February 15th, 2012 at 6:49 pm
I have spent a number of hours the past few days reviewing our open litigation with our attorneys. As we went through that process, one thing became abundantly clear: An inordinate number of our lawsuits arise from boundary line disputes. Those cases all involve some alleged statement by our agent regarding the boundaries of the subject property, all of which turned out to be false. These claims, of course, can be very expensive, depending on the property involved. In one of our cases, the plaintiffs allege that we told them a finished hillside, which provides the property with significant privacy, was theirs. In truth, the hill belongs to the neighbor and, given its size, the plaintiffs claim it is worth over 6 figures.
So, what does this mean to you? It means that you should NEVER make a representation regarding property lines if at all possible. As you know, fences and walls, which often appear to be on the boundaries, are often placed incorrectly. Further, when the seller tells you where the boundary lines are, they are often incorrect. So, say nothing. You are not a surveyor and making a representation can often get you in trouble. If you have to address the issue at all, make sure you provide a source. Then recommend that the buyer confirm the source’s statement with their surveyor. For example, if you can’t stay on the sidelines totally, the most you should say is something like the following: “The seller says the brick wall is on the boundary line but I have not confirmed it. If you want to be sure, you should have the property surveyed.” That way, the representation is the seller’s and you have told the buyer that you haven’t confirm what they said. You have also told the buyer what they can do to make sure the seller’s statement is correct. In other words, you have disclosed what you know and given the right advice, thereby protecting yourself from a misrepresentation claim. But remember, the preferred thing is to say nothing at all about boundary lines. Those statements can very easily come back to haunt you.
As always, please contact us with any questions you may have
February 2nd, 2012 at 6:48 pm
One of the most common complaints I hear from listing agents is about inspection or repair reports that they are convinced are bogus. Specifically, the seller and listing agent often believe that an inspection provided by the buyer is really an attempt to negotiate a reduction in the purchase price. As a result, the seller and listing agent often believe that the inspector looks for problems to identify, or to blow out of proportion, that don’t really exist. For example, in a call I received today, the listing agent received a report identifying close to $100,000 in repairs. According to the listing agent, the inspector who prepared the report never actually visited the property. Further, the vast majority of the listed repair costs were only needed “if” certain conditions exist. Of course, since he never visited the property, the inspector didn’t know “if” those conditions existed. To no one’s surprise, the seller refused to give money for these “repairs” and the deal was cancelled.
As a result, the question I got was whether this report needed to be sent to buyer no. 2. This is common, and normally includes the seller telling us that we cannot give the report to anyone since they are sure it was just a negotiating tool and not a real statement of the property’s condition. So, what should you do?
The first part of the answer is obvious and answer: Give the report to the buyer. We are not contractors or inspectors and should not be judging the work of others. They are theoretically experts in areas that are beyond our knowledge. That being said, there are some additional things we can do if we really believe that the report is not accurate. First, we can describe whatever facts about the report’s preparation that we think is appropriate. For example, in the story above, we should tell the new buyer that the person who prepared this report never visited the property and therefore could not know if the conditions upon which he bases the report actually exist. Obviously, those facts must give pause to anyone wanting to rely on that report.
Additionally, we often recommend that the seller hire their own inspector to prepare a report on the same system as is referenced by the report you object to. For example, if the report you object to relates to the property’s roof, then bring in another roofer and have him prepare a second report. When you do that, you give both documents to the buyer so she sees both the old buyer’s position, as well as the seller’s. In that case, as it should be in all our deals, the buyer has all the information available and can make her own decision.
So, if you get a bad report, don’t let it cause you to do the wrong thing. No matter how much you doubt it, give the report to a new buyer. But also give him the other side of the story. Get another report, from a legitimate inspector, and pass that on too. That way, you have done your job, and the buyer can make their own decision based on all the facts in our possession. Such a decision will be theirs alone, and therefore not our responsibility.
As always, please contact us with any questions you may have.
January 27th, 2012 at 6:47 pm
As we have said before, the world of short sales in an ever evolving one, with people coming up with changes as quickly as properties are sold. One of the things we have seen in many recent short sales is the listing agent asking the buyer to open escrow and make her deposit at the time of contract acceptance, not bank approval. Apparently, short sale agents are tired of buyers submitting acceptable contracts and then bailing on the deal before the bank responds is received. Of course, from the seller’s perspective, a cancelled deal wastes a lot of time and effort. As a result, the listing agent asks the buyer to make a deposit up front, hoping that by doing so, he will tie the buyer to the property in a more concrete way.
Unfortunately, this practice has created a formerly unseen problem for our short sale buyers. As you know, many short sale sellers are totally disengaged from the transaction. They are not going to receive any money at close of escrow and, frankly, don’t really cares what happens in the deal. As a result, when the buyer properly cancels the deal, the seller is nowhere to be found and/or will not sign the cancellation instructions. Of course, in that circumstance, most escrow companies will not return the buyer’s deposit.
So how do we protect our buyers in this case? The answer, most commonly, lies in the escrow company’s General Provisions. In those provisions, some escrow companies provide methods by which the deal can be cancelled without mutual instructions. For example, in Pickford Escrow’s General Provisions, the parties agree that, if one of them tries to cancel, Pickford is to send a cancellation notice to the other party. If Pickford gets no response from that party, they are specifically authorized to perform the original request and cancel the escrow. In other words, in such a situation, your client’s money would be returned to her.
So please remember, the choice of escrow is not a throw away. Escrow companies are different in many ways and you need to understand those differences before you agree to one company or another. Your buyer’s ability to cancel when the seller has disappeared may be very important to them, and you should know what their rights are before picking escrow. So review the General Provisions, or choose a company whose provisions provide you with the protection you need. In any case, think about the choice and don’t give up on it for a small concession on the other side. After all, escrow holds the money and the company doing so should be very important to both you and your client.
Of course, let us know if you have any questions.
January 11th, 2012 at 6:46 pm
As you know, it is very common these days for agents to work with a partner or as part of a team. In many of those cases, while multiple licensees are actually working on the transaction, the documents only have the name of the lead or main agent. As a result, while the client may thing that Jane Doe is doing all the work on their deal, in truth John Doe is also very involved. When that happens, unfortunately, the client is often unhappy, especially if something goes wrong. They believe they hired a specific person, and want her handling the transaction unless you explain otherwise. In order to help you avoid this problem, CAR released a new form in November, the Additional Broker or Agent Acknowledgment (Form ABAA). This document provides you with paragraphs to make the four following disclosures: 1) To advise the seller that there are multiple brokers representing her (paragraph 1); 2) To advise the buyer that there are multiple brokers representing him (paragraph 2); 3) To advise the seller that there are multiple licensees affiliated with the same broker working with her (paragraph 3); and 4) To advise the buyer that there are multiple licensees affiliated with the same broker working with him (paragraph 4). Obviously, since we are the client’s fiduciary, they are entitled to know these facts.
In truth, our ultimate concern is that your client is aware of who is servicing their listing or transaction. While this form is a good way to make that disclosure, it is not required. If you know that more than one person or broker will be servicing a listing, you can have both names put in the Listing Agreement. Similarly, you can make multiple agency disclosures to a buyer identifying all the licensees and brokers working on their behalf. How you make the disclosure doesn’t really matter, as long as the disclosure is made. That being said, CAR created this form to make it easier for you. As a result, please be sure that in the appropriate circumstances your client knows everyone who is working on their behalf. You can use the ABAA or another form. Just use something.
s always, please feel free to contact us with any questions you may have.
December 20th, 2011 at 12:08 am
As many of you have heard me say in the past, CAR provides many good tools for its membership, including many of the forms we use in our transactions. One of my favorites, and one which we do not see used as consistently as we would like, is the Request for Repair (Form RR). This document is good for a number of reasons. First, it provides a simple, written record of what problems the buyer knew about and what repairs she asked for and, furthermore, what the seller agreed to repair. The RR is only one page, and gives you both the buyer’s requests and the seller’s response. That makes it very convenient for everyone to use and makes their agreement very clear. On the other hand, when the RR is not used, I cannot tell you how many times the parties end up fighting over just what their agreement was. The buyer thinks the seller agreed to fix a certain thing and the seller says no. Typically, in these instances the repair agreement was either verbal of done by e-mail and was therefore not as clear as necessary.
Next, if the parties desire, the RR provides them with a place to negotiate a credit rather than repairs. We are seeing this more often, where the seller would rather not actually perform repairs. As a result, the RR gives the parties a place to memorialize the agreed upon credit.
Finally, and perhaps most importantly, the RR gives the parties, especially the seller, the opportunity to ensure that the repair negotiations are complete and that the buyer is willing to move forward. As you know, section 2A of the RR reads as follows: “If Buyer agrees to (i) remove in writing the contingency(ies) identified on the attached Contingency Removal form…” then Seller will agree to make certain repairs. In other words, if the buyer is willing to commit that the identified repairs are all they are asking for, and will therefore remove the identified contingency, then the seller will make the repairs. Of course, this means that the listing agent must always attach a Contingency Removal form to the RR and must always at least check box 1E for removal of the Buyer’s investigation. That way, the seller would only be bound to make repairs if the buyer gives up their right to cancel over the property’s condition and agrees to move forward with the identified repairs only. If that contingency is not removed, of course, the buyer can still cancel the deal and therefore can request more repairs. So, by using this form, along with the CR, the seller is protected, and only needs to make the agreed upon repairs if the buyer agrees that they will not ask for anything else.
So remember, always us the RR form when negotiating repairs. It makes the parties’ agreement very clear. And, as importantly, if you represent the seller, make sure to attach a Contingency Removal to the RR and check the Buyer’s Investigation box so the buyer loses their leverage and can’t ask for anything else. This way, the agreement that is memorialized on the RR will be the final one regarding repairs and the parties can move forward knowing exactly what is expected of them. As always, please contact us with any questions you may have
