It makes sense to have a sense of law, or legal morality, behind the idea of “owning” land. Is that land truly yours? This deed or title says so! As they always say in the legal industry -- if it’s in writing, it’s legally binding. Such is the case for the niche of real estate law, a particularly complex practice varying from state to state in terms of what’s required in a real estate transaction. Such requirements are particular for obvious reasons: we’re talking about a pretty big ticket item here, a house.
Once you know how real estate law works, though, discussing issues with a broker, a real estate attorney, agent or whoever, wouldn’t make you seem so much like a fish out of water or a duck in a sand trap. Rather, you’ll be the legal partner in probably one of the greatest transactions of your life. So pay close attention here. This could get pretty complex.
Legal terminology and full disclosure
That agreement between the broker, seller and buyer is crucial. Hence, the words better make both legal and literal sense. This is especially the case when each state has various specific requirements when it comes to real estate law. If you’re a broker, there’s one priority on your plate: make sure you consult with a good real estate lawyer. Why? Because as good a real estate broker can be, legal mistakes are common, such as the failure to represent the specific details of the property and to clarify who you would represent. This is especially confusing when dealing with dual agencies.
Common advice (besides consulting with an attorney) is to fully disclose all information. Make copies of just about anything in question. Don’t leave a single page out. Additionally, a broker has to detail specifically in documentation such concepts as “zoning,” “utility usage” and “square footage.” Touching on everything is key. If anything is ever left out, it could result in litigation issues.
Even consider certain fiduciary duties. If a realtor or broker is a fiduciary, that individual has specific duties entrusted to him or her to always attempt to get the very best deal out of a property, disclosing any potential defects within the property and implementing all kinds of state-specific language especially in exclusive listing agreements.
In this day and age when the real estate market has sat in the ashes of a fiery downpour, legal precedence is that much more important. Brokers must be on the up and up about the law.
The new considerations of this day and age in real estate
Speaking of the state of the real estate market, it’s a tough battlefield out there. Having the legal power to back you up, though, will keep you relatively unscathed. There are some facts to keep in mind, though, such as the nearly 70% of tenant-owner legal disputes result from late rent payments. It doesn’t seem like much of an issue when you think about it, but when it comes to money in a crashing market, something has to be done.
Why is it such a big deal? It’s simple. Because of the difficulties in the real estate market, many landlords are actually quite reluctant to go the standard route and file for eviction, even for tenants who end up defaulting on their payments. It has been getting that much more difficult to find new tenants. No tenants means no money. Instead, landlords file a simple “breach of contract” lawsuit.
To muddy the waters even more, property liens these days often do more harm than good to brokers for obvious reasons. When lenders don’t like to approve of documentation for property titles these days, it’s that lien that’ll actually penalize a broker by essentially locking down that owner with no way to provide for those broker’s commissions. The owner can’t sell the property; the broker can’t make any money.
Even worse, developers won’t pay the full commissions until construction actually begins. That sometimes doesn’t turn out so well for obvious reasons -- scheduling, weather, etc. etc. -- and if the developers don’t pay, the workers don’t get paid, the workers don’t show up, the house doesn’t get built, the deals go sour, and the tenants don’t even get a chance to move in because the home hasn’t even been built, yet! It’s not a pretty sight.
Moreover, frivolous lawsuits these days become the norm, because a lot of tenants and visitors try to look for an easy way out of an agreement by addressing a so-called “bad” relationship of conflict between the landlord. An example of a type of lawsuit would be a “slip-and-fall” issue. You get into some kind of minor “accident,” and ultimately the responsibility falls on the head of the owner of the house: the landlord. You can do some research of news in real estate law to find that any particular landlord might’ve had to deal with a $125K lawsuit regarding a mouse infestation. Again, it’s not a pleasant picture.
What it takes to make it as a real estate broker
Costs like that ultimately affect brokers, shrinking commissions and diminishing future transactions, thereby further crushing the real estate market. What can a broker do? Simply do the research. Before even addressing the possibility of a real estate transaction, ensure that everything’s kosher with a property title, that you’re dealing with only the property owner, and literally become proficient in the legalese lingo.
In essence, make sure you’re armed to the teeth! -- before you jump into the lion’s den. The real estate market is a dangerous place these days. Be prepared.
About the author: Matt is the CEO at UpCounsel - the fastest growing legal solution for businesses. You can follow more of his legal tips on twitter @upcounsel.