Date post: | 11-Jan-2017 |
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Due Diligence in Seller Representation in Residential Real Estate Transactions
RE97R15
Jody OBrien
Definition
due dil·i·gencenounLAWreasonable steps taken by a person in order to satisfy a legal requirement, especially in buying or selling something.
Agent – Attorney - Consumer
• Role of the agent
• Role of the Attorney
• Role of Buyer/SellerSpecial Needs
Diligence
Other Providers
You are not….• Home Inspector• Septic designer, installer or inspector• Town official• Plumber, electrician, contractor, roofer etc.• Appraiser or Assessor• Engineer• Surveyor…….
Unless you say you are…..then you are!
• DeWolfe V Hingham Center Realty
• Zonning• Commercial v residential
• Representation made in writing (ad & MLS)
• Representation made by agent in verbally to buyer
• Quinlin V Clasby• Zoning• Multifamily• Representation made by agent in MLS
• Representation made during showing
• No public records verification
• Disclosure becomes your representation
• Public records obtained
• Owner interviewed• Disclosure becomes
others
DUE DILIGENCE CHECKLIST
Public Record• Have a checklist• Have a reason for more or less
• Don’t forget to read and review the gathered documents
• Don’t interpret, advice or explain beyond your scope of expertise
• Document all discoveries and activities beyond your checklist
Checklist• How does your checklist compare to the definition?
– “Reasonable effort”• What are the boundaries of your research?• What are the red flags?• What documentation will your checklist produce?• What responsibility will the seller have?• Does the seller acknowledge that responsibility?• What responsibility will the buyer have?• Does the buyer acknowledge that responsibility?
• Lets look at some items you may want to consider on your Due Diligence Checklist…….
Registry of Deeds• Deed review
– Rights of way, easements – Ownership– Life estates – Restrictions, covenants – Legal description of property
Registry of Deeds• overview
– Liens – Orders of Notice – Plot Plans– Title V restrictions
Town/City Hall• Field/Assessor’s card review
– Accuracy – Owners– Dimensions
• Lot size• House square footage
• Taxes– Paid/unpaid– Betterments
Town/City Hall
Permits• Filed and fully executed
– Building, plumbing, electrical, etc. – Completed and signed off
• Special permits or variance
Sellers’ Statements – Who should fill out the form
– Full disclosure of all known defects
– Yes – No – Unknown
Home Inspection– Accompany, or not? – Reports– Negotiation– Repairs– Documentation– Disclosure
CONDOMINIUMS
Condominiums
• Master Deed • Declaration of Trust • Unit Deed • Bylaws, Rules and Regulations
• Budget, Special Assessments,
• Pending litigation• Owner occupancy, Number of units, owned by more than one owner
• Reserve Study• Minutes, etc. • First right of refusal • 6d Certificate • Rental/pet restrictions • Management/Trustees • Certificate of Insurance
• HUD approvals
MULTI UNIT DWELLINGS
Multi-Unit Dwellings
• Tenants– Tenancy agreements/Leases
• In writing v verbal • Notice required to accommodate sale, or transfer
– Pending litigation or evictions – Security deposits/Last month’s rent held in MA banks, if held
• Occupancy certificates • Verification of units permitted
In-laws and Accessory Units • Community zoning bylaws vary • Restrictions • Transferability
Environmental Issues• Contamination, mold, Asbestos, EMF, Radon• Underground tanks • Wet Lands
– Local - Conservation Commission – State - DEP (Department of Environmental Protection)
– Federal – EPA or Army Core of Engineers– Documentation
• Orders of Condition • Certificate of Compliance
• Rivers Protection Act
Lead Paint Disclosure – Required disclosure for sellers of houses built before 1978
– “Does this house have lead paint?”– Proper completion of the form – Documentation
• Inspection report• Certificates of Compliance, • Risk Assessment• Letters of Interim Control
CONTRACTS TO PURCHSE
Offers and P & S• Dates• Note specific clauses and the bases/origins for the language
• Not an abdication, or waiver, of your common law duties
• Verification of accuracy of information – Names, addresses, Book/Page references
• “AS IS” CLAUSES – If willful non-disclosure of known defect is found, clause may not survive in court
PRE CLOSING TO CLOSING
• Final utility readings (electric, gas, water/sewer, etc.) • Smokes and carbon monoxide • Tax Stamps • Municipal Lien Certificate• Title V • TRID timeline• Walk-through
THINGS TO CONSIDER
• Walking the line between licensee and attorney• Agency relationship and Fiduciary DutiesLearn to recognize red flags and guide Sellers to the proper authoritative source
• If you do not know the information, know where to find the information
• Recognize the limits of your own knowledge • Do your homework and research • Be the source of the source • Remember, licensees are not attorneys unless they’ve passed the bar!
Resources• NAR
– Legal Scan – quarterly review of legal cases
• Richard Vetstien’s Blog– Massrealestatelawblog.com
Jody O’BrienThe RE/Education Company
Committed to Professionalism in Real Estate through Education
Blogwww.reeducator.com
Presentationwww.slideshare.net/ReEducationCompany
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