I'm involved in another lawsuit .....

By
Education & Training with Real Estate Expert Witness Support

......not as a defendant,  but as an expert witness.  I can't give you names (to protect the guilty and innocent) but I think it would be worthwhile to tell you some of the lessons comng out of it.

It involves a property that did not have their final road and easments recorded but they were to be done before close of escrow.  There were new CCRs that included a road agreement.  For various reasons,  the CCRs never got completed so the Seller took the easments (that were identified in the CCRs) and gave them to title just prior to close. For some reason that escapes me,  the title company did not have the parties sign new instructions,  prepare a new prelim,   nor did they contact the buyer or buyers agent about the new easements. 

The buyer is now claiming  (by the way,  10 years after the closing) that he should have been informed.  I wonder if the fact that his house is now worth almost $1,000,000 less than he bought it for has anything to do with this?  But,  back to the story. I represent the seller.   There are several lessons:

  1. He did not sue his agent, althought in my opinion,  she made the most mistakes.  They are friends.  So,  even when you screw up,  if your client likes you,  they are less likely to sue you.
  2. Don't trust anyone.  In my classes,  I teach a "trust but verify" approach to doing Buyer due diligence.  And,  this isn't about home inspections.  The buyer and their agent need to be suspect of everything without being paranoid.  Even when you are dealing with someone like a major Title Company,  don't assume they are doing it right
  3. There was a shared road/driveway.  This is quite common but I am not sure that agents really see the potential dangers here. This should tell you that there are easements.  You need to get the underlying documents so that the buyer can find out where they are,  what rights they have and whether they are giving or getting the easement.  Also,  there should be some kind of road agreement.  If you will look back on an earlier post,  I went into great detail about the issues surrounding road agreements.  Without a good one,  it could really be a problem when it comes time to make repairs
  4. Parcel maps -  the one that you typically get with your prelim is impossible to read because it is too small.  Buyers agents should order a full sized map,  with your property on an 8 1/2 by 11 page.  At least you might have some chance to see where the easments are
  5. But,  that leads me to another problem.  In the case above,  there were multiple easements and it was complicated.  I took the position during the deposition but a complicated parcel map is outside the capabilties of most agents.  And,  when that is so,  the buyer's agent should contact the Title Department of your closing company for help. 
  6. When you need a lawyer -  you will remember that the NAR Code of Ethics says that when you are over your head,  you should advise clients to contact a lawyer.  Sometimes,  I find agents are reluctant to do that but it is important.  In this case,  when they saw the complicated prelim/easements they should have advised.  And,  are you,  as an agent,  really qualified to determine if an existing road agreement is sufficient or deficient?  And,  what if there is no road agreement,  which is quite common?  Again,  set your client up with an attorney.  You wil note that I said,  set them up.  Too often,  I am involved in cases where the client goes to an attorney who is not a real estate attorney.  Not only are they less qualified but will cost your client more money as they learn at your clients expense.  You don't tell your client to call a roofer,  you refer them to a roofer.  We should be doing the same with attorneys
  7. At signoff,  the agent admitted she did not review documents.  Again,  too often,  we rely too much on the Escrow or closing officer to explain things.  Let them do their job but remember,  you are the one that knows the most about the transaction.  Again,  it is a trust but verify approach.  Some of the top agents I know,  arrive at the signoff 30 minutes early to review documents before signoff.  And,  yes you should be at the signoff
  8. Don't remove contingencies:  If there is any issue still outstanding,  do not remove contingencies,  even if your time is up.  It is better protection to the buyer that you write an addendum,  asking for further information and extending the contingency.  Worst case is the seller refuses to sign it,  then the buyer would have to make a decision
  9. Beware of the contract:  Too often,  when agents are explaining the contract to the client they fail to explain the buyer's duties to protect themselves.  It is common that buyers are warned :
    1. Investigate everything.  So,  when they don't,  they have some liability
    2. Don't trust disclosures -  all sellers are not dishonest but seller disclosures can be a little iffy.  So,  warn the buyer that they should "trust but verify"  (there it is again) any seller disclosures
    3. City/county records:  I know agents don't want to get involved in ths but buyers should be advised to check out what is in the file at the city or county.  I have been on several lawsuits where,  had the buyer done that,  there would not have been a lawsuit
    4. Nieghborhoods - recommend that your buyer walk,  not drive,  the neighborhood,  talkng to neighbors.  Always someone doing yard work or walking a dog.  Buyer can lern about the issue before closing,  instead of after.

Have to run.  Am teaching a class on contracts today at the board.  Good selling

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Guy Berry

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Comments (7)

Donna Harris
Donna Homes, powered by JPAR - TexasRealEstateMediationServices.com - Austin, TX
Realtor,Mediator,Ombudsman,Property Tax Arbitrator

Sounds like a very interesting lawsuit, 10 years later.  What's the statutes of limitations there?

Jan 23, 2009 04:56 AM
Guy Berry
Real Estate Expert Witness Support - San Jose, CA
Real Estate Broker and Legal Expert

In california,  the statute changes based on the legal theory.  For misrepresentation,  it is 3 years from discovery.  We lost this argument at an earlier hearing. 

Jan 23, 2009 05:02 AM
Leslie R. Willis
RON NEFF REAL LIVING - Chillicothe, OH

Just a thought, here in Ohio we have title insurance and of course the old E&O insurance.  Wouldn't these two types of insurances cover the issue(s) at hand?

 

 

Jan 23, 2009 05:06 AM
Guy Berry
Real Estate Expert Witness Support - San Jose, CA
Real Estate Broker and Legal Expert

Leslie,  the buyer is suing the seller for non disclosure because there were parking easement, a 40 ft right of way etc along with the other issues.  E/O protects the agents but not the seller.  yes,  they sued title and won but they still have right to sue the seller

Jan 23, 2009 05:13 AM
Leslie R. Willis
RON NEFF REAL LIVING - Chillicothe, OH

So you are saying that these things were not previously recorded or disclosed?  And the buyer unknowingly signed the paperwork at closing granting these easements and etc?

Do agents in your area go to the closings and pay attention to what is going on?

I know we can't be giving legal advise but when presented with a paper to sign granting easements etc.....I know my ears perk up. 

 

Jan 23, 2009 05:31 AM
Richard Weeks
Dallas, TX
REALTOR®, Broker

Sounds like a very interesting case.  With the way the economy is we will see more and more law suites.   I love your statement "trust but verify"

Jan 24, 2009 02:42 AM
JC Melvin - Commercial & Business Broker
JC Melvin - KW Southwest - Las Vegas, NV
The ONE Thing Workshop Trainer

Thanks for the goog insight and information. It is very interesting what prompts people to sue, especially 10 years later? JC in Vegas

Jan 24, 2009 06:32 AM