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Category Archives: Residential Real Estate

Real Estate Contracts During a Home Sale or Purchase

Author By Paul S. SianPosted on

Real Estate Contracts You Will Encounter During a Home Sale or Purchase

Real Estate Contracts You Will Encounter During a Home Sale or Purchase

Definitions used in this article:

Implied Contract: A contract created by actions of the parties involved and is not always in writing.  Courts usually look for a meeting of the minds to determine if an implied contract exists.

Explicit Contract: A contract created by a written document which is signed by all parties involved with the contract.

When buying or selling a home you will come across a number of different contracts that you will sign as part of the process. You may be wondering what all these contracts are and how do they impact you. This post provides a general explanation for the various contracts used in a real estate transaction and the functions they read the fine print in real estate contractsserve in the transaction process.

Buyer Representation Agreement

A Buyer Representation Agreement is an agreement between the home buyer and a real estate agent. The agreement generally states that the real estate agent will get a commission by helping the buyer find a home and assisting in the process of buying the home. The assistance aspects include taking the buyers to homes they want to see or suggesting homes for them to see; preparing the offer in accordance with the buyer instructions; negotiating on the buyers behalf with regards to any matter related to the home purchase; guiding the buyer along the home purchase process and more.

This type of contract should be in writing (explicit contract) to have maximum effect. Sometimes these agreements will also state that the real estate agent is due a commission regardless of whether or not the buyer uses the agent’s services or showed them a particular home. Some agreements may only require the payment of a commission if the real estate agent is the procuring cause of the sale (i.e. the agent showed a particular home to the buyers).

Sometimes a real estate agent may forgo having their buyer sign this type of document in order to not make the buyers feel pressured. Those agents may be proceeding under the assumption that they are under an implied contract with their buyers.  If the buyer who has not signed any agreement happens to purchase a home without the help of their real estate agent or another agent happens to put in an offer for the buyer, the agent may not be entitled to a commission. Whether the agent will get a commission will depend if it can be shown that they are the procuring cause and whether or not their broker will pursue a lawsuit to get the commission.

Seller Representation Agreement

A Seller Representation Agreement is an agreement between a real estate agent and a home seller for the purpose of listing the seller’s home on the market for sale. Generally most real estate brokers want these agreements to be explicit contracts signed by both the seller and the agent representing the broker so as to avoid any confusion as to duties and rights. Many states have laws governing the marketing of real estate by licensed real estate agents and usually do have other forms for the sellers to review and sign in order to indicate their understanding of how the real estate agent they have hired will work when it comes to representing them and other buyers and sellers.

The seller representation agreement usually has a start date, end date, terms regarding what will go and what will stay with the property, language regarding use of advertising signs, forms of advertising (internet), home warranty information and more. It should be noted that while the seller representation agreement may state what items will stay with the home after closing that agreement is not binding upon the seller and buyer since it is only an agreement between the seller and the real estate broker. If a buyer wants certain things to stay with the home those items should be specifically mentioned in the Offer to Purchase contract document talked about below.

Buyer Offer To Purchase

The buyer’s offer to purchase represents merely an offer until it is accepted in writing by the seller. Any counter offer by the seller represents a new offer. If the buyer rejects the seller counter offer the seller cannot go back and decide to accept the offer that was first presented unless the buyer agrees to it. While an offer to purchase or counter offer can be made verbally (implied contract) in order for the offer to be legally enforceable in court it must be in writing (explicit contract) in accordance with the Statute of Frauds. Anything not captured in writing will not be enforced in a court of law. Therefore if there is something from the house (movable kitchen island, curtains or other non-fixed window treatments etc.) that you would like to stay with the home it is best to make sure that item is specifically written in to your offer to purchase.

Generally earnest money is not a requirement of an offer to purchase residential real estate. Earnest money is used to show a good faith desire to enter into a purchase agreement but is not required by law. Earnest money is usually credited towards the buyer upon closing. The earnest money will be returned if the seller and the buyer are unable to come to agreement on an offer. If the seller or the buyer call off the offer to purchase due to some disagreement then usually any claim to the earnest money must be released by the seller in writing before the money can be returned to the buyer. If a seller refuses to release their claim to the money then the parties must go to court to have a judge decide who is entitled to the earnest money.

Just because either the buyer or the seller state they want to back out of the deal does not mean they can back out of the deal without both parties agreeing to cancel the Offer to Purchase. If one of the requirements (contingencies) of the offer of the offer is not met then the offer can be cancelled without consequence to either party. Contingencies such as financing, home inspection, selling another home first are some common contingencies found offers to purchase. If the buyer or seller wants to back out of the purchase offer for the simple fact they changed their mind they could be sued by the other side for breach of contract.

Mortgage Document

When money is borrowed to purchase a home the mortgage document represents an explicit contract between the borrower and the lender. The mortgage document will set out the terms of the payments, due dates, late payment penalties, assignment provisions (the ability to sell the loan to another company) and more. While there are many consumer protection laws designed to keep borrowers from signing documents with illegal or unethical use a professional when dealing with real estate contractsprovisions one should still review the document and understand what is being signed since the commitment is a long term one.

Other Explicit Contracts in Real Estate

Home Warranty:

With a home warranty the buyer or the seller can purchase warranty coverage on the major systems of the house like water heater, HVAC, appliances, etc. Usually the warranty coverage is provided for a one year period and can be renewed yearly. The home warranty company will require the warranty agreement be signed by the person paying for the warranty. Always make sure to read the warranty document to know what is and what is not covered under the policy.

Title Insurance Policy:

The title insurance policy covers the lender and the buyer (if the buyer purchases a policy for themselves) in case there are hidden title defects on the property. In order to set out the terms of coverage for the insurance policy everything is put into writing and is signed by those seeking the coverage. For more information on Title Insurance check out the title insurance section at Ivy Pointe Title.

Other Implied Contracts

Implied contracts during the real estate process can include services provided by a company or individual with the promise of payment upon completion of the work. For instance a cleaning company, home inspector, home stager may agree to do work in your home in exchange for payment after completion. Due to the smaller amounts of money involved both parties agree to do the work without any written contract.

A common example of an implied contract is when you contact a cleaning company and ask them to clean your home prior to your putting it on the market for sale. A cleaning company may agree to perform the work with an unwritten implied promise to pay them for the work after they are done. If the home seller refuses to pay the cleaning company after the work has been done the cleaning company can sue the homeowner in small claims court and attempt to recover the money owed.  The court will look at if there is a written contract (whether language via email or text message) or will look towards what the parties actually said and/or did and make a decision on whether a contract does exist.

Final Thoughts

Many real estate contracts can be confusing with all the legalese in them. If you have any questions or are unsure about terms of a particular requirement in a contract you should ask the person presenting you the contract to explain the language to you. If the answer does not resolve your questions or concerns then you need to find outside expert help from a real estate attorney. It is better to walk away from a contract than to sign something that will bind you to terms or requirements you never intended to.

Do you have a real estate contract you have questions about?

Paul Sian is a licensed attorney in the States of Ohio and Michigan.  If you have any questions about a real estate contract you are being asked to sign feel free to contact me at [email protected] or via phone at 513-943-5668.  Feel free to connect with me on Twitter and Facebook.

 

Real estate phishing scam is a serious threat

Author By Finney Law FirmPosted on

Real EstateAccording to the National Association of Realtors, all parties engaged in real estate transactions should be cautious of emails requesting wired funds.  Recent trends show that real estate transactions have increasingly become the target of a sophisticated phishing scam, commonly known as “spear phishing.”

The hackers break into email accounts seeking information about current or upcoming real estate transactions – looking for names and identifiable information of sellers, agents, buyers, title companies, or attorneys.  The hackers then use this information, while posing as a party to the transaction, to request a wired funds deposit into their account.  Sometimes the hackers will use an email address that is different from the sellers email address by one letter, which goes unnoticed by the buyer.  The victim, believing the wired funds deposit is for closing, unsuspectingly transfers the funds and the hacker makes off with money.

Many people are lured into a false sense of security that hackers only go after large companies, like Sony, Target, Home Depot, and eBay.  However, small businesses and home buyers are much more susceptible to “spear phishing” because they lack the sophistication, technology, and legal assets to prevent such attacks.

“Spear phishing” involving wired funds in real transactions has occurred in numerous states and defrauded large sums of money from its victims.  According to an article by Sam Silverstein in Realtor®Mag, multiple incidents of fraud were reported in North Carolina, including an incident involving a $200,000 loss.  A separate article by Rose Meily in the San Jose Mercury News mentions a first time buyer losing $13,000.00 to a spear phishing scam.

However, there are ways to prevent or guard against spear phishing.  Here are some recommendations:

  • remain vigilant to suspicious activity during a real estate transaction
  • always call to verify all the information before a wired transfer
  • develop a face-to-face relationship and/or voice contact with parties involved
  • exchange and verify contact information of parties involved
  • maintain communication with parties involved
  • maintain strong email passwords
  • change email passwords
  • use two-step verification for emails
  • encrypt emails and documents
  • clean out email accounts
  • use data security programs and anti-virus software

Let our real estate team “make a difference” for you in your real estate transactions.  Contact Dylan Sizemore (513-943-6659) or Isaac Heintz (513-943-6654) to assist in your real estate needs.

Cybercrime hitting real estate

Author By Christopher P. FinneyPosted on

This article from the National Association of Realtors explores some of the means by which cybercrime is hitting real estate transactions.

Finney Law Firm, LLC and Ivy Pointe Title, LLC are equipped with the latest technology, tools and standards required by the CFPB to assure secure transactions, but…you can never be too careful.

Read and implement these NAR tips to make sure you and your clients and customers are not victims!

Hamilton County Auditor Dusty Rhodes has a revamped web site and a nifty mobile app!

Author By Christopher P. FinneyPosted on

Realtors have amazing new tools at their fingertips almost daily with emerging web sites and smart phone apps.  Still, we are impressed with the new web site and mobile app of the Hamilton County Auditor.

HamiltonCountyAuditor.org  has a smart new interface and valuable tools for Realtors, including:

  • Property search, which quickly allows you to access property description, auditor’s valuation, tax information and sales history.
  • Detailed instructions for property valuation complaints.
  • On-line forms such as the CAUV form, rental registration form, and a Homestead exemption form.
  • A calculator that estimates the impact of upcoming tax levies on your property’s taxes.
  • Streetview photos and aerial/CAGIS imaging of the property.

Dusty Rhodes also has a nifty mobile phone app available both for I-Phones and Android phones that allows for limited information under the property search function such as Auditor’s valuation, sales history and streetview and aerial images of the property.

We recommend that every Realtor, commercial and residential, load the mobile app to their phone.  It is a powerful tool.

 

Catch me if you can: How to steal real property

Author By Christopher P. FinneyPosted on

After 30 years as a real estate attorney, I thought I had seen everything: Bill Erpenbeck, mortgage fraud, short sale fraud, and the massive fraud perpetrated on America by Wall Street in the housing crisis.  Indeed, well before the mortgage crisis hit with full force, I authored a continuing education course entitled “Fraud” and taught it to thousands of Realtors, builders and lenders exposing rampant fraud in the residential and commercial real estate industry .

But still I was shocked in the past two years to be personally involved in two cases involving outright theft of real property right here in Hamilton County.  One of those cases is highlighted in the Cincinnati Enquirer here.

Background: The passive, unilateral nature of our property recording system

Assuming that the Hamilton County Commissioners’ abolition of registered land has been effective (read here), the land registration system is entirely passive from the County’s perspective in both Ohio and Kentucky.  This system of land record recordation is typical throughout the nation.  What this means is that by and large the government officials responsible for accepting documents for recording do just that — they accept what is presented to them, and then index them.  They do nothing at all to check their validity.

To transfer real property, one simply brings in for recordation a deed that is purportedly signed and acknowledged (notarized) by the current owner.  In Ohio, the Auditor will transfer the real estate on his records and “green light” the deed for recording by the Recorder.  The County Recorder simply time-stamps and records whatever original instruments are presented to him in proper form and with a property legal description.  In Kentucky, the County Clerk performs these same functions.

It is no one’s job at the Auditor’s office or Recorder’s office to verify signatures — or even to check that the notary public acknowledging the signature is licensed by the state.

The system is “passive” in that the offices receive the instruments for recording, and as long as their grantor information lines up with public records, they index and record the transfer on their records.

Just prepare and sign a deed transferring property into your name

So, the new scam I have seen is follows this pattern:

  1. The fraudster forms a limited liability company that he owns and controls.  Anyone can do this with an attorney, through LegalZoom.Com or even just by completing simple forms available from the Secretary of State of each state.  (NOTE: Each state requires each LLC to have a “statutory agent” to receive formal legal notices, but many states — including Ohio do not require the ownership of the LLC to be publicly identified.  Kentucky does require LLC ownership to be disclosed.)
  2. The criminal then finds a suitable real property — presumably one that has vacant and neglected for some time.
  3. Then, the fraudster prepares a deed transferring that property into the name of his new LLC.
  4. He signs that deed or finds someone to sign it, and has it acknowledged (notarized).
  5. The notary public is required by law to verify that the signer of the deed, but many simply do not.  Further, if the target property is in a corporate name, it is unusual for the notary to check that the signer has authority in fact to sign for the seller.  (NOTE: In the fraud referenced in the article linked above above, he himself acted as the notary, and signed someone else’s name to the deed in place of the actual owner.)
  6. That fraudster then markets the property for sale and quickly — for consideration — transfers the property to a new buyer, pocketing the cash and disappearing into the woods.

The system is further undermined because office supply and stationary shops will produce a notary seal for anyone — or for a fictional name — without checking if that person is in fact a registered notary public.  Thus, the signer and the notary public can be fictional on a deed.

Experienced real estate professionals are shocked this could happen

I have had the chance over the past year to tell the story before audiences of experienced Realtors of two separate frauds in Hamilton County in which I personally participated — once representing the actual owner whose property was “stolen” in this fashion and once representing the end buyer.  In each instance, the Realtors were shocked and dismayed that our land title registration system could be so easily gamed.  But it can and does happen.

How buyers can protect themselves

As we have explained here, when buying real property there are only two layers of protection for the buyer: (i) the Seller, who makes broad promises by means of a general warranty or limited warranty deed has continuing obligations to the owner under that deed to assure that title is “good,” and (ii) the coverage provided by an owner’s policy of title insurance.

Many sellers have “nothing to their name,” and thus the promises they make under warranty deeds could be worthless — and it is difficult for a buyer to ascertain whether a seller has the means to stand behind their promises.  Thus, when I sit at a closing table and hear a buyer tell me why they have no need for an owners’  policy of title insurance — or worse, for their Realtor to explain that it is worthless — I cringe.  I don’t want to argue to convince a buyer to purchase something that I am selling and profiting from, but at the same time  I do know there are risks the buyer is undertaking if he does not obtain that coverage.  The “theft of real property” described above is one of these risks that is difficult or impossible for the closing agent to detect, but one fully covered by title insurance.

The end of the stories

We mention two scenarios above where our clients were victims of property theft.  In the first instance, our client was the buyer — and he had purchased an owners’ policy of title insurance.  Thus, he was made whole by the underwriter as son as the real owner made a claim to title to the real estate.  In the second instance, our client was the owner at the time of the “theft.”  He instituted a “quiet title” action to recover record ownership of his property and won a default judgment against the wrongdoer, vesting title back in the rightful owner’s name.  That client elected not to pursue the tortfeasors — the thieves, the notary, the closing agent — any further to save time and money.

Conclusion

The moral to this story is twofold: (i) don’t kid yourselves, it is dangerous out there, and (ii) title insurance covers a multitude of “sins” when real estate title goes bad.

Let Finney Law Firm and Ivy Pointe Title, LLC help you avoid and insure over these risks of real estate investing.  Call Rick Turner of Ivy Pointe Title with any questions at 513-943-5660.

Commercial Leasing: ABCs of HVAC

Author By Isaac T. HeintzPosted on

In the commercial leasing world, the provisions regarding the maintenance, repair and replacement of the heating, ventilating, and air conditioning system (HVAC) are often a point of contention. The reason for this is that the repair and replacement of the HVAC can be expensive, and the scope of the repair and replacement can be directly affected by the actions (or inaction) of the tenant. This summary will review some of the considerations and suggest possible resolutions to consider to address the HVAC.

Typical Landlord Lease

The initial draft of a typical retail commercial landlord’s lease will pass all costs associated with the maintenance, repair and replacement of the HVAC through to the tenant. From a practical perspective, this type of clause may not properly allocate the costs of the HVAC to the tenant based on the tenant’s use of the system. For example, this type of clause may require the tenant to pay for costs for a system that is damaged prior to tenant’s lease, or could result in the tenant having to replace the system in the last month of the term. From a landlord’s perspective, this type of clause may result in the tenant attempting to prolong the life of the HVAC beyond its useful life to avoid having to pay for the replacement of the unit.

Condition on Commencement

The condition of the HVAC on the commencement of the lease can affect the required costs associated with the maintenance, repair and replacement. If the HVAC is new, then there should be a warranty on the system and the tenant should seek a lease clause ensuring the warranty is passed through to the tenant. If the HVAC is not new, the tenant should have the HVAC inspected to determine the condition of the system and predicted useful life. If there is a concern regarding the condition of the HVAC, the tenant should consider negotiating some type of warranty and/or limit on the costs for repair/replacement for the system by the landlord (e.g. annual cap, etc.).

Maintenance, Repair and Replacement

The lease should allocate the responsibility for the maintenance, repair and replacement of the HVAC between the landlord and the tenant. If the landlord is relying on the tenant for the maintenance, the landlord should consider requiring tenant maintain a contract with an HVAC service provider for biannual or quarterly service. If the landlord is relying on the tenant for the maintenance and/or repair of the HVAC, the landlord should consider requiring tenant maintain a log regarding the same as a condition of the lease. The landlord will want to review any maintenance agreement or repair log on a regular basis to ensure that they are being maintained.

Landlord’s Concerns

The landlord will not want to cover the payment for costs of the repair and/or replacement of the HVAC if the system is damaged by the tenant. For example, if the tenant fails to regularly change the filters or props open the doors of the premises causing damage to the system, the landlord will not want to cover the cost of repairing or replacing the system. The landlord will want to limit any warranty and/or agreement to cover costs to exclude damage to the HVAC caused by the tenant.

Replacement of HVAC

Most tenants are not thrilled with the possibility that they will have to pay for the replacement of the HVAC towards the end of the term. This can lead to a tenant attempting to bandage the HVAC to avoid the replacement. A better solution may be for the landlord to agree to pay for the replacement, and have the tenant reimburse a proportionate share of such costs for the remainder of tenant’s term. This should create an incentive for the tenant to seek the replacement of the HVAC when the repair costs are high and/or functionality of the system is compromised.

Summary

Although not uncommon, a simple clause in a commercial lease requiring the tenant to maintain, repair and replace the HVAC may not properly allocate the costs between the parties or be in the best interest of the landlord. A clause addressing the HVAC that takes into consideration the interests of the tenant and the landlord can help avoid conflict between the parties regarding the HVAC. Further, it will reduce the incentive of the tenant to seek a new location at the end of the term if the tenant faces the prospect of having to replace the HVAC if they continue operations at the premises. So, both the landlord and tenant have an incentive to think through the HVAC clauses at the beginning of the leasing relationship.

Chris Finney teaches 2016 Property Tax Valuation class with Hamilton County Auditor Dusty Rhodes

Author By Christopher P. FinneyPosted on

Chris and Dusty

On Friday, January 20th, our own Chris Finney taught a 3-hour continuing education class before the Cincinnati Area Board of Realtors with Hamilton County Auditor Dusty Rhodes.  Rhodes has graciously co-taught this course — approximately 12 times — over the past seven years with us.

The class, presented to about 35 Realtors, teaches about intricacies of the property tax bill, as well as hands-on, step-by-step, do-it-yourself instructions about how to prepare a complaint and present a case before the Boards of Revision in each of Ohio’s 88 counties.

A detailed self-help video of a similar presentation is available here.

The filing deadline in Ohio is March 31 of each year.  If you want this firm to assist you in the presentation of your Complaint, please contact Anna Ausman at (513) 943-6651.

It’s Property Tax Valuation time, again!

Author By Christopher P. FinneyPosted on

The Finney Law Firm has an extensive practice in property tax valuation work, assisting property owners in correcting the valuation of over-assessed properties in Ohio by the County Auditor and in Kentucky by the Property Valuation Administrator.  Since its founding, this firm has filed and won (or advantageously settled) more than 300 such Complaints, including for major corporate clients as well as small investors and individual homeowners.

We can either charge for this work at our standard hourly rate (plus expenses) or on creative contingent fee and fixed fee formulations.

This year, the Warren County Auditor has re-assessed all parcels in that County, and since this is the first year of the tri-ennial cycle, every property owner there has the right to challenge that valuation. We are in the second year of that cycle in Hamilton, Clermont and Butler Counties.

Read here about this year’s Property Tax Valuation class before the Cincinnati Area Board of Realtors.

Finally, watch here the on-line video wherein Attorney Chris Finney shares with you the step-by-step method you can appeal a tax valuation in Ohio on your own.

Isaac Heintz and Dylan Sizemore instruct: “Five Pillars of Success” to Anderson Chamber of Commerce

Author By Isaac T. HeintzPosted on

Tuesday of this week Finney Law Firm attorneys Isaac T. Heintz and W. Z. “Dylan” Sizemore present “5 Pillars of Success” for the Anderson Chamber of Commerce.

The course addresses the foundations of business success through carefully establishing and planning the success of your business with legal strategies in corporate law, real estate law and estate planning.

A video of the course will soon be available on line.

Are you entitled to a refund on Indian Hill School District Class Action Settlement? Here are the details

Author By Christopher P. FinneyPosted on
This firm was privileged to serve as class action co-counsel along with Maurice Thompson of the 1851 Center for Constitutional Law and Paul DeMarco of the Cincinnati firm of Markovits, Stock and DeMarco in securing a refund of illegally-collected taxes levied by the Indian Hill School District for 2010 through 2014.  That legal team has settled claims for our clients relating to the over-assessment and payment of taxes totaling $5.5 million.
A recent article in the Cincinnati Enquirer about the law suit (Sanborn v. Indian Hill Local School District) and the settlement are here.
In the Spring of 2016, class members should be receiving notices from the Settlement Administrator about how to obtain their refund.  Taxpayers must respond in order to get their refund check.
  • PLEASE NOTE: If you or someone you know owned property in the Indian Hill School District for those years and have since sold the property, the Auditor’s Office, and therefore the Settlement Administrator, may not have your address and you may not be notified of your right to receive a refund.  In order to obtain notices about the refund, please be sure to contact the Settlement Administrator noted below and provide the following information: (a) your name and address, (b) the property you owned, and (c) the period you owned the property.
The class includes every property owner who paid the illegal levy for the years in question and includes both residential and commercial property owners.  The amount of the refund will vary by property and payor, but we estimate the average refund will exceed $800.
Here is what is going to transpire on this settlement:
    1. The court-appointed Settlement Administrator will send a letter to every class member who can be identified in the Spring.
    2. The Settlement Administrator will have calculated the pro-rata share of refund due to each taxpayer, which amount will be included in each notice.
    3. The recipients of the letters must respond to receive their refund.  They can also opt to donate the monies to the Indian Hills Public Schools Foundation.
    4. If payors of tax bills cannot be identified, or if they fail to respond, their pro-rata share of their refund will be paid to the Indian Hills Public Schools Foundation.
    5. Inquiries should be sent to the Settlement Administrator:
Dr. Harvey Rosen, Ph.D.
Burke, Rosen & Associates
2800 Euclid Ave., Suite 300
Cleveland, OH 44115
(216) 566-9300
There is also a web site about the settlement: IndianHillSettlement.Com.
If you have any questions, please give Chris Finney of this office a call at 513-943-6655 or email him at [email protected].
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