The "latte vision" in an age of Xtreme disclosures.
"Come on, gang, let's automate the transaction now and get rid of unnecessary documents. It is hurting consumers, housing markets and the industry."
Brad Inman, real estate commentator and cheerleader for the groovy consumer experience
For the past few weeks I've been doing my best to throw cold water on the idea that the real estate transaction can be as easy and painless as ordering a latte. Not that I don't want the real estate transaction to be easy and painless, just that I know it can't be. Yes, reading disclosures is a bummer, I know that. And as one 30-something panelist at Inman's recent Real Estate Connect San Francisco admitted: "I didn't even read the documents", which, according to Inman, seems like a "practical response to the ridiculous requirements put on homebuyers and sellers in the process". Moral: if it isn't fun, and you don't see the point, why do it?
Because that's part of being a grown-up?
Then the other day I ran across (and was run over by) a disclosure package chock full of "unnecessary" documents, a package I can only categorize as "state of the art" and, most likely, far more a vision of the future of real estate than anything involving a latte. It's for a new condo development, and embodies the latest in lawyerly thinking on the art and science of making a seller, in this case the developer, magically invisible to lawsuits. And I'm not just referring to the clause in the CC&Rs that prohibits buyers from suing the developer for construction defects. First it's mediation, then arbitration. No day (let alone several years) in court for you the aggrieved new condo buyer.
No, I'm not talking just about a clause that may be more wishful thinking than enforceable, based on recent court decisions. I'm talking about disclosures that inform buyers that the developer will be building more units at the site in the future, and that home-building is a noisy and dirty business, and that home-selling means salespersons and prospective buyers traipsing all over and cluttering up your spanking-new development. I'm talking about a disclosure that condo-living is "cooperative living": "give careful thought to whether you will be able to live happily in an atmosphere...where the interests of the group must be taken into account..." (What a comment on society!) I'm talking about disclosures such as full and unabridged renditions of such mesmerizers as a Stormwater Treatment Measures Maintenance Agreement and a Landscape Maintenance Agreement. I can email you copies if you like.
Nor should we overlook the Fed-mandated guide to residential environmental hazards (lead, asbestos etc.) included in the package. Nor the state-mandated Homeowner's Guide to Earthquake Safety. Nor the full copy of Resolution No. 15048 declaring the city's intent to establish a Community Facilities District. Nor Exhibit A Description of Facilities Eligible to be Funded. Nor the estimates not only of the HOA's utilities costs, but of the residents' utilities costs, forever and ever, or at least for the foreseeable future. Nor the exhaustive soils report. Nor the manifold, various and sundry other resolutions and explanations, some mandated, some standard-of-care, some just a really good idea.
And we definitely shouldn't overlook the developer's ample purchase contract. As I asked the salesperson, "Only 72 pages? Are you sure they didn't leave something out?"
It's a monumental disclosure package—and a monument to disclosure packages—adding up to a pile 6 inches thick. I didn't weigh it because for some reason our office doesn't have a scale for weighing disclosure packages. Yet.
You may have the same question my clients and I had: Huh?
"Most of the documentation foisted on homebuyers and sellers," sez Inman, "is the result of an overreaction to bad behavior by lenders, builders, Realtors and scam artists [I like that last pairing!]..." His solution? "The industry needs to use its clout to remove some absurd regulatory requirements and to automate the transaction with easy-to-use digital documents."
Oh yeah! Can you imagine how the press and public would react if the National Association of Realtors® wasted its "clout" in a (futile) attempt to do away with what looks like (and often are) consumer protections? The Internet would be chewing on that for years, and every group challenging the real estate industry (remember when banks were lobbying to overturn the regulations banning them from real estate brokerage?) would be citing it as proof that organized real estate is no friend of Main Street.
But more than that, there's a rhyme and reason for all this "foolishness": condo buyers have frequently complained about, and sometimes sued about, all the above and more. And at a time where "a man's home is his castle" is still very much current homeowner thinking, prospective buyers need to be reminded that it ain't necessarily so.
So are Xtreme disclosures "hurting consumers"? No, just making their heads hurt, and that's not a crime in this state. "Hurting the housing market"? No, the housing market looks pretty healthy to me. "Hurting the industry"? Anything that keeps plaintiff's attorneys from using the industry for target practice helps more than it hurts. And by the way, what exactly does "automation" mean in this context? Robots on an assembly line? An IBM Watson for every brokerage and buyer? And how is either going to save us from disclosures packages big and bad enough to star in their own action movie?
My guess is that the more likely a buyer needs to be reminded of doing his due diligence, the more unlikely he is to do it. But that's his signature on the reminder, Your Honor.
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