Sold “AS IS”. This week’s legal Q&A via Washington Association of Realtors

Being a Realtor and member of both the National Association of Realtors as well as the Washington Association of Realtors.  I get a weekly legal Q&A.  As a Real Estate Broker I must stay up to date regarding laws as they apply to Real Estate.  Some of these questions (I think) would be interesting to the general public. This week’s Q&A involves the use (or misuse) of “AS IS”.  As a Broker, I see this “phrase” included in more listing than I care to count.  It usually arouses a chuckle, and then the fleeting question in my mind…WHAT does THAT mean?  With the inevitable answer…absolutely nothing.

Question:
If a transaction is “as is” (usually an REO property), what about the neighborhood review? Is it part of “as is” or is it still valid?

Answer:
There is no way the Hotline lawyer can answer this question with certainty because there is no way to know what the words “as is” mean as set forth in the context of this question. Unfortunately, in too many transactions, neither the parties nor the brokers know what the words “as is” mean in the given transaction. Use of the words “as is” as a solution to some transactional problem is another one of those industry myths that needs to be busted.

The words “as is” standing alone, with no definition, have little or no meaning. If the purchase agreement simply states “as is”, those words essentially have no meaning. What the seller means by use of those words and what the buyer perceives may be very different things. When the term is used, it must be accompanied by an explanation of what the words mean in the given transaction.

If seller is attempting to shed all post-closing liability for the condition of the property, that issue must be fully negotiated and documented. Inclusion of the words “as is” alone, in the purchase agreement, will not offer seller any post closing protection from liability for the condition of the property. If seller wants liability protection because of the condition of the septic system, that needs to be negotiated and documented. The same is true of the roof, the mechanical system and every other aspect of the property.

Perhaps the seller has included the words “as is” in the listing printout in an effort to indicate that seller won’t make any repairs. That is fine. Buyer can still include an inspection contingency, a title review contingency and any other contingency of buyer’s choosing including, as specified in this question, the neighborhood review contingency. If seller accepts buyer’s offer with those contingencies in place, the contingencies are binding on the parties notwithstanding seller’s use of the term “as is” in the listing printout. If buyer asks seller to make repairs following buyer inspections, seller may accommodate or deny the request the same as if the words “as is” were not included in the listing printout.

A noteworthy issue in this discussion is the absence of an “as is” provision in the statewide forms system. There is no standardized “as is” provision precisely because “as is” is intended by different parties to mean different things in different transactions. If a client indicates that use of an “as is” provision is important to them, broker should advise the client to seek legal counsel for assistance in drafting the “as-is” provision. When it is considered that most sellers who want to use an “as is” provision, want to do so in an effort to shield some level of legal liability, it is easy to understand that a lawyer needs to draft that provision that will affect the legal rights and liabilities of the parties.

Simply put, use of the term “as is” is not a silver bullet to solve drafting problems in real estate transactions. To the contrary, a seller who believes they are shielded from post-closing liability for condition of the property by use of the term “as is” on the face of the purchase agreement is a seller who likely has a claim against their broker if seller is sued by buyer after closing based on the condition of the property. Use of the term “as is” alone won’t shield seller from liability to buyer but it may create liability for seller’s broker. If seller persuades a court that seller relied on broker’s assurance that the term “as-is” afforded seller liability protection, then seller will likely have a viable claim against broker. Again, if a seller believes they need to use or reference the term “as is” in the purchase agreement, broker should advise that seller, in writing, to seek legal counsel for assistance in drafting the “as-is” provision necessary to accomplish seller’s objective.

Hotline Attorney Annie Fitzsimmons writes the Legal Hotline Question and Answer of the Week. Please submit questions to legalhotline@warealtor.org or call (800) 562-6027. Please have your NRDS number ready when you call or e-mail the Hotline with your question.

The Legal Hotline lawyer does not represent Washington Association of REALTORS® members or their clients and customers. Research this topic and thousands of others online

 

Legal Discriptions and Title Reports

The Buyer I recently represented got into contract with the Seller. All was well until we received the Title Report. How much time do we Real Estate Brokers take to look over the details within the report? Some of the things we MIGHT verify on the report could be the correct address and any “funny” looking leans. Some Brokers really don’t look at the report at all. In this case the Buyer and myself did take a close look. Seems the property in the report contained a different legal description than the property my Buyer was intending to buy. A legal description is usually obtained from a Title Company and most Brokers simply give the Title Company the Sellers name, address and tax id number and the Title Company will then send over a copy of the most current deed with a legal description something like…lots 1-4 Block 6 Nitkey’s 1st Addition to West Seattle. Here is what happened in this recent sale….Many years ago the property owners transferred ownership to 2 properties they owned from themselves to a Trust. One advantage of doing so is to avoid probate preceding when settling an estate. What happened is when the documents were recorded the Deeds were recorded on the wrong properties…example Lot A was recorded on B and B on A (both A and B were owned by the Sellers). So when the deed was sent over to the Brokers the legal description referenced property some blocks away. To add insult to injury, when the error was discovered and a new Title Report and Legal were done, somebody transposed two numbers in the address, and a second incorrect deed and Title Report was issued and sent over to the Brokers. Of course these are both very simple errors to correct but they do take time. This is not something that should be discover a week before closing because that would cause a delay in closing opening up a whole new set of hurdles. One such major hurdle is the fact that a “correct” legal description is REQUIRED to be attached to the contract…NO legal, NO contract.

Close scrutiny by both Buyer and Broker saved a potential fiasco. Knowing what to look for within a Deed and Title Report also proved invaluable. Having a Broker with a good working relationship with the Title Company and a Title representative who understands what I’m talking about is critical.

We Real Estate Brokers can’t catch all the problems 100% of the time, but working with the more experienced Brokers who’ve seen a lot throughout the years, and have the experience to quickly identify a problem and come up with a solution is invaluable to our clients.

 

This week’s legal Q&A via Washington Association of Realtors

Being a Realtor and member of both the National Association of Realtors as well as the Washington Association of Realtors.  I get a weekly legal Q&A.  As a Real Estate Broker I must stay up to date regarding laws as they apply to Real Estate.  Some of these questions (I think) would be interesting to the general public. This week’s Q&A involves creative ways people have come up with to burglarize homes.  

Question:
Buyer and broker signed a buyer agency agreement with buyer wanting to view very expensive homes. Now, broker is realizing that most if not all of the financial information buyers provided is false. When buyer has entered a purchase agreement, they have terminated just before EM is due. Broker believes buyers are using broker to view homes prior to burglarizing the home. Local law enforcement supports this theory.

1. Is broker still required to honor the Buyers agency agreement?

2. How does the Real Estate Law of Agency impact this situation? Specifically Section 7(b) “Not disclosing confidential information” … what if the information is not correct anyway and when it may prevent a crime and both the police and the MLS want broker to file “Suspicious Activity Reports”. May broker disclose what broker actually knows of these buyers?

3. In Form 21, paragraph a, there is the provision where buyer represents having sufficient funds to close. What must broker disclose to a seller if broker knows buyer lacks the funds?

Answer:
Recall broker’s Agency Law duty to disclose material facts: “Licensee is required to disclose all existing material facts known by the licensee and not apparent or readily ascertainable to a party which adversely affect the physical condition of or title to the property. For licensees, a material fact is defined as information that substantially adversely affects the value of the property or a party’s ability to perform its obligations in a real estate transaction or operates to materially impair or defeat the purpose of the transaction.”

Buyer’s broker now knows that buyer seemingly lacks the financial wherewithal to complete a transaction of the sort contemplated by any purchase agreement buyer may enter. Buyer’s broker must disclose that information to any seller. It seems a potential solution to broker’s problem is disclosure to buyer that broker must disclose to any seller that buyer lacks the financial wherewithal to complete the transaction.

Unless buyer can correct misinformation on broker’s part, buyer is not going to want broker writing offers for buyer and disclosing buyer’s dishonesty and lack of financial strength to seller. Confronted with this truth, buyer is likely to determine that buyer no longer wishes to work with buyer’s broker and buyer and broker will be able to agree to terminate their agency relationship and agency agreement.

It appears from the question presented, that buyer gave broker certain information and broker, using his own devices, determined that information to be false. If that is the case, then the falsity of the information is not confidential information, because buyer did not provide the information to broker. Broker learned the information on his own. If those are the facts, then broker is under no obligation to conceal the information and may share it with law enforcement and broker’s MLS, in broker’s discretion.

This is an interesting situation. At the end of the day, however, neither the Department of Licensing nor a court room judge is going to hold a broker responsible for breaching a buyer agency agreement if performing the agreement would have resulted in broker aiding and abetting the commission of a crime. Broker must be certain that broker is not misinformed about buyer’s financial wherewithal and/or the veracity of the information buyer provided. If broker is properly informed, then broker simply needs to find a way to confront the buyers and terminate the agreement. Perhaps the first step is for broker to present his information to buyers and ask buyers to explain the inconsistencies. If buyer cannot explain the inconsistencies, then broker likely has his answer.

If broker has any question as to how to proceed, after talking with his managing broker, broker should consult legal counsel

Hotline Attorney Annie Fitzsimmons writes the Legal Hotline Question and Answer of the Week.

The Legal Hotline lawyer does not represent Washington Association of REALTORS® members or their clients and customers. 

 

2011 Housing Trends

Interesting reading.  Nice short and concise. 2011 Housing Trends

 

 

Will Seattle Criminals soon to be a Protected Class?

But I don’t WANT to rent to sex offenders, crackheads, violent abusers or people convicted of drug dealing.  However I may soon have too, and so might YOU if you own a rental property in Seattle or even just want to rent out a room in your home.  The Mayor’s Office through the Seattle Civil Rights Office is reviewing adding People with Arrest and Conviction Records to the Protected Class Status in regards to housing and employment.  Washington State law already restricts Landlords and employers from gaining knowledge of criminal activity in which the perpetrator has been 7 years out of jail.

Seattle currently includes these protected classes:

Age
Ancestry
Color
Creed
Disability
Gender identity
Marital status
National Origin
Parental status
Political ideology
Race
Religion
Sex
Sexual orientation
Use of a Section 8 certificate
Use of a service animal
Military status or Veteran

I believe there are only two jurisdictions in the USA that have similar protections for criminals and they are both in one Mid-Western state.  Could Seattle become the city of choice for just released felons? Should Seattle Landlords and “mom and pop” small businesses be responsible for transitional housing and employment for convicted felons, or is that something best left to the government, who can also provide the counseling if needed.

I support fair housing for all, but how fair is it to the single mother who moved into my apartment 2 years ago now being forced to share a wall with a violent felon fresh out of Monroe or San Quentin?

This should not be just an issue Landlords are interested in but also those who may want to rent out a backyard cottage, or the mother-in-law unit in the basement of their home.  Also, those who live in apartments who were comforted by the fact their Landlord does do criminal background checks on all applicants.

Finally, if criminals are to become a protected class wouldn’t that really diminish the viability of those listed above who truly are in need of protected class status?

A second Community Forum to discuss this important issue will be held on:

Wednesday, March 16, 6 – 8 pm

Seattle City Hall, 600 Fourth Avenue

Bertha Knight Landes Room

Draft language of the proposal will be available at least two weeks prior to the forum at www.seattle.gov/civilrights.

 

What Do Real Estate Agents Know?…A Lot

As an agent in my 15th year, I’m sometimes amazed at what can be learned by just putting a question out there to a couple of my colleagues. So often agents will ask each other for referrals and recommendations. Its understandable an Agent would have relatively good resources for trades people related to real estate and housing…IE roofer, painter, junk hauler, lenders, etc. However, the referral I was looking for had nothing even remotely related to real estate…or business for that matter. No, I need a referral for a health care provider. A reliable, honest and knowledgeable person to assist an elderly person in their home. So I called Carla an agent in my office and left her a voice message. Carla promptly returned my call with a solid lead or three. She also placed follow up calls over the next several days to check on my progress. I headed out to a Brokers Open not to only preview the home (a part of my daily routine) but to also inquire with this agent (she works for a competitor Brokerage) who I thought would also be helpful…kind of multi-tasking. While at this Brokers Open another agent (from yet another competitor Brokerage) wandered in and gave her two cents worth.

So at the end of the day I had no less than seven solid referrals from three sources. In general Real Estate Agents are knowledgeable people. They are helpful people too. Willing to lend a hand when a hand is needed. Willing to share knowledge when knowledge is seeked.

So…do you need a referral?

 

JUST SOLD: 4BR 3BA Sweeping View House in Seattle, WA, $900,000

http://www.windermere.com/tid278546&showBrand=0

via For Sale: 4BR/2+1BA Single Family House in Seattle, WA, $900,000.

Arroyo Vista, Sweeping bluff southwestern view. Three Tree Point to Blake Island. Mt. Rainier to Olympic mountains. Almost 3500 SF. Level entry mid-century, resort like swimming pool. The enormous daylight immersed basement is entertainment oriented and has a sweeping view too, 2nd kitchen, Fp, office and guestroom. Plentiful garden spaces features rose garden, vegetable gardens and more. 2 tax parcels of 20,718 SF. 2 car garage and plenty of off-street parking. You’ll be amazed, come take a look…and plan to stay awhile.

 

For Rent: 2BR/1BA Duplex in Seattle, WA, $1,040/month

For Rent: 2BR/1BA Duplex in Seattle, WA, $1,040/month.

 

Landlord Tenant Relations

I quite often receive email from my Tenants (I prefer to refer to them as residents) giving me a compliment.  An occasional complaint as well.  However the compliments far outnumber the complaints.  Today one of my residents (who likes to garden) had a request to enlarge their gardening area, to the area commonly known as the planting strip across the sidewalk from their apartment.  This planting strip area currently is grass with small 6 or 8 foot tall trees every 15 to 20 feet.  The area directly in front of their apartment is very small but the plants and shrubs they’ve planted there look very, very nice.  It’s fairly obvious they have maxed out that area and the “creative aspects” is complete, all that is left now would be the maintenance (weeding, pruning, etc.) which the resident does.  We maintain the lawn and weed the gardening areas not “claimed” by one of the residents.

I personally feel it is great when my residents like to garden in front of my properties.  Numerous reasons of course, some of which are:  It brightens up the curb appeal of the buildings.  It encourages other residents to do the same.  It gives the residents more of a stake in the overall appearance of my properties.  They feel a sense of pride in their accomplishments.  I’ve often found those who take good care of the outside also take good care of the inside.  It also makes them happy.  A happy resident (tenant) makes for a happy landlord

All these things amount to other benefits as well for me the landlord.  Such as: Good residents who pay their rent on time, they tend to not bother others, they tend to be good neighbors, they tend to stay longer, they literally “plant roots”.  All these things together create a good community of renters.  A good community of renters attract more good renters when I have an apartment that becomes vacant.

However there are two sides to every coin.  As a real estate agent I know as a matter of law that things planted in the ground are considered “fixtures” and all “fixtures” belong to the property.  So when property sells, the Buyer is also purchasing the things planted in the ground.  The Seller may not remove the plantings to take to their new property (unless otherwise mutually agreed to in writing).  So the question is: what happens to the plantings a tenant has put in the ground when they move?  Well…I don’t know.  So far, I’ve just let them take what ever they want after meeting with me at the property and discussing it.  So far it has not been much of a problem.  A couple of years ago a tenant moved out and took all her plants with her.  All that was left was a small area of dirt.  Well, today that area has been cultivated, nurtured and loved.  Today it looks better than it ever has.  This was done by the current renter.

One of the services I offer to those who use me to purchase rental property is good sound advice after the sale, on how to make good management decisions, tenant selection, maintenance and advice on good landlord tenant relations.  It makes for a happy customer.  A happy customer makes for a repeat customer.

So…here is a quote of what I consider a complement from this tenant: “I know that this property is very dear to you and you watch over it carefully.”

Larry Nitkey

 

 

Averages…Not for me

I’m not one for averages (see previous post) but they do tell us something…what that something is, is up to you to decide. This from the Seattle Puget Sound Business Journal:

Monday, July 6, 2009, 11:57am PDT

King County average, median home sale prices rise in June
Puget Sound Business Journal (Seattle)

The average home sale price in King County rose to $446,044 last month from $423,875 in May and the median sale price rose to $363,116 from $351,500 a month earlier.

The number of pending sales in King County rose to 3,042 in June from 2,801 in May, according to data collected by the Northwest Multiple Listing Service (NWMLS), which tracks home sales in 19 Western Washington counties.
Those prices are still lower than a year ago, when the June 2008 average sale price in King County was $502,727 and the median price was $400,000.
Real estate brokers surveyed by NWMLS said they were worried that overall home sale prices could be dragged down by a wave of foreclosure sales and short sales (sellers selling a home for less than what they owe on a mortgage ; such sales typically take longer to complete than a traditional sale). But they were optimistic about the area’s real estate future.
“I think we’ve been through the worst,” said Dick Beeson, owner/broker of Windermere Commencement Associates in Tacoma, in a statement.