Great Advice Worth Keeping
You may not be buying or selling a home right now, but at some point you likely will. Our guest writer this month, real estate attorney Laurie Murphy, has some excellent advice to heed when your time comes (or now, if you know someone currently in the thick of it.). Use these tips to keep from making costly mistakes when buying or selling a home.
- Don’t rely exclusivelyon a broker. Most brokers and their agents are hardworking and ethical, yet all of them have a bias toward getting the deal closed. That can and sometimes does, influence the advice they give and the manner in which they handle the transaction.
- Don’t sign real estate contracts you don’t understand.Do you need a lawyer to help you buy or sell real estate? Would you buy or sell an expensive business without hiring a lawyer? Why would you buy or sell an expensive house without consulting counsel?
- Sellers should freely disclose and buyers should ensure they are receiving, full disclosures.
If you are the seller make full and complete disclosures and be prepared to provide any documentation supporting disclosed “defects”, including any notices, reports or estimates to repair. Pretend your mother is buying the house. What would you want her to know about it?
If you are the buyer, make sure you get all the documents the seller has pertaining to his disclosures. Demand them and don’t take no for an answer.
Be very leery of a broker who tells you to downplay any problems with the property you are selling or who refuses to ask the seller for additional information about disclosures.
- Shop around for title and escrow: You can often save money by not simply agreeing to use the escrow or title company your broker recommends. Though it is illegal for those third parties to give a kick back to the broker, brokers do own escrow companies and it is not illegal for a broker to suggest you use their escrow.
- Understand your home inspection – what it covers and what it does not cover: Home inspectors are not a regulated profession. You don’t need to have a background in construction to become one. Home inspectors just give the house a visual once over. Also they may make you sign waivers that limit your rights if they make a mistake.
Get someone who knows what they are doing to obtain all the permits for the house and verify that no unpermitted work was done. Also consider hiring a contractor who does residential construction to give the house a once over.
The consequences of buying property with unpermitted additions or alterations can be very expensive.
- Understand the title report: Make sure you understand the title report and what will be excluded from your title policy. If your lot is not a standard rectangle in a planned unit development, consider getting an upgraded title policy which will provide more coverage.
Get actual copies of all the easements and encumbrances on the property and if that property includes easements on adjoining property, get copies of those as well. If you don’t understand these documents hire someone to explain them to you. Easement law can be very complicated and easements can adversely affect not only the enjoyment of your property but your pocketbook.
- Understand how you will be holding title and how title is being conveyed: If the seller is married and is conveying title as his or her sole and separate property, that can be a red flag. It may signal that the non-conveying spouse knows more than he or she may want to disclose. It might also signal that the on-conveying spouse is trying to avoid creditors.
Be very careful if you are buying with another person who is not your spouse. Property owned by people who are either romantically linked, family members or friends, can be problematic if the parties split or have a falling out. Joint tenants or tenants in common have an absolute right to possession unless there is an agreement to the contrary. Then there is the problem that both parties have to agree to sell. If they don’t, one has to go to court.
- Don’t neglect dispute resolution clauses: Listing agreements and purchase and sale agreements can have binding arbitration clauses; however, they only cover the parties to those agreements, seller and broker for the listing agreement, and buyer and seller to the purchase agreement. Also, inspectors often have arbitration clauses in their agreements but they only cover the buyer and the inspector. Conflicting dispute resolution clauses can cause serious procedural hassles.
- Pay attention to contingency periods. You should understand what is involved each step of the way and make sure when you sign the purchase agreement you will be able to meet the contingencies. Brokers generally keep track of these things but it is the broker’s preference for the deal to close, so make sure you understand them and make sure you know your rights and obligations. No matter how friendly the other side and their brokers seem, don’t expect that your contingency periods will be extended.
- Get additional information if you are buying a condominium and make sure you understand your rights and obligations as a condo owner: If you are buying a condo, make sure you get financial documents from the HOA. Make sure you know whether there is pending or prior litigation involving the developer. Does that litigation need to be funded by assessments? Will your dues be going to pay for repairs that were part of the claim against the developer? Is the property insured and for what? Can you get a condo owners policy and a loan? How many of the units are owner occupied? Are the reserves adequate? Is the development older and in need of significant capital repairs?
Read the CC&Rs and other governing documents to know what your rights and obligations are. HOA boards are mini-governments whose decisions the courts generally won’t interfere with. And, there is no shortage of fraudulent board members or management companies. Get the info up front, otherwise it will be too late.
- Investigate the parties: Consider getting a background check on the parties to the transaction. Are they litigious? Are they in financial trouble? People in financial trouble have more reason not to fully disclose.
Many thanks to our guest writer Laurie Murphy, Attorney at Law, who has a specialization in real estate law, for providing this valuable information to share with our readers. Inquiries regarding this article may be made directly to Laurie at (310) 277-8011 or via email at MLM@VRMLaw.com