When you're buying or selling a home, there are many important legal issues, large and small, that you should be aware of. To begin with, a residential real estate transaction is a complicated process. When a major investment is transferred from one party to another, it is important to take care of even the subtle legal details. If not they can turn into major problems if not handled correctly. It is essential to be as informed as possible in order to properly protect yourself during the process of buying or selling a home. There are several issues that will certainly cost you if you are not properly informed. In this report, we identify 3 of the most common of these issues. Because there are many legal issues to consider, your first step is to consider choosing reputable and experienced professionals to represent your interests. When selecting your real estate agent, ensure that you find someone who has extensive experience and a proven track record with the process. They should also refer you to a local real estate lawyer who can ensure your interests are protected.
3 Legal Issues That Could Cost You Thousands
Following are 3 common examples of legal clauses/issues that can work to your disadvantage if not fully understood and/or worded correctly:
1. Hubbard Clause
Essentially this commonly used clause attempts to address the situation where a buyer wants to purchase another home but needs to first sell their existing home. The buyer and seller enter into a purchase agreement, with an addendum, which is subject to the buyer selling their existing home. The terms also allow the seller to attempt to find another buyer who is ready and able to buy the home. Then it is simply a matter of which comes first. Either the first buyer finds a purchaser for their existing home or the seller finds another purchaser and then cancels the first buyer’s agreement.Buyer side concerns include the wisdom of locking in a price if the market is softening. You could end up paying more for the home than you probably should. Additionally, you could end up losing the home if the seller finds another purchaser before you sell your existing home. Typically the seller provides you with 2 – 3 days notice that they have another purchaser and will be canceling your existing agreement.Seller side concerns include a potential decrease in qualified purchasers who otherwise would be willing to consider your home. Other prospective purchasers know they would have to wait 2 or 3 days before learning if their offer was going to be accepted. This is particularly critical with “out of town” buyers who are in town on a house hunting trip. Relocating buyers tend to pay more than local buyers because of their time motivation and generally will not be willing to wait for 2 -3 days to see if their offer can be accepted by the seller. They typically spend a couple of days looking at many homes and then make an offer on one. If the seller is unable to respond quickly, due to an existing Hubbard Agreement, out of area buyers tend to move on to the next home since they want to wrap up an agreement before they depart. Besides losing prospective purchasers the seller may also lose the existing buyer if the buyer’s home does not sell.Make sure you are working with an experienced real estate agent who can help guide you through this process. Too many agents routinely advise their clients there is nothing wrong with signing a Hubbard purchase agreement because they don’t understand the ramifications, or worse yet, don’t care. Remember it is your money and/or equity that’s at stake. Your real estate agent can provide you with names of real estate attorneys familiar with such scenarios. Remember, many thousands of dollars could be riding on the decisions you make at this point.
2. Inspection Clauses
Some real estate transactions have fallen through because of the wording of the inspection clause. This clause previously stated that the buyer has the right to rescind their offer if they were dissatisfied with the outcome of a home inspection. In some cases, this was used unfairly against the seller when a minor repair issue would give the buyer a legal loophole to their change of heart. Meanwhile, the seller lost both time and money because of this technicality. First, they may have declined other offers (offers which may now be lost for-ever) in favor of the one which has now fallen through, and missed the opportunity for other offers which might have come through during the current negotiations. Secondly, their home may have been unfairly labeled as a "problem house" which could cost them in terms of the dollar amount of subsequent offers. And thirdly, they then found themselves back on the market, incurring the inconvenience and additional carrying costs of having to market their property for a longer period of time. This clause should read that the seller has the option to fix any items that the home inspection flags. This wording protects both the buyer and the seller. The buyer is assured that the home they are buying meets objective structural standards, and the seller is protected against the whim of a buyer who changes his/her mind. Not all contracts will be written in this way. Make sure you are working with a real estate agent and lawyer experienced in such real estate matters to ensure your interests are protected.
3. In-ground Oil Tank Clause
Contrary to popular opinion it is not against the law to have an in-ground oil tank when it is properly installed by licensed professionals. However, most of the in-ground oil tanks were installed many years ago and public perception of them is not favorable. Even more importantly, mortgage lenders have an issue with in-ground tanks. The concern is what happens if one of these tanks has a leak and fuel oil contaminates a neighbor’s well, or worse yet, an aquifer which supplies water to lots of homes? Lenders are not willing to subject themselves to such risks. Lenders assess risk from a standpoint of what will happen if this home goes into foreclosure and they now own a home with a potential environmental nightmare that could cost a huge amount of money to remedy. Therefore if fewer buyers are able to obtain a mortgage on your home due to in-ground oil tank concerns, it likely will impact on the seller’s bottom line.Arguably the best course of action is for sellers to be proactive. The ideal remedy is to have the tank removed immediately by a licensed firm. If the tank is not too old, another option is to have it leak tested by a qualified firm to ensure the tank is not a hazard to the environment. You should understand however many lenders will not accept an in-ground oil tank even if the seller has a report showing the tank is not leaking. The bottom line is if the seller wishes to appeal to all potential buyers (and their lenders) the tank should be removed. Otherwise you very well could be limiting the pool of available buyers which directly translates into a classic supply and demand scenario. If the home you are buying or selling has an in-ground fuel oil tank there are specific issues that need to be addressed. A knowledgeable real estate professional will assist you to ensure an appropriate legal clause is written into the purchase agreement to protect your interests and to provide you with names of attorneys who are familiar with such matters. By being aware of these and many other legal issues, and by seeking advice from an experienced real estate professional and legal counsel, you can protect yourself against unnecessary costs and potential hardships.