Most person-to-person purchases work rather simply. A seller puts an item up for sale for a certain price. A buyer either pays the price asked or finagles a better price. Money and goods exchanged, each goes on their merry way. Sadly, real estate purchases are far from such simplicities.
In order to protect both sellers and buyers in real estate, there are many rules, regulations, paperwork, legal procedures, tax adherences, and so forth that all must be completed before a sale is finalized. Adding to this is the fact that many of the above factors vary greatly by state and city. And, just to make it a little more complicated, most real estate transactions involve mortgages, which are accompanied by their own stipulations and paperwork.
Let’s look at some of the caveats involved in real estate and how they can affect both sides – seller and buyer:
1. Does the seller have the authority to sell the real estate?
Perhaps the home was in a trust, community property agreement, held by a limited liability company, or sold under an expired power of attorney. There are many such cases where a seller does not have the sole legal authority to sell the property.
How can a buyer or seller determine if the seller has the sole legal rights to a property? A lawyer can perform a title search to determine exactly who has legal ownership of the property.
2. Is the property zoned for the buyer’s needs?
A lot of buyers assume that a property being used for ‘X’ or a seller saying it can be used for ‘X’ must mean that it can indeed be used for ‘X.’ Not true.
Example: A buyer intends to convert a rental home property into a duplex. If the buyer doesn’t check the zoning, then they could discover after the purchase that the property is zoned for single family use only.
Example: A buyer is buying a restaurant with an existing bar. After the purchase, he could discover that the restaurant’s liquor license was grandfathered to the existing owner and will not transfer to any new owners in the dry area.
While sellers should know the zoning of the property and make appropriate disclosures, it’s vital that buyers and their legal representation preform their own due diligence before closing.
3. Have all counters been agreed upon?
Rarely does a buyer offer exactly what the seller is asking. Instead, a buyer makes an offer. The seller can accept that offer as it is or reject it and make a counteroffer. The process goes back and forth until both parties agree on exact terms. Sometimes, handwritten changes will appear in the contract. It’s important that both parties thoroughly assess changes and sign off on them. If there are any questionable or obtuse terms, then please contact your legal representative to ensure your rights are protected.
4. Is every facet of the transaction in writing?
It’s not legal if it isn’t in writing. Perhaps the seller gave the buyer a handshake that a leaky roof would be repaired prior to transfer; if it isn’t in an addendum to the purchase and the transaction has been signed off and closed, then the buyer has little recourse if the seller fails to make his handshake count. Plain and simple – every single facet of the transaction should be in writing, in the contract, and signed by both parties
5. Do you need a possession agreement?
If you’re allowing the seller to stay in possession of the property past closing, then, yes. You must have a possession agreement that clearly outlines a length and all terms in order to protect your rights.
One word of caution, however, buyers should consult their legal representation before allowing such. There are often many liabilities the buyer could face here, such as if the seller gets hurt on the property or the property is damaged somehow between closing and possession.
A possession due on sale agreement should be made if you do not wish to allow the seller to stay on the property past the closing date.
6. What goes and stays after the property is sold?
The buyer purchases the property and just assumes that the beautiful chandelier hanging in the master suite or the custom appliances in the kitchen all stay. Wrong. Countless hours of litigation have been consumed by arguing over what property features the buyer or seller was entitled to keep. Buyers and sellers both should consider what are non-negotiable items that must stay or go and include this in a written addendum that both parties sign.
In closing, as both buyers and sellers alike can see, the complexities and caveats of real estate transactions are not as simple as chewing prices at a yard sale. Real estate is often the largest purchase the average consumer will make in their lifetime. With such at stake, it’s vital to protect yourself. Contacting a professional lawyer with SBEMP’s Palm Springs real estate law firm to guide you through the real estate transaction process is the best way to protect both your rights and your investment.