Can I get in trouble
for that?
A few weeks ago a friend of mine from Texas called me and
told me about a problem he was having with a recently consummated real estate
transaction. He had inherited a townhome
in a very nice part of town. He had been
pretty much managing the property for his mother for a couple of years before
he inherited it. He had it rented and
that had been going along pretty well. One of the neighbors, who was a friend
of his mom’s and also a real estate agent, had found him a couple of
tenants. After he inherited the property
he no longer wanted to be a landlord, so he decided to sell.
Who’s working for
whom here?
Once he decided to sell he discussed his options with the
helpful neighbor/real estate agent. She
told him she was aware of a gentleman who had been waiting to buy into that
community for a while. She suggested
that maybe she could work something out between the two of them and save the
trouble of listing the property. You know
what a pain listing a property is; cleaning, showing, open houses, and phone
calls. This would be easy. She would just simply introduce the two and
let them negotiate the deal. Money and
property would then be exchanged; no muss, no fuss. And that’s pretty much how it went.
The buyer checked out the house, he and my friend agreed on
a price. There were some repairs that he
wanted done, not the least of which was a new roof. They got an estimate to repair the roof and my
friend agreed to reduce the price to cover that cost. He also agreed to accept a sales contract
that was contingent on the buyer selling his property. It was all very casual and not a lot of
excess paperwork was done.
I guess that was
pretty easy, right?
In my opinion there were a couple of problems with this situation,
and I believe they all stem from a lack of well-defined representation of
either party in the transaction. First
of all, without the home being listed and presented to the larger marketplace
there is no way of knowing if the price agreed upon was the best price for
either party; much less the best price for the seller. It could have been a very fair price, but we
will never really know. Secondly,
because of the somewhat casual approach to the deal there was no property
disclosure from the seller to the buyer. And thirdly, in today’s market of
multiple offers and bidding wars when prices can change dramatically in weeks
if not days, to accept a contingency contract from the one and only potential
buyer for the property seems like a bad idea all the way around.
Wow, that was close!
Well, the buyer’s house finally sold after several months
and a number of extensions of the contingency deadline. So the sale of the townhouse did ultimately
close. Of course we don’t know if the
seller received his best possible price for the property. But it is highly unlikely, both because of
the time lag and the lack of market exposure.
What we do know is that he paid additional taxes, insurance and other
costs while waiting for the buyer’s house to sell.
We also now know that because of the lack of a property
disclosure document the buyer was not made aware of a pre-existing water
problem. My friend says he really had
not thought about the breach of the neighbor’s retaining wall that had caused a
pretty serious leak into the townhouse several months prior while a tenant was
living there. After all, the neighbor
had made repairs by adding a french drain and it was assumed that he had
corrected the problem. I do believe
though that a disclosure form that specifically asks about such situations
would most likely have reminded him of the water event, and he would have
disclosed it.
So what’s the big
deal?
What’s the big deal you ask?
So they had to wait a little longer to close. And the seller spent a little extra money. Maybe the seller didn’t get the max price,
but then maybe he did! Well, I said my
friend the seller didn’t think much about the original flood and water
problem. I should go on to say that he didn’t
think much about it until after he received the letter from the buyer’s
attorney. That was the letter
threatening legal action over the flood in his newly purchased and newly
remodeled townhouse. Turns out it might
have been a good idea to disclose the water situation after all.
The jury is still out on this one, so we will have to wait
and see the outcome. I do know one thing
though; both parties would have been much better off if they had been
professionally represented by a full time, well trained and licensed REALTOR®.
#JohnsCreekRealtor, #JohnsCreekHomesforSale
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