Posts Tagged ‘real estate law’

Another Dual Agency Dilemma

Monday, August 7th, 2017

Many of you know that I have written often of the perils of dual agency. Case in point: I received a phone call today from a woman whose sister is working with an agent to purchase property. The agent also represents the seller.

Apparently the buyer and seller executed a contract. The seller, four days later, realized a mistake was made and they should have asked for a higher price. The agent let the buyer know that they were to sign an addendum for the higher price. The buyer did not agree and was fearful that the seller could cancel the contract. Her initial deposit money is already in escrow and escrow is open.

I do not represent this person and have not seen the contract. I did not provide legal advice but rather told the caller what right a buyer has under basic contract law – unless of course there is a clause in the contract giving a party more rights or altering the general rules.

Here is the bottom line: as a buyer in a real estate transaction, where there is a fully executed contract and no party has breached, and where there have been no alterations of contractual obligations pertaining to rights to cancel or amend, as long as a buyer performs his or her duties under the contract on time the seller does not have a right to cancel the contract. Parties of course CAN mutually agree IN WRITING and signed by all, to alter material terms, but if a buyer does not agree to do so it does not generally give the seller the right to cancel if the buyer is not in breach of contract.

Once again this problem is a result of dual agency- how can an agent who has a fiduciary duty to the seller (who wants to change a material term), also fulfill a fiduciary duty to the buyer (who does not agree)? This is a big pitfall of dual agency and a big reason for real estate lawsuits. I advised the caller to contact the agent, contact escrow, and if necessary contact an attorney.

Share
RSS Feed

Buyers, Sellers & Agents: Make Sure Your Sale Is Legal

Wednesday, November 16th, 2016

There is something important that all home buyers, sellers and agents need to be aware of and it is very easy to discover: making sure all parties on title have signed the listing agreement and the residential purchase contract (and of course all further documents that relate to the sale).  th

It is extremely important that all listing agents check the property deed prior to having sellers sign a listing agreement. It is not hard to do and takes only a call to the title representative.  You cannot rely on what the seller(s) tell you, as they may not even realize that there is another person on title. Recently I sold a home on behalf of my buyer clients. I pulled up the tax records and saw there were 2 sellers named as owners. I drafted the offer with both names. Due to complicated circumstances one party was going to sell and the other was going to sign an interspousal deed transfer, but that was not signed yet. We got around it but it was a very strange situation and a bit risky.

Another home I sold recently had 3 sellers, but only 2 were named in the tax records; however the deed showed there was a third party on title (parent of one of the sellers). The listing agent was not aware of this and we had to get the third seller’s signatures on all paperwork after the contract was accepted. Luckily that third seller was cooperative – this may not always be the case.

If someone who is on title does not sign all paperwork then technically there is no contract, as the law states that all owners on title need to agree to a sale. You can imagine the legal repercussions down the road if things are done  improperly! The good news is that the title company will catch this and it can be corrected, but not if the other person who has not signed decides to be uncooperative.

If you are an agent, this is something you should know, but believe it or not many agents have listing agreements signed without checking with their title department to assure that all parties on title sign the agreement. Similarly, buyers agents need to check the deed before writing offers to make sure this is the case. If you are a buyer or seller, you should ask your agent to make sure s/he has all the correct information at the time of listing or writing an offer.

 

 

Share
RSS Feed

3 Reasons Home Buyers Should Not Work with Listing Agents

Thursday, February 18th, 2016

The concept of dual agency – where a listing broker also represents the buyer in a real estate purchase transaction – has been a subject of contention for a long time. Most listing agents dream of representing both the seller and buyer, as it leads to a bigger paycheck in the end. Of course there is a lot of paperwork both sides must sign to indicated that they are aware of the dual agency – this of course is designed to protect not only the parties to the transaction but also the agents and brokerages (hint hint: to try to prevent lawsuits). th

Opponents to dual agency – and I happen to be one (in most cases) – argue that the listing agent’s first duty is to the seller, and that can hurt the buyer in the long run. Here are 3 reasons why buyers really should have separate representation when purchasing a home:

1.  Allegiance to seller first: As a representative of a seller, an agent has a duty to uphold the sellers’ best interests. A buyers’ agent has the same duty to the buyer. If one agent represents both parties, you can see how this could be a big problem for one party – and the buyer is the one who usually gets the short end of the stick. For example, let’s say the seller tells the listing agent something about their situation that will affect the price or other aspect of the sale. The buyers’ agent’s job is to get the best price for the buyer, but the listing agent’s duty to the sellers (to not disclose confidential information that could affect price or other key components of a sale) clashes with the duty to the buyers – how can you get the best price for your buyers if you cannot tell them what you know on the seller side that could help them? Someone is getting left in the cold, and it is almost always the buyer.

2.  Negotiations: The agent is often privy to certain information that will help in negotiations on behalf of the seller, such as the sellers’ bottom line price or other information that could assist in negotiating on their behalf. As mentioned above, this could detrimentally affect the buyers’ negotiating powers because the agent’s first duty is realistically to the seller. It is imperative that buyers have a representative who looks out for their best interests exclusively.

3.  Agent Misunderstanding. As you can see, there are big problems in representing both parties. One of the biggest of all, unfortunately, is that many agents do not understand the legal ramifications of doing so. Many brokers do not oversee these sales closely enough, and the agents are left to handle them to the best of their abilities. This can and does lead to lawsuits down the road if the agent is not careful what s/he says or does, discloses or doesn’t disclose. You can see how it is the buyer who will suffer.

*****

While I am a proponent of separate representation for the buyer and seller in a real estate transaction, there are situations where dual agency can actually be a benefit for all parties involved (commission alone should NEVER be a reason for an exception). One example is where the seller is financing part or all of the buyer’s purchase. The dual agent can be instrumental here in figuring out details. Of course, separate agents for each party can also do this. Some other situations do make sense at times, but the bottom line is that if you are a buyer you should have someone looking out for your best interests first and foremost. When you call a listing agent about a property their goal is to sell it. With a buyer’s agent that person’s goal should be to sell you the home that best meets your needs, with the ability to represent your interests exclusively.

If you are in the market to purchase a home or income property, strive to find an experienced and informative area agent to assist you – one who has strong negotiating powers and a keen sense of the legal aspects of the sale. If you do find yourself in a dual agency situation, make sure you involve the agent’s broker so that your best interests are not jeopardized.

Share
RSS Feed

Beware: Secondary Lien Holders Could Sue You…

Saturday, December 8th, 2012

If you are facing foreclosure and have more than one lien (mortgage), there is a new law that could greatly affect you. The California Supreme Court just denied review of a state appeal court ruling that allows second “purchase money” lien holders to sue homeowners for deficiency judgments after a first lien holder has foreclosed. Don’t worry, I’ll break it down in simple terms.

In California the homeowner is protected from lawsuits for the amount of the difference between what is owed on the mortgage, and what the home sells for at foreclosure auction (or even a short sale) – this is called a deficiency judgment. Other states allow lenders to sue homeowners for deficiency judgments, but California is a non-deficiency state. So if you only have one loan and are foreclosed upon, you are safe for now from a lawsuit by your lender.

The new ruling applies to secondary lien holders and foreclosures. Back in the boom of the real estate market many people took out two loans to purchase their homes. The second lienholder almost always loses big when there is a foreclosure, as there is not enough money to cover the debt owed to the first.

NOW, that second lender can sue the homeowner after the foreclosure for the deficiency, BUT only if the second lender is not the same lender as the first. (It is important to remember is that many loans are bought and sold on the secondary market, so even though you may originally have had two loans held by the same lender, one may have been sold. So it is imperative to know who your lienholders are before heading into a foreclosure).

It is very important for any homeowner facing foreclosure to contact an attorney to discuss their particular scenario, to make sure that you understand whether there is a chance you could be sued after foreclosure. Do not wait until the last minute – this could severely effect your options and what you could possibly do to avoid future lawsuits. For more information on this particular case, here is the citing: Cadlerock Joint Venture, L.P. v. Lobel, 206 Cal.App. 4th 1531 (2012); 143 Cal. Rptr. 3rd 96.

 

Share
RSS Feed