The recession of 2007 may just be a bad memory for most people, but for many in the real estate market, its effects still linger.
With roughly 8 million homes lost to either short sales or foreclosures, it's understandable that there are still reverberations in the industry.
How did we get here?
Part of the problem is linked to the "flipper market" that emerged around 2010. All the real estate owned (REO) properties attracted investors who renovated the properties and attempted to "flip" them. The flipped properties initially assisted the recovery of the market, but in the long-term, they created litigation headaches for those in the industry.
Flippers are solely profit-driven investors. As such, they may take shortcuts with labor and materials to increase their profit margins. They know that they aren't going to be living in the homes, so they figure it's unnecessary to use high-quality materials.
Flippers also know very little about these properties. Unless they take the time to learn of any defects that are not visible on inspection, their disclosures may be incomplete. Some of these investors didn't even bother to get the proper permits for the repairs and improvements they made. Buyers subsequently learn that aesthetically-pleasing properties do not guarantee good construction.
When the new homebuyers discovered the shoddy repairs were only cosmetic in nature, lawsuits were filed all over the country. Some are still wending their ways through clogged court dockets.
All of the residents who formerly lived in the foreclosed-upon properties needed somewhere to live after losing their homes. This caused a nationwide shortage of affordable rentals, as these displaced homeowners were now competing against millennials for housing.
Millennials comprise 11 million renters and account for 11 percent of rental household growth in the last decade. With so much competition for decent housing, it was inevitable that problems arose.
Real estate professionals saw a major uptick in litigation between tenants and landlords. Some of the issues that wound up in court include:
- Tenants' rights violations
- Rent control law violations
- Wrongful evictions
- Wrongful lease terminations
- Un-inhabitability claims
- Failure to maintain property allegations
Real estate law is complex
Some tenants and property owners try to handle their own legal matters, but this can quickly go south in the courtroom. When you are threatened with the loss of your dwelling or the use of your property, it's always best to fully understand both the laws of the Commonwealth of Pennsylvania and the city of Philadelphia.