Alabama's "Buyer Beware" Law: What Relocating Homebuyers Must Know

Cameron Walker: All right, you're watching Boomtown, a podcast about Huntsville's explosive growth both on and off the Arsenal. I'm Cameron Walker your host. I'm the broker owner of Cameron Walker Realty located right here in Huntsville, and you're joining me and my co-host Megan. We love that you guys are here. We ask that you subscribe so we keep you informed of everything that's going on in Huntsville.

Cameron Walker: All right, welcome back to the Boomtown podcast. I'm Cameron Walker, broker owner of Cameron Walker Realty, here again with my host Megan.

Megan Hines: And I'm Megan Hines, and I am a realtor at Cameron Walker Realty.

Cameron Walker: Thank goodness, right? Yes. Well, you know, previously we talked a little bit about what people didn't expect moving here, and we talked a lot about some of the stuff that we came to know and love about Huntsville, and some of the things we weren't so excited about. But we didn't really touch on one of the biggest things, particularly when we're talking about real estate and how it relates to that... is the buyer beware nature of Alabama. I know you coming from the West Coast and me moving here from the East Coast, those are areas that have a lot of buyer protections in place. So kind of give me a quick rundown of your take on buyer beware and what people should be looking out for.

Megan Hines: Well, I think you need to think of it as sometimes called a non-disclosure state. So the way that this is going to affect you in reality is that you're not going to receive the disclosure. If you sell a house in most states, you'll have to put together a disclosure which is going to take you some time. You're going to have to find out the condition of all the major systems in your home, and then disclose that. That disclosure almost counts as a warranty, right? "I am attesting that my air conditioner is in this condition." And that doesn't happen here at all. You could just be like, "I have no idea anything about this home, and please buy it."

Cameron Walker: For sure. I've been doing videos for about three years about the area, and I think the first five videos I probably mentioned buyer beware in all of them, and one of them is even titled "Buyer Beware." To kind of give a definition of it, what has to be disclosed is: let's say you buy a house from a realtor. They have more onus to disclose... and in my experience, they do worse than better. Then you have if there's a health or safety concern, like say there's loose asbestos in the home or there's a shoddy staircase that's pretty dangerous. I mean, you can just say you don't know about pretty much anything. That's the other part, is you don't have to find out.

Megan Hines: Yeah, and if you say you don't know, it's not like anybody's going to go interview everybody who works on houses in the area. You could accidentally find out, but most of the time...

Cameron Walker: Just to clarify on that, we're talking about the seller, right? So the seller and or their agent. The onus isn't on us to go discover it either, right? If I'm listing somebody's home for sale and I go dig up all the problems with the house, I'm doing a disservice to them compared to the other 4,000 agents that won't, because then they're not going to maximize the value of their property. So in Alabama, when we look at it from a licensing law and an ethics standpoint, we would actually be in more trouble by doing that than we are by not doing it.

Megan Hines: And so then you flip the script and you're the buyer agent.

Cameron Walker: Yeah, so that's where it starts to come into play a little more. I mean, your job as the buyer and the buyer's agent is to find out. Their job is not to tell you.

Megan Hines: That being said, I do often recommend that people get a pre-listing home inspection. Yes, there is the risk if you find out something you have to disclose it, but this is a standard inspection that you're getting and they're going to find out anyway, right? If my inspector can find it, their inspector can find it, and it's better to have a plan for a problem you know is coming than to hope no one notices and see if you can get away with it. I mean, that's just not how you should go through life.

Cameron Walker: Yeah, no, and I do see a fair amount of homes that do have those. Where I see more disclosure is actually the agent notes. So like if you're on Zillow and you're looking at the house, "Charming four bedroom three bath," whatever. When we're on the MLS, there's a separate section that's only available to agents to see, and there we'll see, you know, "roof original, HVAC 12 years old, water heater replaced 5 years ago." I wouldn't say those necessarily serve as a disclosure, but it's the closest thing we're going to get. Now, something else though that is important is... let's say you did have one of those pre-inspections, you still don't have to disclose that you know the water heater is old. But if I ask about it as a buyer or buyer's agent, you do have to give me an honest answer.

Megan Hines: Yes, I like to call it Alabama's "don't ask, don't tell" policy when it comes to houses. For sure. It's this very... I find it sort of strange. Like, I have to ask you, you have to tell me the truth. If I don't ask you, you don't have to tell me. And that's why when you're working with an agent in the state, you need to make sure that they're asking questions and getting those in writing. I like to send them in an email that way we have a record of it, because if I ask you and we're alone in a room, who knows?

Cameron Walker: Yeah, no absolutely.

Megan Hines: And if you buy like a house "as-is," the Alabama Supreme Court has upheld that they don't have to disclose any of this stuff or make any repairs.

Cameron Walker: So I start looking at ways to mitigate the risk. What are some things you and your clients would do—obviously asking the questions, doing it over email—but what else would you do to kind of mitigate risk for your clients?

Megan Hines: Looking at the house. I mean there's a lot you can find out about a house by looking at it. You start on the outside of the house, you walk around the house. Probably the biggest problem with foundations around here is water. We have moist air and we have torrential rain sometimes. The ground is made of limestone so it's got holes in it, water comes in. So you're going to be looking to see if water is hitting this house anywhere. If you have water coming towards your house on a regular basis, it's going to have a problem.

Cameron Walker: Yeah, if there's no drainage and water's just coming towards your house, you can bet even if there's no problem right now, something will develop.

Megan Hines: And then you're looking for cracks in the brick, uneven floors... I like to have a moisture reader with me when I look at houses. That way if you know... there's a lot you can see if you know how to look. And that does mitigate risk. And then you know, if a house is as-is, it should be priced differently.

Cameron Walker: Yeah, and we get into problems when the market gets super hot around here. Because like in '21, people needed places to live, we have people moving here, and then it gets competitive, and then you start throwing caution to the wind. And I just advise people, I mean I really advise people, that if you can't afford a $50,000 home repair, don't buy an as-is house. That's the bottom line.

Megan Hines: If you can afford it, don't risk it if you can't lose it.

Cameron Walker: Absolutely. Some things I do is I focus a lot on new construction, right? So that's another exception to the buyer beware rule, and then also you got your warranties. You're going to see how the house is seated on the lot. There's drainage requirements as part of the permitting and approval now versus what it used to be 40 years ago where an entire mountain of water could run at your house. Now they don't allow that. They've got to be sloped away. Modern building techniques and materials too are really helpful. All the houses are wrapped in a Tyvek-type wrap to prevent moisture penetration. Everything's sealed. And then you know you have the warranties for the different components on the home too. So for me that's a big way to mitigate some of the risk.

Cameron Walker: And you mentioned earlier that having a pre-inspection for the seller in a not so hot market, like right now we're kind of really balanced... if you got something that's been on the market for a month or two and you're really interested but you have some doubts or some concerns, there's nothing wrong with getting a pre-inspection before you make an offer. Now you're risking about $400-$450 on that inspection, anybody else can come and put an offer in while you're getting it. But let's say the inspector can usually get out there within a day or two... they usually get your report same day. So you're not really giving up that much time.

Cameron Walker: If I were the listing agent, I'd be more likely to take the buyer that already had the inspection because they're buying it with their eyes open, knowing exactly what's in this house, warts and all, versus the person that's going to come in and do the inspection a week later and then ask for discounts or repairs. Our offer is already going to reflect those things, and so the seller is getting a known quantity versus an unknown quantity. As long as you do it quickly, you could actually be increasing your odds of getting that home assuming you still like it after the inspection.

Megan Hines: You could be. The other thing is if you're the seller and you choose to do that, I think it's a selling point. It absolutely is. Like if you're on the fence between two houses and one of them has essentially provided you with a disclosure, I would choose the house that I had confidence in.

Cameron Walker: Sure, absolutely. I will say the name on that report means a lot to me. There are home inspectors that grease the wheels, they're just there to keep things moving. See no evil, hear no evil, speak no evil. And then there are home inspectors that are like, "Hey, you're missing caulk around this tiny little thing" because they're looking at that attention to detail. So I would say the name on that report. And also, you mentioned being able to visually see stuff... that's a huge thing for me. I do a lot of sight-unseen for buyers. I've got two people right now under contract that won't see their house till they own it. So I've got to be their eyes and ears. I'm sending them video of these homes, and you can see the cracks and the different warts. If I can see those with my untrained eye, but it's not on that home inspection report from the seller, I already know that thing's useless.

Megan Hines: Yeah, so there is that too. It's pretty obvious pretty quickly if it's a six-year-old home that hasn't been updated in 20 years and there's only three defects on the home inspection report... it's not an accurate report. And I think we need to explain to people how what you can use to get out of a contract... like how that works, because this is a question I get all the time.

Cameron Walker: It is, and as the broker that's probably something that falls more on my shoulders too. If you're in say California, Colorado, Washington, and you make an offer on a house, you give earnest money, and you get the home inspection back or you just get the willies about the house, you can pretty much get out of it and get your earnest money back.

Megan Hines: Yeah, you could just be like, "I heard there was a ghost."

Cameron Walker: Exactly! In Alabama, earnest money is used one of three ways: You go to closing and it's applied towards your closing cost or down payment. Two, if you and the seller agree to part ways, there's a form called a Mutual Release where you agree whether the seller or the buyer gets the earnest money. And the third way is you go to court. So if you can't agree and you don't go to closing, it goes to court. This surprises a lot of people.

Megan Hines: Okay, so what would determine who gets what?

Cameron Walker: It goes back to the protections in our contract for health and safety related structural defects, major subsystems (electrical, plumbing, HVAC, roof). And if you do a home inspection there's a separate addendum and you have some more protections built in there. So there are ways to protect yourself, but cosmetics are not included. Where I see people get into arguments and debates is 'this is cosmetic, this is not'.

Cameron Walker: Several years ago I had a deal where we bought a house, we had an inspection contingency, and we bought it during the coming soon phase. It was sight unseen not only for the buyer but for me. When we got in there, the water heater just looked like it was about to rust out. I mean literally you could see little spurts of water up on the top, rust everywhere. But technically it got the water hot to where it was supposed to go. So this was an area where me and the other agent really butted heads. I really had to hammer on the contract, the very specific wording in the contract about how it would not afford my client the use of this system. That was how we were able to get them to replace the water heater or get a credit for it.

Megan Hines: That's interesting, because you know... if your air conditioner is 30 years old, they test it and make sure it's working. That's why we have to ask how old the air conditioner is before you go under contract. Because if you have a working component that's old, that's not a reason to ask for a replacement.

Cameron Walker: Agreed, yeah. I had somebody where the house had two air conditioner units. The big one was newer, there was a smaller one for a bonus space that was old. My client just didn't realize it. When the home inspection came back, that was a big sticking point. So we actually brought out our own inspector to inspect the unit, because the seller wasn't going to give us the $7,000 for another unit, and it was working fine.

Cameron Walker: I had a home inspection report come back last night on a house... the inspector noted that the roof, the HVAC, and the water heater were all at end of life. Now we knew this going in. But because we were here, it was below freezing all day yesterday. So the home inspector wasn't able to test the air conditioning portion of the HVAC system. He can't test whether or not it cools when it's 27 degrees out. We're going into this knowing that that's something likely the client's going to have to replace. My client's very handy, he's looking for a fixer-upper. We bought this at fixer-upper price.

Megan Hines: And I'm sure he knew that this was a possibility because you're his agent.

Cameron Walker: Absolutely. And this was a conversation. But somebody coming from the West Coast or East Coast where there may be more buyer protections might look at this inspection report and be like, "Oh well I can ask for this, this, and this or get out of the contract." Well no, that thing heats and gets the water to the temperature it's supposed to be. That dishwasher runs, it might be 20 years old, but it runs. So that's something that people have to adjust to moving here.

Megan Hines: I mean I had a seller from Arizona last year who told me they had somebody put an offer on their house, and then two weeks later just pulled it. That person pulled it having nothing to do with the home inspection, just because he noticed something about the house that he didn't like anymore. It does protect sellers in this instance... but as a buyer, probably not preferable for most people.

Cameron Walker: Sure. Something else too that I think a lot of people don't think about is environmental factors. In Alabama, because there's a quarry or an auto detailing shop or a junkyard somewhere nearby, that's also not a reason to get out of the contract because the expectation is you did your due diligence coming into the contract.

Megan Hines: Google Earth is really great for this. I mean, it doesn't get updated all the time so there might be something new, but it'll find your prisons, your big scary stuff is going to be on there.

Cameron Walker: Absolutely right. For sure. One I see people complain about all the time online—it's almost funny and it's actually part of the reason we named this podcast Boomtown—is being close to the Arsenal. The Arsenal originally started off as a munitions testing area, and they still are. They're finding explosive devices from back then and blowing them up. You might hear a huge explosion at 2 AM. Also testing rockets and countermeasures and missile defense.

Megan Hines: I live in South Huntsville. I haven't heard very many at 2 AM, but I do hear it. It's usually in the afternoon 'cause I live where you can hear it. And yeah, the first few times I was like, "What is happening? What's that boom?" And now we could be under attack and I'd be like, "It's fine."

Cameron Walker: Exactly! It's 23 minutes door-to-door from our house to her office on the Arsenal. We don't actually hear the boom... but our garage door shakes. If on a cloudy night they're testing rockets, you can hear it. But in another state that might be a reason not to buy or need to be disclosed. It's the same thing with flight paths. You've got Huntsville International Airport. It's not a huge airport, but it's active. On a cloudy night they're coming in lower, it's louder. If that's something that's going to disturb you, then you obviously don't want to buy a house in that flight path.

Megan Hines: I mean why would you ask if you didn't know? Am I going to be hearing loud booms at this house? I never asked when I moved here, right?

Cameron Walker: Right! And that's what people have to bear in mind. Like flood insurance... some sellers disclose they have flood insurance, some don't. So every single house I show, before I go show it, I look at it on the FEMA flood map.

Megan Hines: Yeah, I look at it on the FEMA flood map and things can change. So I do write often contingent on not needing flood insurance. It's a great contingency to put in there. And you probably should be concerned, because insurance is not getting any cheaper for anyone.

Cameron Walker: No, I mean you look at all the things going on with climate change... insurance is going to continue to go up. In my own neighborhood, two homes just in the last couple months were rezoned by FEMA into a flood zone that were not previously. So they've been there for 14 years, original owners, so now they have flood insurance because they both have mortgages. I would familiarize yourself with that FEMA flood map, because it's not just if you're in a flood zone... if you're beside a flood zone, you could easily end up in a flood zone at some point.

Megan Hines: That's bad behavior, I mean really.

Cameron Walker: Absolutely right. I got into a tiff with one of the city engineers a couple months ago because I don't like to sell somebody a house on the verge of a flood zone unless there's an elevation difference where we feel comfortable. If you're in a neighborhood and the developer brought in a foot of dirt to get it out of the flood zone, just a heavy rain and you're back in it.

Megan Hines: You have to find out. I think that's the bottom line here. The difference between buying in a buyer beware state—Alabama, which is an extreme buyer beware state—is really the things you do before you sign that contract. You have to do your homework. You have to ask questions, ask them in writing. You're going to look at the house in a pretty different way. You are falling in love with a house in Alabama as an adult... you're going to check and see.

Cameron Walker: Absolutely. Does this house have a job? Does it come with child support?

Megan Hines: Yeah, for sure. You're gonna have to do your homework before you sign. And the other thing that bears mentioning here is if you need to get out of a contract, it's not just the earnest money you might lose. Basically... you're liable for breach of contract. Somebody could just say "okay" and let you out of the contract, or they could go after your earnest money, or they could go after you for breach of contract. If you were going to buy it at one price and then that house sits on the market for six months and they lose $50,000 on it, can they go after you for that?

Cameron Walker: They can absolutely, and that's the specific performance which is mentioned in the contract. If you back out of a contract for a reason that's not allowed in the contract... let's say the house goes back on the market for two months, they take $10,000 in discounts and they have to give $10,000 in closing costs, that's 20 grand they're going to hit you with if they decide to sue you. They can also include any utilities, insurance, taxes they paid during that period. That's why it's so important to do your due diligence going in, because of these legal liabilities.

Megan Hines: Yeah, and I think understanding the difference between a cosmetic problem and something that interferes with the use of the property. Knowing the age of those systems is incredibly important. That's why I always ask those, and I ask them in writing so if they tell me something that's not true we also have recourse.

Cameron Walker: There you go. It's got to be done before we go under contract. Absolutely.

Megan Hines: Well I think we've kind of run this into the ground a little bit. I don't want to terrify people, I mean people buy houses here all the time and have great experiences. But if people still have more questions, hit us up.

Cameron Walker: Yeah absolutely! So if you bought a house in Alabama or you're thinking about buying one, let us know. Drop a comment, tell us if you've seen problems before or you've had to disclose something weird. Appreciate you guys watching, make sure you hit that subscribe button so you can catch up with us every month about what we're talking about next. You can always catch us on audio wherever you get your podcast, be it Spotify or Apple, or you can watch our video on YouTube. We really appreciate you guys being here!