Still More Real EstateBefore leaving the subject of real estate transactions, here are just a few more tips that might be helpful when the time comes.
If you're working with a Realtor - whether as seller's or buyer's agent (but not both, I hope) - your purchase and sale agreement will likely consist of filling in the blanks on the agent's standard form. It's not a bad form at all and has been refined many times over the years, but it has the tendency to lull you into thinking that if you complete all the blanks to your liking, you're home free. Home free is a great place to be, but you want to make sure the agreement is leading you there. What I'm primarily talking about is the section on the form for "Additional Provisions", where there aren't any guidelines at all, but where something else may really need to be added. Examples? OK, let's say you want this home to double as an office - very common these days. Most towns have zoning ordinances that either restrict home occupations or home-based businesses to certain districts, or at least require some form of approval. If it's just you in front of a computer screen, no one would likely know or care, but you might need to be sure your electronics would have good service there. Plus, maybe you need regular deliveries, or to hang out a sign, or have customers or clients come see you. In that case, there may be off-street parking requirements or limits on the kind of flashing billboard you can erect. Before you get locked into a purchase that doesn't take any of that into account, you'd want to add a provision that gives you time to check out the requirements and get any necessary approvals. Oh, and if you don't get approved, you might want the right to get your deposit back and have a chance to move on to a happier home. Not your scenario, you say? How about this one. Your business career has thrived and now you want that stress-free second home on the lake. And you've always wanted that nice ski boat, a little fishing skiff, a sailfish, maybe a canoe and a couple of kayaks, even a SUP (ask your kids). The place that's perfect has a seasonal dock, but you want something larger that you don't have to pull in every fall. That usually requires State approval and can be hard to come by. You'd want your agreement conditioned on getting the necessary go-ahead, and you might want to sail off to another lake if you can't make it happen. If it's not there in black and white, the seller won't want to give back your deposit. Other conditions that might be critical to the deal could be getting approval to add on for your mother-in-law, getting a neighbor to let you cut some trees for a view, or confirming that the town will plow the road in the winter if you plan to convert that rustic cottage into a year-round home. You can probably think of a lot of others that might be significant for you. The key here is not just to think about them, but to make sure they're in there with the financing and inspection terms. If they're left out, it won't matter how important those issues are to you; the seller will say, thank you very much for that deposit, and sell the property to someone else. One final comment - and this is important whether you're in the real estate market or not. Most [non-real estate] contracts are legal and enforceable even if not in writing. The problem is proving an oral contract that's just floating out there in the breeze. Your rule of thumb should be this: if it's something that would hurt to swallow - financially or otherwise - then put it in writing. People don't do it because they don't want to insult their family members, friends or neighbors by making it seem like they don't trust them. That's not it, but people's memories and understandings differ and morph, particularly as more time goes by. And the written thing doesn't have to be full of "whereas" and "now, therefore"; it just needs to clearly say what's important. If it does, you may not be home free, but you'll be on the road there. Posted on 08/09/2013 More Summer Real EstateI wrote previously about getting the right professional help when you pull up stakes and head for your next residential destination. From a lawyer's perspective, though, the opportunity to help often doesn't come early enough in the process. People hook up with their brokers to sell or see the object of their (dis)affection, and then they're so anxious to seal the deal that they sign whatever's put in front of them. And I'm not dissing the brokers; many have lots of experience and can do justice to a purchase and sale agreement; they just may not be representing the party who needs the help the most. See that last entry for more on that.
So, for those of you who can't wait to ink something and then want to ask their questions later, here are a few tips to consider before giving it your best John Hancock: No matter how hard you shake the other party's hand, there's no such thing as a binding verbal agreement to sell or buy real estate - so your instinct to get it on paper is a commendable one. The law recognizes many verbal contracts, but not where real estate is the subject. That goes back to something like the Magna Carta. The trouble is, once you've signed it, you are committed - unless you specifically write in that you've got, say, 48 hours to have a lawyer review it for you. There's no legal requirement for any specific deposit amount - $100 would do the trick if the other party accepted it. Still, the custom these days in these parts is for about 5% of the purchase price. If you're a buyer, I always suggest a modest amount when the agreement is signed, and then the rest once you've done your due diligence with the lawyer or completed your inspections. From the seller's standpoint, you want enough up front to make sure the buyer isn't just kicking the tires. Ah, inspections! Whether you plan to inspect everything or not, give yourself the right to do so. You can always waive an inspection later on, but you won't get the right to do more if you didn't reserve that opportunity in the agreement. And give yourself enough time. Fourteen days is the absolute minimum if you're going to use a professional person - and I suggest that rather than your brother-in-law. Plus, if there's a well or septic system, or a basement that might have a radon problem, you'll need time to get back the test results. Of course, from a seller's standpoint, don't allow so much time that your sale is up in the air for 30 days or more during the prime marketing season. Likewise, a cash sale is always preferred, but if your buyer needs financing, keep the leash as short as possible there, too. In fact, inquire whether they're pre-qualified for the amount in question, so the loan commitment can be quick, and the only real issue will be getting the place appraised for what your buyer has agreed to pay. As for what's included in the deal beside the kitchen sink, make sure any appliances you're counting on as a buyer are going to be in good working order - but as a seller that you're turning them over in "AS IS" condition without any guaranties like that. See how important it is who's writing the agreement! If the place is a hoarder's paradise, or if you want to make sure some important painting or repairs have been completed (that were included in the agreement, of course), make sure you have the right to a final inspection early on the day of the closing. Landscaping with major appliances is an honored Southern tradition, but you may not want to take on that refrigerator planter. Finally for now, the dates in these agreements can be misleading. The date for getting inspections done and raising problem issues, and the date for pulling out if your financing falls through, are cast in concrete. If you miss them, you're out of luck, and you either lose your deposit or you go forward without those bases covered. Ironically, though, the specified closing date in New Hampshire is just a sort of target date, and if it takes someone a few days more to pull their act together, that's not going to blow up the deal. That is, unless the date is really important to one of you, and so you spell out clearly in the agreement that "time is of the essence" of that date. That could indeed be the case if the sellers need the funds to close on their new McMansion, or if the buyers need to get in pronto because their moving truck is idling in the driveway. Posted 07/18/2013 Summer Buying and SellingSummer is traditionally the time of year when the real estate market heats up, and people make a concerted push to actively market what they have and to get re-situated before the kids go back to school. So let's talk a little about buying and selling.
People often wonder whether they really need a real estate agent and/or lawyer to navigate these waters. I say yes on both counts. Sure, a selling agent will cost about 5% of your price these days, but a good one will help you set that price correctly and then show the property to greatest advantage. That alone could be worth the commission, but (s)he will also make sure anyone who wanders through your door is actually qualified to buy it; they'll help negotiate the terms of the deal once an offer is made; and they'll handle the dozens of details that always come up prior to payday. If you're a buyer, though, keep in mind that the nice agent who drives you all over creation to find your dream home is really the seller's agent; that is, unless you hire an agent of your own. There are more and more buyer's agents these days, and I highly recommend you go this route if you want someone looking out solely for your interests. After all, buying a house is indeed the largest purchase most of us will make, and we routinely get professional help with decisions that don't count nearly as much. What I totally recommend against, however, is having a "dual agent", one who theoretically is representing both parties. Can you say "conflict of interest"? There's a reason why lawyers can't represent both sides in these (or any other) transactions, and the same should go for real estate agents. What you get is someone who really isn't an effective advocate for either party - and so not worth the commission - no matter how gracefully the double agent tries to straddle that barbed wire fence. Just my opinion, but there it is. As for lawyers, one who knows his/her way around these deals can make sure the purchase and sale agreement you sign is going to work for you. So, is the deposit unreasonably high or low; are there issues with the deed that might be objectionable (rights of way, poor legal description); are the additional provisions you want to include, say, about work to be done prior to closing, or about the seller staying on for a month or so, going to protect your interests? Many buyers forgo a lawyer these days, figuring the title insurance company can do everything they need. Title companies do indeed fulfill a critical role in making sure all the liens are paid off and the documents are properly executed at closing - and I recommend title insurance for every buyer - but they don't generally deal with issues of substance like the ones I just mentioned from the lawyer's bailiwick. For example, the title company will make sure there's no outstanding mortgage or tax lien and that all the right fees are being paid, but they won't care about whether someone else has the right to use your driveway or to put his septic system on your side of the line - or about how to protect you if the seller wants to stay on after the closing. Knowing the role of each person involved in a real estate transaction can help you decide whose help you need - and getting the right help can make all the difference when you sit down at the closing. Posted 07/11/2013 |
Phil RunyonPhil Runyon has been practicing law in Peterborough, NH, for over 50 years. He has regularly sent out emails to his clients, keeping them updated on changes in the law that effect estate planning, and writing about other relevant concepts or planning techniques. Archives
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