TheBottomLine: The Bottom Line on Eminent Domain

TheBottomLine: The Bottom Line on Eminent Domain: Eminent Domain Eminent domain, also known as compulsory purchase, expropriation and compulsory acquisition, is the right of a governmen...

The Bottom Line on Eminent Domain

Eminent Domain

Eminent domain, also known as compulsory purchase, expropriation and compulsory acquisition, is the right of a government to seize a citizen's property without their consent but with due monetary compensation. The property is taken either for government use or by commission to third parties for public use, or, in controversial cases, for economic development. Specific uses for seized property are typically for public utilities, highways, railroads, and for public safety.

In the United States, eminent domain laws originated from the perceived need during the late 18th century to assure compensation to homeowners whose houses were forcibly taken over by traveling armies. Such compensation is ensured by the Fifth Amendment of the United States Constitution, which also requires that land may be appropriated by the government only for “public use” – a deliberately limiting phrase chosen by the Bill of Rights' principal author, James Madison, over the inherently broad phrase “public purpose,” which would allow for greater maneuvering by governments who wish to seize private property for tax purposes.

The intended distinction between these terms was overridden in 2005 when the U.S. Supreme Court ruled that private homes in New London, Connecticut, may be handed over to a developer to increase the city’s tax base. This "public purpose" was interpreted in the 5-4 decision as "public use," thereby empowering the city to invoke eminent domain and set a precedent for such interpretations in the future. A public backlash caused a handful of states to restrict their own power to interpret the U.S Constitution so broadly, and then-President Bush signed a similar law. Effectively, these laws maintain the long-held understanding that eminent domain is intended for the building of public works, not the promotion of private development. However, eminent domain is more often exercised by local and state governments that may enforce it in any way they please. Some governments employ eminent domain for the benefit of private developers and other commercial interests on the basis that anything that increases the value of a given tract of land qualifies as "public use."

Eminent domain can also be used to seize blighted buildings from their owners. The definition of “blighted” varies by jurisdiction and can be overly vague, but it generally describes buildings that lack adequate ventilation, sanitation, electricity and utilities, or that pose a fire hazard, or are otherwise unsafe. In one case, whole slums were razed in southwest Washington, and the land was transferred to private developers to create condominiums, private office buildings and a shopping center. Even a non-blighted property was taken because it lay within the slum, and the courts decided that the redevelopment project could be judged as a whole, rather than on a parcel-by-parcel basis.

 

Because blighted properties can be more easily seized, a home inspection performed by The Bottom Line inspector can be used to inform homeowners of conditions that might cause a home to qualify as blighted. 

 

In summary, a homeowner has little say in whether their home can be taken through eminent domain, but periodic maintenance, regular inspections, and safety upgrades can make it more difficult for the property to be declared blighted and help ensure that it maintains its full market value based on its condition.

TheBottomLine: The Bottom Line on Pool Safety!

TheBottomLine: The Bottom Line on Pool Safety!: Safety Guidelines for Home Pools Swimming pools should always be happy places. Unfortunately, each year thousands of American families co...

The Bottom Line on Pool Safety!

Safety Guidelines for Home Pools

Swimming pools should always be happy places. Unfortunately, each year thousands of American families confront swimming pool tragedies, drownings and near-drownings of young children. At The Bottom Line, we want to prevent these tragedies. These are guidelines for pool barriers that can help prevent most submersion incidents involving young children. These guidelines are not intended as the sole method to minimize pool drowning of young children, but include helpful safety tips for safer pools.

Each year, hundreds of young children die and thousands come close to death due to submersion in residential swimming pools. The Consumer Product Safety Commission (CPSC) has estimated that each year, about 300 children under the age of 5 drown in swimming pools. Hospital emergency-room treatment is required for more than 2,000 children under 5 who were submerged in residential pools. The CPSC did an extensive study of swimming pool accidents, both fatal drownings and near-fatal submersions, in California, Arizona and Florida -- states in which home swimming pools are very popular and used during much of the year.

• In California, Arizona and Florida, drowning was the leading cause of accidental death in and around the home for children under the age of 5.
• Seventy-five percent of the children involved in swimming pool submersion or drowning accidents were between 1 and 3 years old. 
• Boys between 1 and 3 were the most likely victims of fatal drownings and near-fatal submersions in residential swimming pools. 
• Most of the victims were in the presence of one or both parents when the swimming pool accident occurred. 
• Nearly half of the child victims were last seen in the house before the pool accident occurred. In addition, 23% of the accident victims were last seen on the porch or patio, or in the yard. 
• This means that 69% of the children who became victims in swimming pool accidents were not expected to be in or at the pool, but were found drowned or submerged in the water. 
• Sixty-five percent of the accidents occurred in a pool owned by the victim’s immediate family, and 33% of the accidents occurred in pools owned by relatives or friends. 
• Fewer than 2% of the pool accidents were the result of children trespassing on property where they didn’t live or belong. 
• Seventy-seven percent of the swimming pool accident victims had been missing for five minutes or less when they were found in the pool, drowned or submerged. 

The speed with which swimming pool drownings and submersions can occur is a special concern: by the time a child’s absence is noted, the child may have drowned. Anyone who has cared for a toddler knows how fast young children can move. Toddlers are inquisitive and impulsive, and lack a realistic sense of danger. These behaviors, coupled with a child’s ability to move quickly and unpredictably, make swimming pools particularly hazardous for households with young children.

Swimming pool drownings of young children have another particularly insidious feature: these are silent deaths. It is unlikely that splashing or screaming will occur to alert a parent or caregiver that a child is in trouble. The best way to reduce child drownings in residential pools is for pool owners to construct and maintain barriers that prevent young children from gaining access to pools. However, there are no substitutes for diligent supervision.

 

Why the Swimming Pool Guidelines Were Developed

 

Young child can get over a pool barrier if the barrier is too low, or if the barrier has handholds or footholds for a child to use for climbing. The guidelines recommend that the top of a pool barrier be at least 48 inches above grade, measured on the side of the barrier which faces away from the swimming pool. Eliminating handholds and footholds, and minimizing the size of openings in a barrier’s construction, can prevent inquisitive children from climbing pool barriers.

 

For a solid barrier, no indentations or protrusions should be present, other than normal construction tolerances and masonry joints. For a barrier (fence) made up of horizontal and vertical members, if the distance between the tops of the horizontal members is less than 45 inches, the horizontal members should be on the swimming pool-side of the fence. The spacing of the vertical members should not exceed 1-3/4 inches. This size is based on the foot-width of a young child, and is intended to reduce the potential for a child to gain a foothold. If there are any decorative cutouts in the fence, the space within the cutouts should not exceed 1-3/4 inches.

 

The definition of pool includes spas and hot tubs. The swimming pool-barrier guidelines, therefore, apply to these structures, as well as to conventional swimming pools.

 

How to Prevent a Child from Getting OVER a Pool Barrier

 

A successful pool barrier prevents a child from getting OVER, UNDER or THROUGH, and keeps the child from gaining access to the pool except when supervising adults are present.

 

The Swimming Pool-Barrier Guidelines

 

If the distance between the tops of the horizontal members is more than 45 inches, the horizontal members can be on the side of the fence facing away from the pool. The spacing between vertical members should not exceed 4 inches. This size is based on the head-breadth and chest depth of a young child, and is intended to prevent a child from passing through an opening. Again, if there are any decorative cutouts in the fence, the space within the cutouts should not exceed 1-3/4 inches.

 

For a chain-link fence, the mesh size should not exceed 1-1/4 inches square, unless slats fastened at the top or bottom of the fence are used to reduce mesh openings to no more than 1-3/4 inches.

For a fence made up of diagonal members (lattice work), the maximum opening in the lattice should not exceed 1-3/4 inches.

 

Above-ground pools should have barriers. The pool structure itself can sometimes serves as a barrier, or a barrier can be mounted on top of the pool structure. Then, there are two possible ways to prevent young children from climbing up into an above-ground pool. The steps or ladder can be designed to be secured, locked or removed to prevent access, or the steps or ladder can be surrounded by a barrier, such as those described above. For any pool barrier, the maximum clearance at the bottom of the barrier should not exceed 4 inches above grade, when the measurement is done on the side of the barrier facing away from the pool. 
 
If an above-ground pool has a barrier on the top of the pool, the maximum vertical clearance between the top of the pool and the bottom of the barrier should not exceed 4 inches. Preventing a child from getting through a pool barrier can be done by restricting the sizes of openings in a barrier, and by using self-closing and self-latching gates.

To prevent a young child from getting through a fence or other barrier, all openings should be small enough so that a 4-inch diameter sphere cannot pass through. This size is based on the head- breadth and chest-depth of a young child.

 

Gates 

There are two kinds of gates which might be found on a residential property. Both can play a part in the design of a swimming pool barrier.

 

Pedestrian gates are the gates people walk through. Swimming pool barriers should be equipped with a gate or gates which restrict access to the pool. A locking device should be included in the gate's design. Gates should open out from the pool and should be self-closing and self-latching. If a gate is properly designed, even if the gate is not completely latched, a young child pushing on the gate in order to enter the pool area will at least close the gate and may actually engage the latch. When the release mechanism of the self-latching device is less than 54 inches from the bottom of the gate, the release mechanism for the gate should be at least 3 inches below the top of the gate on the side facing the pool. Placing the release mechanism at this height prevents a young child from reaching over the top of a gate and releasing the latch. Also, the gate and barrier should have no opening greater than 1/2-inch within 18 inches of the latch release mechanism. This prevents a young child from reaching through the gate and releasing the latch.

  

Other gates should be equipped with self-latching devices. The self-latching devices should be installed as described for pedestrian gates.

 

How to Prevent a Child from Getting UNDER or THROUGH a Pool Barrier 

In many homes, doors open directly onto the pool area or onto a patio which leads to the pool. In such cases, the wall of the house is an important part of the pool barrier, and passage through any doors in the house wall should be controlled by security measures. The importance of controlling a young child’s movement from the house to the pool is demonstrated by the statistics obtained during the CPSC’s study of pool incidents in California, Arizona and Florida. Almost half (46%) of the children who became victims of pool accidents were last seen in the house just before they were found in the pool.

All doors which give access to a swimming pool should be equipped with an audible alarm which sounds when the door and/or screen are opened. The alarm should sound for 30 seconds or more within seven seconds after the door is opened.  It should also be loud, at least 85 decibels, when measured 10 feet away from the alarm mechanism. The alarm sound should be distinct from other sounds in the house, such as the telephone, doorbell and smoke alarm. The alarm should have an automatic re-set feature. Because adults will want to pass through house doors in the pool barrier without setting off the alarm, the alarm should have a switch that allows adults to temporarily de-activate the alarm for up to 15 seconds. The de-activation switch could be a touch pad (keypad) or a manual switch, and should be located at least 54 inches above the threshold of the door covered by the alarm. This height was selected based on the reaching ability of young children.

Power safety covers can be installed on pools to serve as security barriers. Power safety covers should conform to the specifications in ASTM F 1346-91. This standard specifies safety performance requirements for pool covers to protect young children from drowning. Self-closing doors with self-latching devices could also be used to safeguard doors which give ready access to a swimming pool.

 

Indoor Pools

 

When a pool is located completely within a house, the walls that surround the pool should be equipped to serve as pool safety barriers. Measures recommended above where a house wall serves as part of a safety barrier also apply for all the walls surrounding an indoor pool. 

 

Guidelines

 

An outdoor swimming pool, including an in-ground, above-ground, or on-ground pool, hot tub, or spa, should be provided with a barrier which complies with the following:

 

1. The top of the barrier should be at least 48 inches above grade, measured on the side of the barrier which faces away from the swimming pool. The maximum vertical clearance between grade and the bottom of the barrier should be 4 inches measured on the side of the barrier which faces away from the swimming pool. Where the top of the pool structure is above grade, such as an above-ground pool, the barrier may be at ground level, such as the pool structure, or mounted on top of the pool structure. Where the barrier is mounted on top of the pool structure, the maximum vertical clearance between the top of the pool structure and the bottom of the barrier should be 4 inches.

 2. Openings in the barrier should not allow passage of a 4-inch diameter sphere.

 

3. Solid barriers, which do not have openings, such as a masonry and stone wall, should not contain indentations or protrusions, except for normal construction tolerances and tooled masonry joints.

 4. Where the barrier is composed of horizontal and vertical members, and the distance between the tops of the horizontal members is less than 45 inches, the horizontal members should be located on the swimming pool-side of the fence. Spacing between vertical members should not exceed 1-3/4 inches in width. Where there are decorative cutouts, spacing within the cutouts should not exceed 1-3/4 inches in width.

 

5. Where the barrier is composed of horizontal and vertical members, and the distance between the tops of the horizontal members is 45 inches or more, spacing between vertical members should not exceed 4 inches. Where there are decorative cutouts, spacing within the cutouts should not exceed 1-3/4 inches in width.

 6. The maximum mesh size for chain-link fences should not exceed 1-3/4 inch square, unless the fence is provided with slats fastened at the top or the bottom which reduce the openings to no more than 1-3/4 inches.

 

7. Where the barrier is composed of diagonal members, such as a lattice fence, the maximum opening formed by the diagonal members should be no more than 1-3/4 inches.

  

8. Access gates to the pool should be equipped to accommodate a locking device. Pedestrian access gates should open outward, away from the pool, and should be self-closing and have a self-latching device. Gates other than pedestrian access gates should have a self-latching device, where the release mechanism of the self-latching device is located less than 54 inches from the bottom of the gate.

• The release mechanism should be located on the pool-side of the gate at least 3 inches below the top of the gate.
• The gate and barrier should have no opening greater than 1/2-inch within 18 inches of the release mechanism.

9. Where a wall of a dwelling serves as part of the barrier, one of the following should apply:

• All doors with direct access to the pool through that wall should be equipped with an alarm which produces an audible warning when the door and its screen, if present, are opened. The alarm should sound continuously for a minimum of 30 seconds within seven seconds after the door is opened. The alarm should have a minimum sound pressure rating of 85 dBA at 10 feet, and the sound of the alarm should be distinctive from other household sounds, such as smoke alarms, telephones and doorbells. The alarm should automatically re-set under all conditions. The alarm should be equipped with manual means, such as touchpads or switches, to temporarily de-activate the alarm for a single opening of the door from either direction. Such de-activation should last for no more than 15 seconds. The de-activation touch pads or switches should be located at least 54 inches above the threshold of the door.
• The pool should be equipped with a power safety cover which complies with ASTM F1346-91. 
• Other means of protection, such as self-closing doors with self-latching devices, are acceptable as long as the degree of protection afforded is not less than the protection afforded by the above.

10. Where an above-ground pool structure is used as a barrier, or where the barrier is mounted on top of the pool structure, and the means of access is a ladder or steps, then:

• The ladder to the pool or steps should be capable of being secured, locked or removed to prevent access.
• The ladder or steps should be surrounded by a barrier. When the ladder or steps are secured, locked, or removed, any opening created should not allow the passage of a 4-inch diameter sphere.

These guidelines are intended to provide a means of protection against potential drownings of children under 5 years of age by restricting access to residential swimming pools, spas and hot tubs.

 

Exemptions

 

A portable spa with a safety cover which complies with ASTM F1346-91 should be exempt from the guidelines presented here. Swimming pools, hot tubs, and non-portable spas with safety covers should not be exempt from these provisions.

TheBottomLine: The Bottom Line on Building a Home

TheBottomLine: The Bottom Line on Building a Home: Building a Home If you want to build a new home, there are things you need to know before you begin. Learn about construction standards an...

The Bottom Line on Building a Home

Building a Home

If you want to build a new home, there are things you need to know before you begin. Learn about construction standards and about buying land, so you know your rights.

 

MPS Supplementing Model Building Codes

  
The Minimum Property Standards (MPS) establish certain minimum standards for buildings constructed under HUD housing programs. This includes new single-family homes, multi-family housing and healthcare-type facilities.

 

HUD Minimum Property Standards and How They Supplement the Model Building Codes

Until the mid-1980s, HUD maintained separate Minimum Property Standards for different types of structures. Since that time, HUD has accepted the model building codes, including over 250 referenced standards and local building codes, in lieu of separate and prescriptive HUD standards. However, there is one major area of difference between the MPS and other model building codes -- durability requirements. Homes and projects financed by FHA-insured mortgages are the collateral for these loans, and their lack of durability can increase the FHA's financial risk in the event of default. More specifically, the model codes do not contain any minimum requirements for the durability of items such as doors, windows, gutters and downspouts, painting and wall coverings, kitchen cabinets and carpeting. The MPS includes minimum standards for these, and other items, to ensure that the value of an FHA-insured home is not reduced by the deterioration of these components.

 

HUD Field Office Acceptance for Areas Without Building Codes

  
HUD requires that each property insured with an FHA mortgage meet one of the nationally recognized building codes or a state or local building code based on a nationally recognized building code. In areas where such state or local codes are used, HUD determines if the state or local code is comparable to the model building code. There are also areas of the United States that do not have building codes. If no state or local building code has been adopted, the appropriate HUD Field Office will specify a building code that is comparable to one of the nationally recognized model building codes. 

Interstate Land Sales

  
The Interstate Land Sales program protects consumers from fraud and abuse in the sale or lease of land. In 1968, Congress enacted the Interstate Land Sales Full Disclosure Act, which is patterned after the Securities Law of 1933, and requires land developers to register subdivisions of 100 or more non-exempt lots with HUD, and to provide each purchaser with a disclosure document called a property report. The property report contains relevant information about the subdivision and must be delivered to each purchaser before the signing of the contract or agreement.

 

Buying Lots from Developers 

Be well informed when shopping for land. Lots may be marketed as sites for future retirement homes, for second home locations, or for recreational or campsite use. However, be wary of any investment aspect that may be stressed by sales personnel. If you plan to purchase a lot which is offered by promotional land sales, take plenty of time before coming to a decision. Before signing a purchase agreement, a contract, or a check: 

• know your rights as a buyer;
• know something about the developer;
• know the facts about the development and the lot you plan to buy; and 
• know what you are doing when you encounter high-pressure sales campaigns. 

Generally, if the company from which you plan to buy is offering 100 or more unimproved lots for sale or lease through the mail or by means of interstate commerce, it may be required to register with the U.S. Department of Housing and Urban Development (HUD). This means that the company must file with HUD and provide prospective buyers with a property report containing detailed information about the property. Failure to do this may be a violation of federal law, punishable by up to five years in prison, a $10,000 fine, or both. The information filed by the developer and retained by HUD must contain such items as these:

• a copy of the corporate charter and financial statement;
• information about the land, including title policy or attorney's title opinion, and copies of the deed and mortgages; 
• information on local ordinances, health regulations, etc.; 
• information about facilities available in the area, such as schools, hospitals and transportation systems; 
• information about availability of utilities and water, and plans for sewage disposal; 
• development plans for the property, including information on roads, streets and recreational facilities; and 
• supporting documents, such as maps, plans and letters from suppliers of water and sewer facilities.

The company filing this information must swear and affirm that it is correct and complete, and an appropriate fee must accompany submission. The information is retained by HUD and is available for public inspection. The property report, which is also prepared by the developer, goes to the buyer. The law requires the seller to give the report to a prospective lot purchaser prior to the time a purchase agreement is signed. Ask for it. The seller is also required to have the buyer sign a receipt acknowledging receipt of the property report. Do not sign the receipt unless you have actually received the property report. Check the developer’s property report before buying. This is the kind of information you will find in a property report:

• distances to nearby communities over paved and unpaved roads;
• existence of mortgages or liens on the property;
• whether contract payments are placed in escrow; 
• availability and location of recreational facilities; 
• availability of sewer and water service or septic tanks and wells; 
• present and proposed utility services and charges; 
• the number of homes currently occupied; 
• soil and foundation conditions which could cause problems in construction or in using septic tanks; and 
• the type of title the buyer may receive and when it should be received. 

Read the Property Report Before Signing Anything

  
This report is prepared and issued by the developer of this subdivision. It is not prepared or issued by the federal government. Federal law requires that you receive this report prior to signing a contract or agreement to buy or lease a lot in this subdivision. However, no federal agency has judged the merits or value of the property. If you received the report prior to signing a contract or agreement, you may cancel your contract or agreement by giving notice to the seller any time before midnight of the seventh day following the signing of the contract or agreement. If you did not receive this report before you signed a contract or agreement, you may cancel the contract or agreement any time within two years from the date of signing. 

Your Contract Rights

  
If the lot you are buying is subject to the jurisdiction of the Interstate Land Sales Full Disclosure Act, the contract or purchase agreement must inform you of certain rights given to buyers by that Act. The contract should state that the buyer has a "cooling-off" period of seven days (or longer, if provided by state law) following the day that the contract is signed to cancel the contract, for any reason, by notice to the seller, and get his or her money back. Furthermore, unless the contract states that the seller will give the buyer a warranty deed, within 180 days after the contract is signed, the buyer has a right to cancel the contract for up to two years from the day that the contract is signed, unless the contract contains the following provisions: 

• a clear description of the lot so that the buyer may record the contract with the proper county authority;
• the right of the buyer to a notice of any default (by the buyer), and at least 20 days after receipt of that notice to cure or remedy the default; 
• a limitation on the amount of money the seller may keep as liquidated damages, of 15% of the principal paid by the buyer (exclusive of interest) or the seller's actual damages, whichever is greater. 

Contract Rights Concerning Property Reports

It has always been the law that if the developer has an obligation to register with the Interstate Land Sales Division, the developer or sales agent must give the buyer a copy of the current property report before the buyer signs a contract. Otherwise, the buyer has up to two years to cancel the contract and get their money back. That fact must also be clearly set forth in all contracts. You may have the right to void the contract if the subdivision has not been registered with HUD, or you were not given a property report. Furthermore, if the developer has represented that it will provide or complete roads, water, sewer, gas, electricity or recreational facilities in its property report, in its advertising, or in its sales promotions, the developer must obligate itself to do so in the contract, clearly and conditionally (except for acts of nature or impossibility of performance). In addition to the right to a full disclosure of information about the lot, the prospective buyer may have the right to void the contract and receive a refund of their money if the developer has failed to register the subdivision with HUD or has failed to supply the purchaser with a property report. While a purchaser may have the right to void the contract with the developer under these conditions, the purchaser may still be liable for contract payments to a third party if that contract has been assigned to a financing institution or some similar entity. The registration is retained by HUD and is available for public inspection. If the property report contains misstatements of fact, if there are omissions, if fraudulent sales practices are used, or if other provisions of the law have been violated, the purchaser may also sue to recover damages and actual costs and expenses in court against the developer. However, depending on when your sale occurred, you may be barred from taking further action due to the Act's statute of limitations. Your attorney can advise you further on this matter.

 

"Cooling-Off" Period

  
Even if you received the property report prior to the time of your signing of the contract or agreement, you have the right to revoke the contract or agreement by notice to the seller until midnight of the seventh day following the signing of the contract. You should contact the developer, preferably in writing, if you wish to revoke your contract and receive a refund of any money paid to date. Even if the property report is delivered to you before you sign a sales agreement, the law gives you a "cooling-off " period. This right cannot be waived.

 

A Word About the Interstate Land Sales Division

The HUD unit which administers the law, examines the developer's registration statement, and registers the land sales operator is the Interstate Land Sales Division. Except for disclosure purposes, this office is not concerned with zoning or land-use planning, and has no control over the quality of the subdivision. It does not dictate what land can be sold, to whom, or at what price. It cannot act as a purchaser's attorney. But it will help purchasers secure the rights given to them by the Interstate Land Sales Full Disclosure Act. HUD is authorized by law to conduct investigations and public hearings, to subpoena witnesses and secure evidence, and to seek court injunctions to prevent violations of the law. If necessary, HUD may seek criminal indictments. HUD is authorized by law to conduct investigations and, if necessary, seek criminal indictments.

 

Exemptions from the Law 

The prospective buyer should be aware that not all promotional land sales operations are covered by the law. If the land sales program is exempt, no registration is required by HUD, and there will be no property report. Here are some of the specific situations for which the statute allows exemptions without review by HUD, including the sale of: 

• tracts of fewer than 100 lots which are not otherwise exempt;
• lots in a subdivision where every lot is 20 acres or more in size;
• lots upon which a residential, commercial or industrial building has been erected, or where a sales contract obligates the seller to build one within two years; 
• certain lots which are sold only to residents of the state or metropolitan area in which the subdivision is located; 
• certain low-volume sales operations (no more than 12 lots a year); 
• certain lots that meet certain local codes and standards and are zoned for single-family residences or are limited to single-family residences by enforceable codes and restrictions; and 
• certain lots, contained in multiple sites of fewer than 100 lots each, offered pursuant to a common promotional plan.

Other exemptions are available which are not listed above. If you have reason to believe that your sale is not exempt and may still be covered by the law, contact the Interstate Land Sales Division.

 

Know the Developer

  
Knowing your rights under the law is the first step in making a sensible land purchase. To exercise those rights, you also must know something about the honesty and reliability of the developer who offers the subdivision that interests you. Don’t fail to ask questions. Whether you are contacted by a sales agent on the phone or by mail, at a promotional luncheon or dinner, in a sales booth at a shopping center, or in the course of your own inspection of the subdivision, make it your business to find out all you can about the company and the property. In addition, get any verbal promises or representations in writing. Don’t fail to ask questions. If you are seriously interested in buying a lot, ask if the company is registered with HUD or is entitled to an exemption. Request a copy of the property report and take the time to study it carefully and thoroughly. If you still have unanswered questions, delay any commitment until you have investigated. Discuss current prices in the area with local independent brokers. Talk to other people who have purchased lots. A local Chamber of Commerce, Better Business Bureau, or consumer protection group may have information about the seller's reputation. Inquire through county or municipal authorities about local ordinances or regulations affecting properties similar to that which you plan to buy. Don't be high-pressured by sales agents.

 

Know the Facts About the Lot

  
Once you have decided on an appealing subdivision, inspect the property. Don't buy "sight unseen." Better yet, hire The Bottom Line inspector to perform a thorough property inspection. Also, check the developer's plans for the project and know what you are getting with your lot purchase. It's a good idea to make a list of the facts you will need to know. Some of the questions you should be asking, and answering, are these:  

• How large will the development become?
• What zoning controls are specified?
• What amenities are promised?
• What provision has the developer made to assure construction and maintenance? 
• What are the provisions for sewer and water service?
• Are all of the promised facilities and utilities in the contract? 
• Will there be access roads or streets to your property, and how will they be surfaced? Who maintains them? How much will they cost? 
• Will you have clear title to the property? What liens, reservations or encumbrances exist? 
• Will you receive a deed upon purchase or a recordable sales contract? 
• What happens to your payments? Are they placed in a special escrow account to pay for the property, or are they spent at once by the developer? 
• If the developer defaults on the mortgage or goes bankrupt, could you lose your lot and investment to date to satisfy a claim against the development? 
• What happens when the developer moves out? Is there a homeowners' association to take over community management? 
• Are there restrictions against using the lot for a campsite until you are ready to build? 
• Are there any annual maintenance fees or special assessments required of property owners? 

This is a partial list of points to consider before you commit your money or your signature. 
 

Know What You are Doing

Interstate land sales promotions often are conducted in a high-pressure atmosphere that sweeps unsophisticated buyers along. Before they are aware that they have made a commitment, these buyers may have signed a sales contract and started to make payments on a lot. They may be delighted with the selection made, but, if not, it may be too late for a change of mind.

 

Nine Dishonest Sales Practices

  
Here are some of the practices avoided by reliable sales operations. Watch out for them and exercise sales resistance if you suspect they are occurring:

 

1. concealing or misrepresenting facts about current and resale value. Sales agents may present general facts about the area’s population growth, industrial or residential development, and real estate price levels as if they apply to your specific lot. You may be encouraged to believe that your piece of land represents an investment which will increase in value as regional development occurs. A sales agent may tell you that the developer will re-sell the lot, if you request. This promise may not be kept. Future resale is difficult or impossible in many promotional developments because much of your purchase price -- sometimes as much as 40% -- has gone for an intensive advertising campaign and commissions for sales agents. You are already paying a top price and it is unlikely that anyone else would pay you more than you are paying the developer. You may even have to sell for less than the price you originally paid for the lot. Sales promotions often are conducted in a high-pressure atmosphere. Furthermore, when you attempt to sell your lot, you are in competition with the developer, who probably holds extensive, unsold acreage in the same subdivision. In most areas, real estate brokers find it impractical to undertake the sale of lots in subdivisions and will not accept such listings. It is unlikely that the lot you purchase through interstate land sales represents an investment, in the view of professional land investors. Remember, the elements of value of a piece of land are its usefulness, the supply, the demand, and the buyer's ability to re-sell it. The Urban Land Institute estimates that land must double in value every five years to justify holding it as an investment. In some areas, the cost of holding the land, such as taxes and other assessments, can run as high as 11% a year.

 

2. failure to honor refund promises or agreements. Some sales promotions conducted by mail, email or long-distance telephone include the offer of a refund if the property has been misrepresented, or if the customer inspects the land within a certain period of time and decides not to buy. When the customers request the refund, s/he may encounter arguments about the terms of the agreement. The company may even accuse its own agent of having made a money-back guarantee without the consent or knowledge of the developer. Sometimes, the promised refund is made, but only after a long delay.

 

3. misrepresentation of facts about the subdivision. This is where the property report offers an added measure of protection. A sales agent may offer false or incomplete information relating to either a distant subdivision or one which you visit. Misrepresentations often relate to matters such as the legal title, claims against it, latent dangers (such as swamps or cliffs), unusual physical features (such as poor drainage), restrictions on use, or lack of necessary facilities and utilities. Read the property report carefully with an eye to omissions, generalizations, or unproved statements that may tend to mislead you. If you are concerned about overlooking something important, discuss the report and the contract with a lawyer who understands real estate matters. The developer also may use advertisements that imply that certain facilities and amenities are currently available when they are not. Read the property report to determine whether these facilities and amenities are actually completed, or proposed to be completed in the future. If the company advertises sales on credit terms, the Truth in Lending Act requires the sales contract to fully set forth all terms of financing. This information must include total cost, simple annual interest, and total finance charges.

 

4. failure to develop the subdivision as planned. Many buyers rely upon the developer's contractual agreement or a verbal promise to develop the subdivision in a certain way. The promised attractions that influenced your purchase (golf course, marina, swimming pool, etc.) may never materialize after you become an owner. If they are provided, it may be only after a long delay. If you are planning on immediate vacation use of the property, or are working toward a specific retirement date, you may find that the special features promised of the development are not available when you need them.

 

5. failure to deliver deeds and/or title insurance policies. Documents relating to the sales transaction may not be delivered as promised. Some sales in the promotional land development industry are made by contract for a deed to be delivered when the purchaser makes the last payment under the terms of the contract. A dishonest developer may fail to deliver the deed, or deliver it only after a long delay. A sales agent may offer false or incomplete information.

 

6. abusive treatment and high-pressure sales tactics. Some sales agents drive prospective customers around a subdivision in automobiles equipped with citizen band radios which provide a running commentary on lot sales in progress. The customer may be misled by this and other sales techniques to believe that desirable lots are selling rapidly and that a hurried choice must be made. Hurrying the buyers into a purchase they may later regret is only one ploy of high-pressure sales agents. More offensive is abusive language used to embarrass customers who delay an immediate decision to buy. In some instances, hesitant buyers have been isolated in remote or unfamiliar places where transportation is controlled by the sales agent or the agent's organization.

 

7. failure to make good on sales inducements. Free vacations, gifts, savings bonds, trading stamps, and other promised inducements are used to lure people to sales presentations or to development sites. These promised treats may never materialize. Sometimes, special conditions are attached to the lure, or a customer is advised that gifts go only to lot purchasers. A "free vacation" may be the means of delivering the prospective buyer to a battery of high-pressure sales agents in a distant place. The promised attractions may never materialize.

 

8. "bait and switch" tactics. Lots are frequently advertised at extremely low prices. When prospective buyers appear, they are told that the low-priced lots are all sold and then are pressured to buy one that is much more expensive. If the cheaper lot is available, it may be located on the side of a cliff or in another inaccessible location. If accessible, it may be much too small for a building or have other undesirable features. The buyers may be lured to the property with a certificate entitling them to a "free" lot. Often, the certificate bears a face value of $500 to $1,000. If the buyers attempt to cash it in, the amount is simply included in the regular price (often inflated) of the lot they choose. Often, this so-called "bait and switch" technique has a delayed fuse. Buyers who purchase an unseen lot for later retirement may be unpleasantly surprised when they visit the development. The lot they have paid for may be remote from other homes, shopping and medical facilities. It may be insufficiently developed for use. When the buyers complain, sales personnel attempt to switch them to a more expensive lot, applying the money paid for the original lot to an inflated price for the new one, and tacking on additional financing charges. If the unhappy purchasers lack sufficient funds to accept this alternative, they are left with an unusable, unmarketable first choice. 

 

9. failure to grant rights under the Interstate Land Sales Full Disclosure Act. Purchasers may not be given copies of the property report before they sign a sales contract. Some sales agents withhold this detailed statement until customers choose a specific lot. Sometimes, the buyers receive the report in a mass of promotional materials and legal documents. Unaware that the report is in their possession, they fail to read and understand it before signing a sales contract.

 

The Bottom Line's Round Table

What can you bring to the table?

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714 587 0486

The Bottom Line

TheBottomLine: The Bottom Line on Things to be Aware of!

TheBottomLine: The Bottom Line on Things to be Aware of!: Real estate agents may be colluding to rip you off A Windermere Real Estate Co. Inc. "Sold" sign stands outside of a home in ...

The Bottom Line on Things to be Aware of!

Real estate agents may be colluding to rip you off

A Windermere Real Estate Co. Inc. "Sold" sign stands outside of a home in Seattle, Washington, U.S., on Tuesday, Nov. 19, 2013.

A new study shows that brokers who charge lower commissions are punished in the marketplace.

Navigating the real estate market can be tough for the average joe, but you might be surprised to find that economists find it confounding too.

The profession has long puzzled over the question of why commissions in the United States are so much higher than elsewhere in the developed world. Economists George Akerloff and Robert Shiller hypothesize in their upcoming book, Phishing for Phools, that the market hasn’t driven down the price of commissions—which average 6% or more than $14,000 for an existing home—because home buyers tend to be very inexperienced.

They point out that by the time the typical American turns 60, there’s an 80% chance that he owns his own home. The statistics also show that Americans stay in their homes for a long time—24 years on average. Akerloff and Shiller write, “These two numbers mean that a significant majority of Americans buy at least one home in their lifetimes; they also mean that the purchase of a home, for most of us is quite infrequent.”

That means that most people aren’t hiring real estate agents and brokers more than once or twice in their lives, making them uniquely incapable to gauge the quality of what their buying. But there may be another reason why commissions in America are so much higher than elsewhere in the world: good old-fashioned collusion.

That’s the claim made in a new working paper published Monday by the National Bureau of Economic Research. Economists Panle Jia Barwick, Parag A. Pathak, and Maisy Wong studied realtor commissions of 653,475 residential listings in eastern Massachusetts from 1998-2011 to determine why commissions in the residential brokerage industry are, “relatively uniform despite low entry barriers and advances in technology that have reduced search costs for buying and selling properties.”

They hypothesized that this was because of the fairly unique nature of the residential real estate market, in which sellers of real estate pay both the commissions for their listing agent and that of the buyer’s agent. Given this arrangement, it’s necessary for buyer’s agents and lister’s agents to cooperate to make a sale. Given this arrangement, it’s possible that dominant brokers in the industry could refuse to work with upstart competitors who are setting their commissions too low.

And when they looked at the data, they found that brokers charging commissions of less than 2.5% were in fact discriminated against. They write:

Consistent with real estate agents steering buyers to properties with high commissions, we find that if a property has a buying commission rate less than 2.5%, it is 5% less likely to be sold and takes 12% longer to sell.

This isn’t the first time economists (or regulators) have scrutinized the highly cooperative nature of the real estate brokerage industry. But a 2008 settlement between the Justice Department and the National Association of Realtors did nothing to ban this practice. Perhaps it’s time for regulators to take another look.