11/13/2021
REAL ESTATE AND THE LAW
I’m not an Attorney, and, if I’m not working under the supervision of an Attorney, I can’t be called a Paralegal. But I’ve been a licensed Florida Realtor for over 8 years, so that does qualify me to provide information about Real Estate contracts and a few dirty little secrets about the Real Estate industry that most people just don’t know about.
REAL ESTATE CONTRACTS ARE LEGAL DOCUMENTS, AND THEY ARE ENFORCEABLE, BUT THE ENFORCEMENT MAY NOT BE WORTH THE COST OR THE HEADACHE
A Real Estate contract is a Legal Document like any other contract. It sets out the terms and conditions for a Real Estate transaction. If a buyer breaks the contract, such as, decides not to close the transaction, the seller does have Legal recourse – to sue the buyer for specific performance. But what does that really mean for the seller?
One, if you’re going to sue the buyer, you’ll need to hire a Real Estate Attorney. And Real Estate Attorneys are not cheap. Figure anywhere from $250 to $400 per hour. Hours add up quickly. Two, and a little known fact, is that if the seller does sue the buyer to perform, he or she can’t just re-list their house. A house can not be sold while there is pending litigation. So the seller must ask themselves, one, what do I hope to recover in damages and does that outweigh what my Legal fees are going to be, and two, just how long is this going to take, because the intention was to sell the house, and you can’t do that if you’re going to litigate. The wheels of justice do spin slowly.
REALTORS HAVE A CODE OF ETHICS
Most people don’t realize or really even care that there’s a difference between a Real Estate agent, and a Realtor. The real estate license is issued by the State. But, if you want to call yourself a “Realtor”, you have no choice but to join “a board”. Every city and region in the US has a Board of Realtors. But when you join the board, you also have no choice but to also pay membership in both your State Association of Realtors, and the National Association of Realtors. You know, the giant lobbying firm that runs commercials on TV. On top of that, you get to pay fees for the MLS (multiple listing service), and “supra”, the electronic keys that open lockboxes.
Realtors are supposed to abide by a “Code of Ethics”. After 8 years in the business, I could write an entire book about the ethics violations I’ve seen. One example was a case where I was representing buyers looking to buy their first home. After working with them for over a month, they finally found the home they wanted. They made an offer, and it was accepted. There was a contract. The other agent found a buyer in the meantime, and she proceeded to blow up the contract. Now she could earn both the selling agent and buying agent commission. The buyers had already paid for a home inspection, so they were out the $450 cost for that. Could they have sued to enforce the contract? Sure, but they didn’t have a budget set aside for real estate litigation, so I suggested they just find something else. They never did. I did file an ethics complaint, but since the other agent worked for the broker who was President of the local board, you can rest assured that my complaint went nowhere.
In another case, an agent left the company I worked for, and I was tasked with taking over their remaining listings. In real estate, listings “belong” to the brokerage, not the agent. One of the listings was for a “real estate investor”. As I was working on listing bank owned homes, I certainly had access to what all offers for these homes were. The investor was interested in one of them, and asked me what he needed to bid in order to have the winning bid. I said, I can’t do that, it’s a violation, and I could lose my license. His reply was, “well Susie and Jason (names changed) always used to tell me what I needed to bid”. So as you can see, the “Code of Ethics” is just total nonsense.
IS NOT DISCLOSING KNOWN FACTS THE SAME AS LYING?
I served on the Community Economic Development Advisory Board for the City of North Port, at the request of the Commissioners. I learned many things about the City. North Port has numerous “commercial nodes” around town. Some are on streets that are currently all residential. Several years ago, when Dollar General decided to build a store at the corner of Cranberry and Price, there was quite an uproar in the community because people who purchased homes in that area “thought” they were buying in a residential area, but the intersection had always been a commercial node. You can bet that none of the Realtors involved in the sale of those homes ever informed their buyers about this. Realtors also tend to gloss over things like the age of the home and how it affects insurance costs, and fun Florida stuff like flood zones and how that can affect insurance, as well as future resale value. Florida is a “buyer beware” State. Which means that if your Realtor representative is not telling you EVERYTHING you need to know, you could get into a serious mess. You can’t rely solely on a sellers disclosure, and home inspectors are humans and as such, they do make mistakes and miss things sometimes. Did you know that North Port, where most homes are on septic, has proposed city wide sewer service that will add a $30,000 cost or lien in the near future? If you are looking in North Port and your Realtor hasn’t informed you of that, you are working with the wrong Realtor.
SMALL HELPFUL HINTS
If I’m representing a buyer, I suggest to put down as little a deposit as the seller is likely to accept. If I’m representing a seller, I suggest they prod the buyer to put down as large a deposit as the buyer is likely to accept. While the cost and time of litigating contracts is usually prohibitive, if a contract does get cancelled after the inspection period, the deposit is at risk. One way out is the “finance clause”. If you can’t get financed, then the seller can’t keep the deposit. I also highly suggest that buyers specify that Title not be ordered until 10 days prior to closing, because if it’s ordered right away, and the house fails inspection and terms can’t be renegotiated, the buyer will be liable for the cost of Title.
WATCH FOR THE FLIP AND LOOK AT PUBLIC RECORDS
Studies are done about what most attracts buyers. Kitchens and bathrooms are at the top of the list. Kitchens and bathrooms can always be updated, we consider these to be cosmetic things. When working with buyers, I always suggest we take a look at the big, high cost items that are not cosmetic things. Like the electric panel, the roof, the windows, the AC unit, the plumbing. These things are far more important than upgraded counters and cabinets. Most of the time, people who “flip” properties – fix them up for quick re-sale – focus on the cosmetic things.
Sometimes, the listed square footage doesn’t match up with public records. This happens when a homeowner does work that is not permitted. Most of the time this happens when a lanai is enclosed. But if it hasn’t been permitted, it’s not reflected in the public records. And even if that doesn’t bother you, as a buyer, it should, because it can cause big headaches for you down the road.
ABOUT US
Stephen Schoenfeld has been a Realtor since 2012. He served as a volunteer representing the Real Estate industry on North Port’s inaugural CEDAB, at the request of the Commissioners. He is also an award winning graduate of the SCF Paralegal program, and is working with the program director to create and develop the Real Estate Paralegal Certificate program. He is the co-owner of My Legal Docs, a Legal Document Preparation service company.