Traps to Look Out for with Regard to For Sale By Owner Transactions
It is important to have counsel in for sale by owner real estate transactions.
Typically, for any FOR SALE BY OWNER SALE/PURCHASE, there are no realtors involved in the transaction. Consequently, the seller has determined a selling price based upon several possible sources or factors which may or may not equate to the true value of the property.
On the other hand, when the buyer is considering the purchase of a property For Sale by Owner without the benefit of a realtor, the buyer may not be aware of the true value of the property or that the seller is, potentially, asking considerably more than the true market value of the property.
Those issues become very important if the buyer is paying cash (and paying too much for the property) or must obtain a mortgage and subsequently determines that the bank appraisal is significantly less than the asking price by the seller.
Why You Need Legal Representation in For Sale By Owner
Under either of these circumstances it is very important for the buyer and the seller to have separate legal counsel to advise them of the pros, cons, and various significant issues involved in such a transaction.
Agreement of Sale
There is absolutely nothing wrong in either a seller selling on their own or a buyer purchasing on their own as long as they have adequate legal representation and advice. One or the other attorney must prepare the Agreement of Sale which will then be reviewed and critiqued by the other attorney.
It will be the responsibility of the seller’s attorney to indicate all of the matters that the seller must consider before they advertise the property for sale and all of the issues that must be considered when they find a buyer to purchase their property.
On the other hand, the buyer’s attorney will typically be handling the real estate settlement, must advise the buyer, and on occasion the seller, of the costs of that sale, and the expenses which they must understand will be their obligation at the time of the settlement.
Further, the buyer’s attorney has the responsibility of making certain that the title to the property is properly searched by a title searcher who is not obligated to discover a good title but who is obligated to discover the true nature of the title to the property.
The buyer’s attorney should have no hesitation to inform the buyer when title is not good and explain that it will take some significant period of time to correct that title – assuming the seller is willing to correct the title. If the seller is not willing to correct the title, the buyer’s attorney has the obligation to tell the buyer to look elsewhere for a property.
On the other hand, the seller’s attorney has the responsibility, after the title search has revealed certain defects, to professionally advise the seller that the property cannot be sold without curing those defects. The seller’s attorney will act on behalf of the seller to cure the defects in the title to the property.
Each Need Own Attorney
Finally, no attorney should represent both the buyer and the seller in such a transaction. The buyer and the seller should each have their own legal counsel, i.e., no attorney can serve two masters.
Seller’s Point of View
From the seller’s point of view, when he or she agrees to sell the property, the seller enters into one of the largest financial transactions in which the seller will ever be involved. The same holds true with regard to the buyer. The buyer is obligating to purchase a property for a significant sum of money and will be entering into a transaction for which, if the buyer gets a mortgage, will incur significant financial liability. If the buyer does not get a mortgage, hard-earned money to buy the property will be shelled out. If that property has a defective title, and the buyer doesn’t protect the purchase with professional legal advice, the buyer may be put in the position of having to pay to cure the title (a cost that should have been the seller’s responsibility) when the buyer sells the property.
We Are Experienced in For Sale By Owner Transactions
Hoffmeyer & Semmelman has a statewide reputation in the real estate field as being thoroughly knowledgeable in representing clients in the sale and purchase of real estate and in discovering and curing defective real estate titles. Please contact our real estate lawyers whenever you are involved in any real estate transaction. We have law offices in York, Shrewsbury, and Mt. Wolf to better serve you.