Real Estate Investing

Let me preface this by saying I am NOT an attorney, I have never studied law, and should you have any legal questions, seek the opinion of a legal professional.

Liability is actually a nine-letter word, but it may as well be the four-letter kind in the real estate dictionary.  An agent recently shared her experiences with a seller who had already moved out-of-state but had a swimming pool in the back yard.  The pool was behind an eight-foot fence.  There were two sets of gates any trespasser would have had to go through to access the water, yet she was still a nervous wreck.

Why?  Because the son of the seller lived nearby and he’d come over every day or two to check on the house.  When he left - every single time - he’d leave at least one of the gates wide open.  The agent begged the seller to tell the son to close the gates, but when the gates were left open repeatedly, she took matters into her own hands.  She bought two padlocks, placed them on the gate latches, and her liability is hopefully gone.

A swimming pool can be a huge liability issue for an agent (on both sides of a transaction) and a homeowner.  The implications for the homeowner are obvious - if they haven’t made efforts to make the water inaccessible for trespassers, neighbors, children and something happened, they could be held liable.  For the listing agent liability is less clear, but if we are knowledgeable that a pool is accessible to someone and the owner is absent, we must make every effort to protect both the possible drowning victim AND the absentee homeowner.

But how could the buyer’s agent be liable?  The same way another agent was sued because their buyer went into an attic space and didn’t walk on the rafters.  They put their weight in the wrong place, went through the floor and fell out of the living room ceiling.  They buyer sued the agent because the agent didn’t clearly warn the buyer to “Watch your step!”  (This is why we often see signs at homes under construction that say “Warning: Construction area.  Enter at your own risk.”)

The buyer’s agent should warn their clients, “Careful! There’s a swimming pool!  Watch your children.  Don’t drown!”

We face all kinds of potential liability issues as Realtors every single day.  Ryan Shaughnessy, a Realtor in St. Louis, wrote an excellent article about who is required to disclose what on his Active Rain site.  I think his best tip for avoiding liability is,

Where appropriate, suggest to the owner/seller that they retain a building inspector to conduct a building inspection prior to the listing of the property for sale so that the potential problems can be repaired before the property is listed for sale.  Verify that pre-listing repairs are documented and accurately disclosed to the prospective purchaser.  The resolution of problems prior to listing can lead to a quicker sale at a higher price.

Read the rest of his post for some great insights.

Photo from Me’nthedogs via Flickr.

Every single day in real estate there are new challenges to address.  If it’s not problems from a home inspection, it could be appraiser issues, dealing with another agent who is either uneducated or overly prideful, or a myriad of other situations.

Today I talked with another agent who told me he received an upsetting phone call from a buyer’s agent he worked with over a year ago.   Last year, the transaction went smoothly from contract to close.  But there was a little item - a hidden glitch if you will - that has reared its ugly head.

The buyer’s agent said the storage building in the back yard had not been paid off, as promised in the contract by the seller.  Now, the company that financed the little shed is in the process of repossession and showed up this week with a truck to haul it away.   I think you could put “Shed Repo Man” in the top 10 list of jobs I do not want.

What is the liability for the agent?  None.  The liability lays with the former homeowner (seller) who in the contract agreed to pay off any liens or leased items prior to closing.  As agents, we review the property condition disclosure form to see if the “YES” is checked for the item that states, “Is any system, equipment or part of the property being leased?”  (This does include a lease purchase agreement for a storage building!).  In the actual contract for the purchase and sale of a home, it specifically outlines who is to pay for leased items prior to closing.

So the seller from a year ago could clearly face some litigation.  Of course, I’m NOT an attorney so can’t say for sure how it would all play out.  I just know if I was to sell, I’d make sure everything that was to remain with the property would paid so it wouldn’t come back to bite me later.