Questions about damage may flood Realtors

By Michelle E. Shaw

The Atlanta Journal-Constitution

Jeff Justice isn’t a psychic, but he’s pretty sure a deluge of questions about mold, water damage and flood plains is in his future.

Justice owns Jeff Justice & Co. Realtors in Douglasville, and last month’s heavy rains and flooding damaged several bank-owned properties he represents. While many of the properties are still listed as “for sale,” the owners have to decide whether they will repair, rebuild or sell as-is.

At the same time, Justice said, people who were ready to buy, and the banks that were willing to put up the money for those homes, are taking a step back to make sure a post-storm house is still worth pre-storm price. Reappraisals are being ordered and, in some cases where damage was extensive, prices could be cut.

“We’re working with the owners of several properties we have on the market that were damaged in some way,” Justice said. “I think it is going to be a little tough trying to sell some of these homes, whether they’re already on the market or if they are eventually put up for sale.”

Georgia law requires home sellers to disclose certain information about the condition of the property, such as water damage, that the buyer may not already know. These disclosures are supposed to be passed from owner to owner. Failure to disclose a previously known condition in a home, including flood damage, active termites or the presence of lead-based paint, could result in lawsuits against the previous owner and sometimes the real estate agent.

Real estate agents depend on the sellers for the information provided in these disclosures, but after major events like the flooding around metro Atlanta, it wouldn't hurt if the agent did a little digging of his or her own, said Phil Jones, president-elect of the Pacific West Association of Realtors, located in Anaheim, Calif.  Homesellers and agents in his region have had to deal with questions arising after earthquakes or wildfires.

“What we find is after an event like this, be it fire, flood or earthquake, there are certainly more questions for our Realtors from the buyer," he said. "We do our best to get those answers to provide reassurance to the client."

One example, he said, was after a 1994 earthquake in Northridge, Calif. The quake registered 6.7 on the Richter scale and was responsible for 60 deaths, according to reports at the time.

“We found after the earthquake that there were a great many questions about foundations, and rightly so” he said. “And I think one of the positives that comes from these situations is it raises the consciousness of the people and the standards of how we build our homes and develop our neighborhoods.”

A similar situation exists in Miami, said Terri Bersach, chairwoman-elect for the Realtor Association of Greater Miami and the Beaches board of directors.

After Hurricane Andrew in 1992, which killed 41 people and caused more than $ 20 billion in damage in South Florida, building standards were heightened and people became more aware, she said.

“Before Andrew, there wasn’t the level of preparation we see today,” she said. “And the buyer is much more informed after every event, so we as Realtors have to be too.”

Bersach said no one was sure how the real estate market would fare after such massive damage to thousands of homes.

It recovered, “But only because we realized we had to move on, and we did,” she said. “Some rebuilt and sold while others rebuilt and stayed. And then there were those who bought as-is, so you see there are buyers out there for every situation.”

Complicating things for homesellers in or near flooded areas of metro Atlanta is that the housing market was already in a severe slump, meaning buyers can be choosy and drive hard bargains. Now they may have to disclose damage or answer awkward questions about how close floodwater got to a property.

But the buyers will come, said Lauren Holmes, managing broker for the Roswell office of Crye-Leike Realtors.

“I think the toughest thing will be all of the disclosures that will need to be made,” she said. “And it is always a good thing for us as agents and Realtors to go over that information with the seller and make sure all of the information is there and correct. Writing ‘I don’t know,’ on that form in certain areas isn’t going to cut it anymore.”

Agents who are informed and know the area and its history will make the best salespeople, Bersach said.

“Agents are going to have to think more globally than selling the house now,” she said. “They are going to have to sell the area. They are going to have to know the amenities and what makes the area great. That’s why people really buy a house, because they are convinced they live in a great place, regardless of the home’s history.”