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from Local Attorney, Michael H. Wasserman

Friday, October 29, 2010

SHOULD LISTING AGENTS DISCLOSE HOW FAR UNDERWATER THE SELLER IS?

It has long been a standard operating practice in my office to make immediate inquiry with Sellers and in the public records to try to ascertain the status of a seller's mortgage liens at the outset of every Chicago area short sale transaction I work on. Buyers certainly want to know information like this as they determine how much (or whether) to make an offer in a short sale situation. If the deal is unworkable, why bother putting up earnest money or wasting time, right? 

Do listing agents have a duty to disclose this, even without a specific inquiry? According to one appellate court in California, the answer seems to be yes.

RIS Media reported today on a California appellate court decision earlier this week (Holmes v. Summers) to the effect that real estate practitioners (Realtors)  have the same responsibility as sellers to disclose information they have that affects the “value and desirability of the property.” 


In that case, the seller and the listing associate withheld from potential buyers knowledge of  three mortgages against the property totaling $1.141 million. The sellers accepted a buyer’s offer of $749,000, but the deal fell apart because the sellers couldn’t deliver clear title. According to RIS, the would-be buyers sued the real estate firm and the court found that the real estate practitioner had a greater duty to disclose facts affecting the desirability and marketability of the property than he did to protect the privacy of the seller.

Analysts say this decision makes it incumbent on practitioners with short-sale listings to provide specific information about circumstances surrounding the sales, including approvals required for the sales to close.


This is not Illinois law, but certainly seems like good advice to listing agents out there. Buyers and Co-operating agents should be asking this question as a matter of course as well. 



Tuesday, October 19, 2010

Do You REALLY Need Homeowners Insurance at Closing? (yes)

A cautionary tale for all my friends and colleagues who represent buyers in real estate transactions.

I had the good fortune to help a long time client close on her purchase of a three flat last Friday. In a year that has been replete with difficult transactions, this one was pretty easy. An all cash purchase of a bank owned property. Clean title to boot. (What can possibly go wrong, right?) The deal came together pretty quickly. We closed in just three weeks.

It is a lovely building  (purchased by a delightful client). The bank that was selling had foreclosed on a developer who (like many others) had apparently run out of money before he could complete a conversion from a rental to condominiums. Overall the place was in good shape. The first floor unit lacked finish plumbing, fixtures and  appliances on the first floor, but the second and third were pretty much rent-able and ready to go. The purchase price seems a bargain. My client is very likely to do well on this one