Buying a house is an important milestone for most anyone. Like a graduation or a marriage, it's an occasion to celebrate.
Except when things go horribly wrong.
The majority of property transactions go without a hitch, but there are those that, like Parkview, fail, leaving their owners and sometimes would-be residents out hundreds of thousands or even millions of dollars. While the purchase of a home is always a bit of a gamble, experts say, there are ways for homebuyers to minimize their risk.
It all starts with education, said Jonathan Rupp, a partner in Scalley Reading Bates Hansen & Rasmussen, P.C., a Salt Lake City law firm with real estate services.
"Don't hesitate to ask a lot of questions," he said. "Make sure you understand everything about the transaction before you do it. If there are things that you don't understand about the transaction, don't do it."
One of the most common pitfalls, Rupp said, is that homeowners don't take the time to read the contracts presented at closing. But it's important to review the contract to ensure it includes the essential elements that should be there — details regarding the location of the property, the scope of what the sale will include, the final price and when and how it will be paid.
And it shouldn't require you to waive any rights, including your rights to legal recourse.
If there's something in the contract that you don't understand, Rupp said, ask someone to explain it to you. You might run the contract by a lawyer, a real estate agent, the local department of housing and urban development, the Utah Association of Realtors, or any number of other resources.
All that said, if the party at the other end of your contract goes bankrupt, Rupp said, even "the best contract in the world couldn't do anything about that."
That puts some responsibility for ensuring the builder or contractor on a project has the financial wherewithal to see it through. This can be tricky, Rupp said, because most homebuilders and sellers aren't publicly traded, but there are ways to detect financial trouble. A credible builder should be properly licensed — licenses are searchable on the state's Division of Occupational and Professional Licensing website — and should be able to produce a certificate of liability insurance. Homebuyers might also check with the Better Business Bureau and talk to locals to find out if any past customers have complaints.
Another thing to keep in mind, Rupp said, is that most municipalities and lenders have a vested interest in safeguarding real estate transactions. Most will require developers to post a bond before beginning work on a new housing development. These bonds help to ensure the builders won't walk away before the project is complete — and if they do, the bond can be used to hire another contractor to finish the job.
Finding out whether such a bond has been posted is usually a simple matter of calling or visiting the office of the municipality in question.
Lenders further safeguard these transactions by requiring proof of a certificate of occupancy — something Rupp said you should not, in most cases, buy a house without. Municipalities issue certificates of occupancy to indicate that a home is equipped with all the essential services, like water and sewer, and that the structure is safe.
If there is no certificate of occupancy on file with the local municipality, Rupp said, that's a significant red flag.There might also be something wrong with the property if, for some reason, traditional lenders won't approve a loan on it.
"There are a variety of reasons why some property might not be eligible," Rupp said. "I would want to find out why it isn't eligible, and really get to the heart of the concerns about the property. If those are concerns you can understand and handle, then you can make an informed decision."
If you're building a home, Rupp said, in most cases you shouldn't pay more than $10,000 upfront. Contracts with a builder should be arranged as pay-as-you-go affairs, and you should keep at least 20 percent of your estimated costs in reserve in case something goes awry. Don't pay the full price of the house until the builder has a certificate of occupancy in hand, Rupp said.
"You should be making sure that work is done," he said, "before you pay for it."
As far as geological hazards like fissures are concerned — some may come as complete surprises, but in most cases, if a landslide, flood or earthquake destroys a house, there were likely warning signs beforehand, said Steve Bowman, the geologic hazards program manager for the Utah Geological Survey.
As in most other cases, Bowman said, it pays to research what's below the ground you plan to purchase. In most cases, insurance won't cover damage caused by ground movement.
Because of the community's vested interest in understanding geologic hazards, Bowman said the UGS has developed numerous geologic hazard maps with color-coded guides to the severity of the risk. These are available for public review on the UGS website.
"In pretty much any place in the state, you're going to run into one or more geological hazards," Bowman said. "Most are easy to deal with."
If you want more detail on a specific site or development, check with the municipality to find out if there is a geotechnical study on file. This can be tricky, Bowman said, because there is no statewide rule on such studies. However, some municipalities require these kinds of studies and file the reports as public records, as is the case in Enoch City.
If there is no geotechnical report, Bowman said, you can look into hiring a consultant of your own, or just do a visual survey of the property for signs of trouble — things like cracks in the ground or a nearby cliff or steep slope.
"Use some good common sense and look around," he advised, "and beyond the site."
For example, a flat lowland property might not suggest immediate problems, but if there is a nearby river, stream or creek bed, that home might be located in a flood plain. cq
At the end of the day, Rupp said, every home is likely to come with its own set of defects or risks. Since you can't eliminate risk, the real goal, he said, is to do your homework and know the risks — and then do enough research to decide whether you can live with the risks associated with a certain property. If you can't reach that conclusion with confidence, Rupp said, you shouldn't sign.