Due Diligence

Dave Friedman emailed me an article in the Times about people who have gotten involved in a scheme to buy land from a company that I would view as unscrupulous.

About three-quarters of the 783 registered bidders in the Marriott ballroom lived in the city, most of them in Brooklyn, according to the auction company. With starting bids as low as $100 for property in enticing locales like Florida and Hawaii, the auction attracted many working-class and middle-class strivers: bus drivers, security guards, grocery store owners, waiters. Many were immigrants, some drawn by ads in the Korean, Chinese and Spanish press.

These would-be property owners, many of whom had been shut out of the city's gravity-defying real estate market, crowded into the cavernous ballroom as a promotional video played on two giant screens, its bubbly announcer declaring, "You can really own a slice of America for very little money!"

Land transactions are conveniently devoid of many of the typical regulations you might see in the purchase of houses or co-ops. No lead paint disclosure, no engineer, roof, heat or termite inspection, and perhaps most beneficial of all the the seller, it is usually a cash transaction. Banks seldom give mortgages on raw land. This also means that the background checking a lender does is absent from the transaction. No title examination. No environmental study. No appraisal. No confirmation of zoning. You are just buying dirt, and if you don't do your due diligence, you invite peril. That is exactly what happened to the guy in this story, who spent over $9000 for a parcel to build a home upon, only to discover the company bought it for $2500 a few months before, and worse, it was zoned only for commercial use.

While I do feel bad for this man, and the company is most certainly a consortium of exploiting, predatory scumbags, he brought this upon himself. Buyer brokers cost nothing, and this is the sort of thing they help innocent consumers avoid. Failing that, a real estate attorney would be in order. Caveat emptor.

Comments

[Tony]

If a buyer's broker costs nothing, he's making his money on the commissions on the sale. Therefore, he's the seller's broker also (in essence). I do know there are buyer's brokers that you can pay a flat fee to broker your end of the transaction. In that case you indeed have a buyer's broker who is looking out for your best interest.