content to trace amount

Warning Signs of Environmental Issues

Radon – lack of disclosure, mitigation system not functioning

Asbestos – wrapped pipes, loose insulation, vermiculite, aged floor, 6 x 6 ceiling tile

Lead – 1978 or beforeUST – cut off fuel lines, new gas, evidence of prior

oil tank, propane

HVAC#9

Warning Signs of HVAC Issues

Aged unitsNo maintenance tagsOdors in house or near unitIneffective function – not hot enough, not cold

enough

We’re going to revisit this is our“Just Serviced….” section.

Electrical#10

Panel, Condition & Location Problems

Warning Signs – Electrical Issues

Outdated Service sizePanel issuesExposed romexOpen junction boxesExtensive use of electrical cordsAluminum wiring (primarily used from 1965 – 1974)

Let’s Play…

“Name that Name that Defect!!!” Defect!!!”

Are you ready?

Name that defect!!

Just Serviced…

Legal Scan- Part II

Other areas of concern….

Seller’s Disclosures…who the heck is the Seller, anyway?

“I’m acting as Power of Attorney for the Seller”“I’m just the Investor”“I’m just the Relocation Company”“I haven’t lived there for years”

Are these valid reasons not to complete the required Property Disclosure Report?

Test your Property Condition Disclosure Statute I.Q.

(CGS 20-327b)

Who is required to complete the Property Disclosure Report?

Is the Report State-created or Federally-created?

How many questions are asked in the document?

Are there any Statutory Exemptions to the requirement of

completing the Property Disclosure Report?

If so, what are they?

There are several exemptions..

Transfer of one or more co-owners solely to one or more of his co-owners

Transfers made to spouse, child, parent, sibling, grandparent or grandchild where no consideration is paid

Transfers pursuant to a court orderTransfers of newly construction residential real

property covered by a one year warrantyTransfers made by executors, administrators,

trustees or conservators

Exemptions…

Transfers made by the Federal Government or any government chartered corporation (such as FHA, FDIC)

Transfers by Deed in lieu of ForeclosureTransfers by the State of Connecticut or any political

subdivision thereofTransfer of property acquired through foreclosure or

deed in lieu of foreclosure

Additional areas of concern….

Misstatement of square footageImported DrywallBoundariesZoningValuationOff-Site Adverse ConditionsStigmatized Property

Best Practices…

Make sure your client understands his/her obligations under the contract

Explain that he/she has a right to bring in specialists to investigate the condition of the property

Do not give advice beyond your area of expertisePoint out potential trouble spots and recommend a

Home InspectionReview Seller’s disclosure and ask for more

information if necessaryDocument everything in writing

Rules of Disclosure

Inquire – ask the seller for informationInspect – look around, what do you seeIdentify – any concerns to your clientRecommend a home inspectionDisclose – make sure your buyer is fully

informedDocument - Put it in writing

Minimize Your Risk

Make sure the Inspection Companies that you recommend have:

Errors & Omissions InsuranceAre fully licensed in Ct and strictly adhere to the

Standard of PracticeStand behind their inspections

Thank you!

Questions???

Thank You!!