Massachusetts Realtor Bill Gassett has written an insightful article on the tax consequences of divorce on homeowners. It is a helpful article for folks enduring that experience.
Read it here.
I have had the privilege of getting to know Cincinnati Realtor and attorney Paul Sian recently. He is a maven of social media and blogging, and I approached him to learn more about how he promotes his legal and real estate practice with these mostly free electronic tools.
He is a font of knowledge on that topic, and a trailblazer in bringing valuable information to the public. For example, his blog is here, and I recommend following him on Twitter, Facebook and Google +.
Sunday of this last week we got together and produced this informative podcast on title insurance and some limited topics in real estate law.
If you are buying property, I’d recommend it for a short listen.
We recommend for commercial real estate investors this article by James Kobzeff on the need for a replacement reserve fund for commercial properties.
Well, Rochester, NY Realtor Kyle Hiscock shows he has a similar initial perception of the USDA as we did — that they grade meat and other farm products. But they are also a major mortgage lender nationwide, and their product is an excellent option for many borrowers.
Read his informative “Insane but True Facts About the USDA Mortgage” here.
It is in our human nature to trust other people. We assume, for example, that if a seller is selling us a house, that he would not sell us a “bill of goods” and convey a house full of defects. It is also in our nature that, when things go wrong, we look for someone other than ourselves to blame. It is further in our nature to expect when we hire a professional to do a job, he will do it thoroughly and properly.
But in the case of purchasing real property, all of these instincts are just dead wrong.
First, people can and do fail to disclose material defects in real property when they sell it. It happens all the time.
Second, as we explore here, the law of Ohio is firmly established as caveat emptor, or “buyer beware.” This means that the burden unquestionably is on the buyer to “kick the tires” and confirm the condition of real property before buying it.
Third, be careful of even relying on your home inspector, as he likely will not stand behind his work.
Now, here are some tips that will try the patience of even the heartiest homebuyer:
1) Even if you do everything right: Ask all the right questions, and hire a home inspector, he might still miss something. Massachusetts Realtor Bill Gassett, here, has a good blog entry today on things home inspectors — despite their best efforts — miss.
2) Let’s assume the home inspector missed something — something big! Surely he will stand behind his work. Unlikely. Most home inspectors have a contractual provision that if they make a mistake, the limit of their liability is the amount you paid them. And generally that is enforceable in Ohio.
3) If you are buying a foreclosure, or from a bank or an estate, they both (i) have no obligation to complete the Ohio residential property disclosure form, and (ii) they usually disclaim liability for home defects. If you pursue them you are going to be mostly out of luck.
4) If a seller agrees to make repairs to a home before the closing, it is incumbent upon the buyer to check — before the closing — that the work was in fact done and done correctly. The closing is an act of finality, and a buyer will claim a “waiver” of claims. So, confirm all obligations are fulfilled before closing.
5) Finally, even if a buyer has a meritorious claim against a seller, a Realtor or an inspector arising from property defects, the odds are pretty good that he cannot afford to pursue those claims in litigation.
What all this means is that a buyer must really, really check out the property, the structure — from footer and foundation to roof, the mechanical systems — HVAC, plumbing, and electrical, and all appliances. For, once he closes, he has bought the property and it’s his. The likelihood of him pursuing post-closing claims profitably is minimal.
Nationally, one of the premier bloggers on real estate topics is Bill Gassett of Re/Max in Massachusetts. You may read his blog here.
He has a nice piece on the differences between buying a single family home and a condominium, here.
Of particular interest to me is his explanation of “Control.” In terms of legal issues associated with condominiums, this is one area that I try to explain to my clients who are considering buying a unit. Also of interest are financing issues on condominiums, as that has become a problem area for many condo buyers of late.
If you are thinking about buying a condominium, I’d strongly recommend it for a read.
Cincinnati Realtor Paul Sian of HER Realtors has an excellent blog on real estate topics here. This month, he put out a podcast with Cincinnati insurance agent Ray Rivera of Allstate Insurance here on property and casualty insurance.
Thanks to Paul for providing this informative audio production on insurance issues.
This article is the eighth in a series on new construction. The contents of this series of articles apply to commercial as well as residential projects.
This blog entry addresses documenting change orders in new construction projects, commercial and residential. But before we get there, let’s re-visit the fundamentals of new construction contracting.
As is set forth in this prior blog entry:
the starting point is a clear starting point. At the time of the signing of the contract, it is important to know what the builder has committed to build — and what he has not committed to — and what the buyer has agreed to pay for that product. Once we have that foundation, we can address the construction changes and price changes from that point.
As a bad foundation of a house will undermine the entire project, a poor starting point for a new construction contract is not a good foundation for the construction process.
Then, once the initial scope, price and timing are clear, as change orders become necessary or appropriate, every single time a change order is agreed upon in a construction project, that change order should be crisply documented. That documentation should be a written change order signed by both parties to the contract, which includes, in each instance, all of the following:
1) The change to the scope of the project. The parties should detail what is being eliminated from the construction and what is being added.
2) The change in the price as a result of the change order.
3) The change in the construction schedule as a result of the change order.
Even if one or more of the foregoing are not changing at all, that should be detailed and documented as well.
I tell clients that the point of a contract is twofold: (i) to flesh out the issues between the parties and eliminate confusion as to what is being agreed upon and (ii) to create a document of the commitment of each party to the other that, yes, can be enforced in a court of law.
What happens when one or more of these issues are left unaddressed is that both issues are at play: (i) the parties may have a misunderstanding of the impact of the change order on timing or price, and (ii) it creates a murky situation when it comes time to enforce that contract.
When a seller acts in the role of financing the sale of real property, residential or commercial, there are significant potential downsides for the seller.
In this article, we explore the three primary vehicles for seller financing in the sale of real property: (i) lease with option or obligation to purchase, (ii) land installment contract, and (iii) deed with note and mortgage back from the buyer. In each of these three vehicles, the seller risks non-payment by the buyer. That blog entry then explores the legal paths to recovering clear title and possession of the property, and collecting on the indebtedness.
But beyond the simple action to collect on the debt, seller financing situations frequently involve further complications for the seller:
1) First, with the seller’s security for payment of the debt being recovering possession of and title to the property, the “security” of the seller is getting the property “back.” But the buyer could in the interim, significantly impair the condition of the property. Commercial buyers could environmentally contaminate the property or make modifications that impair the structure. Residential buyers may make “improvements” to the property that impair its marketability.
2) Second, we have experienced all too-frequently that the buyer tends to assert claims against the seller as a defense to the payment of the seller financing. These claims range from fraud in failure to disclose claimed defects in the real property to misrepresentation as to the rent roll and the P&L statement provided before the closing.
3) Seller can encounter significant legal complications due to unpaid contractors for work on the property (giving rise to mechanics lien claims), unpaid taxes, and unpaid utility bills.
And taking a second mortgage position for a portion of the purchase price (where a deed is exchanged for a portion of the purchase price) can be even more precarious. A second mortgage holds all of the risks set forth above, and in addition, second mortgagees are, obviously, subordinate, to a first mortgage. To the extent that the value of the property to a foreclosure sale is inadequate to pay the first mortgage, the second mortgage is valueless.
Thus, seller should carefully weigh the risks associated with seller financing of real property.
There is a creative children’s song called “The song that doesn’t end,” and through its circular lyrics, according to the song, “it just goes on and on my friend.” Listen here.
For some unfortunate sellers of real estate (usually commercial real estate), there are contracts that don’t end, either. They just go on and on, tying up the seller from selling the property to a third party.
There are some unscrupulous buyers who use a form of commercial real estate purchase contract — on retail space, raw land, offices, apartment buildings, warehouses, and various and other sundry commercial properties — that puts the seller in a terrible box. This form of contract, through some creative and circular language — referencing, for example, 180 days from a date that never occurs– never requires buyer to close, but it also never puts an end to his due diligence period, so neither does he have to terminate.
Thus, forever and ever, under this form of contract, the buyer can sit and wait — preventing seller from selling the property to another party. This allows the buyer to both (i) without cost, to wait until the property becomes “hot” and then someday sell it at a profit to a third party or (ii) to extort a payment from the seller to just dry up and blow away.
Now, because the buyer never has to perform and never has to terminate, it is likely the contract could be defeated in litigation as unenforceable for lack of consideration. The problem is that the buyer can tie the matter up in Courts for a year or two even after the seller commits to litigate, at great cost, of course, to the seller.
The net result is the same — the seller can neither shake the buyer nor force him to close.
Thus, seller beware of the contract that doesn’t end. Read every contract thoroughly before signing.