Real Estate Fraud in Alabama – Can you do anything about it?

The Alabama Supreme Court continues to advance its’ anti-working people agenda with no signs of stopping. One of their classic hits is the case of Teer v. Johnston (Ala. 2010), where they said that it’s perfectly fine to defraud people out of hundreds of thousands of dollars, even in writing, as long as there’s an “AS-IS” clause somewhere in your sale contract.

I’m not exaggerating. Not at all. I know Teer v. Johnston very well, since what happened to the Teers is exactly what happened to me. The Teers were looking for a home. They bought a house from Judith Johnston for $149,500. Just like most every other real estate sale in Alabama, this one was prepared by a realtor. The sale contract was a form document, created by the realtors, and contained numerous pages and disclosures and things like that. One of them–the most important one of all, really–was a document labeled “SELLER’S DISCLOSURE.” The Seller’s disclosure is just what it sounds like: a disclosure form full of Yes/No questions that the seller fills out and provides to the buyer, presumably to let the buyer know the basic facts about the property they’re about to drop their life savings on. Johnston’s home had been flooded while she owned the property–she even complained to Mobile County about the flooding. But did she tell that very important truth in her SELLER’S DISCLOSURE? Of course not. She lied. In response to the question about whether the property had been flooded, she said “No.” So the Teers bought the property, only to find out later that they’d been cheated. The Alabama Supreme Court laughed the Teers out of court, even though they were innocent victims.

What can men do against such reckless hate?

Well I learned a few things through my own experience when I discovered after the sale that my home had been flooded, and that the seller had, in fact, lied to me. In writing. Here are a few lessons:

Lesson #1: Never Trust a Realtor

The seller’s realtor has one job: get the property sold at the highest price possible. Their secondary goal is to get the sale done (and their all-important commission) as quickly and easily as possible. This means that they have not only the opportunity, but the motive to help their client defraud you. They will tell you whatever you want to hear if it makes the property get sold. And they know that the law protects them from the consequences of their own dishonesty, so why would they deal with you honestly?

But what if you’ve got your own realtor? Then you’re in a little bit better position.

Lesson #2: If you have a Buyer’s Agent, get all the facts from them.

And do it in writing. Email all your important questions to the realtor. Ask if the facts in the Seller’s Disclosure, MLS Listing, and advertisements are all true. Ask if the Seller’s Disclosure can be relied upon. (Hint: if your realtor is honest, she’ll tell you straight up that the Seller’s Disclosure is legally as effective as used toilet paper). Ask if the contract gives you any remedy if the Seller turns out to be a big fat liar. If your realtor is a good one, she’ll fight for you and get the Seller to produce proof that their claims are true. If she’s exceptionally good, she’ll convince the Seller to incorporate the disclosure into the sale contract and specifically exclude it from the AS-IS disclaimer. If your own realtor is more normal, then she’ll probably just tell you whatever it takes to get you to sign the papers, pocket her quick commission, and then leave you hanging.

Lesson #3: Conduct a thorough Property Inspection

But Judson wait! If you’re so worried about not getting stuck with a damaged property, why not just put in the work to inspect the home properly? I know that question is coming, and so I’ll go ahead and explain why it is an asinine suggestion. First, very few home buyers are engineers, termite killers, or roofers. So the vast, vast majority of home buyers hire a professional home inspector. But unfortunately, home inspectors are very much like realtors in the sense that though they mostly want to do a good job, they are completely unwilling to accept the consequences if they turn out to be negligent. I’ve read several home inspector contracts, and they all are loaded with fine print designed by corporate lawyers to give you no rights at all. So while it is a good idea to hire an inspector (they usually find a handful of minor repairs that they’ll convince the seller to “fix” before the deal is done), don’t be under any illusion that if, for instance, your inspector doesn’t notice the signs of flood damage, you’ll be able to go after him for compensation. Much like your realtor, he also will shake his head in sadness and then tell you to piss off.

Final Verdict: You may have to sue your realtor.

Since the Alabama Supreme Court has worked so hard to give defrauded home buyers no rights whatsoever, one of the few avenues left to redress the harm caused by fraudulent seller disclosures is to go after your own realtor. Yes, the contract you sign with them is full of nasty fine print designed to promise nothing and demand everything, but they are licensed professionals, hired specifically for their expertise in a complex business. They do owe you some basic duties. For instance, their code of ethics states that “REALTORS shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property or transaction.” That “AS-IS” disclaimer may protect deceitful sellers like Judith Johnston (or, in my case, Dave Cummans), but it doesn’t preclude all claims you may have against your realtor.

If your Buyer’s Agent betrays you in order to get a quick commission, call a lawyer.