Let the Buyer Beware in Real Estate Transactions

7/28/2019 Let the Buyer Beware in Real Estate Transactions

http://slidepdf.com/reader/full/let-the-buyer-beware-in-real-estate-transactions 1/9

Let the Buyer Beware in Real

Estate Transactions

Edward L. Robinson

Joseph, Hollander & Craft LLCWichita, Kansas

1



Expectations v. Reality

• The sellers will be forthcoming with negative

information about the property

• The real estate agents will disclose what they

know about the property

• The inspectors will catch any problems

•

The title insurance will cover what didn’t getdisclosed

2



Expectations v. Reality

• If there is a problem with the property, the

sellers have little incentive to disclose it

• The disclosure obligations of sellers are limited

• The disclosure obligations of agents is limited

• The scope of property inspections is limited

•

The coverage of title insurance is limited

3



The Bottom Line

• Real estate buyers must be vigilant and not

expect to have a safety net if something goes

wrong.

• The best way to do this is hire the best

professionals and know the limits of their

services.

4



The Seller’s Obligation

• Contract for Purchase and Sale of Real Estate (pp. 1-7) – § 20 (p. 4): The Buyer has carefully examined the Property and the Improvements, and in

making the decision to buy the Property, the Buyer is relying wholly and completely uponBuyer's own judgment and the judgment of any contractors or inspectors Buyer may haveselected.

– § 20 (p. 4): Buyer agrees that the purchase price was negotiated after consideration of alldefects in the Property of which Buyer was aware or reasonably should have been aware.

–

§ 20 (p. 4): The parties agree and the Buyer represents that once the Contract has in fact beenclosed, that Buyer in all respects again has acknowledged that Buyer has accepted thepremises without condition or qualification.

• Seller’s Property Disclosure – (p. 8): The Seller discloses the following information with the knowledge that even though this

is not a warranty, prospective Buyers may rely on this information in deciding whether, and onwhat terms, to purchase the subject real property.

– (p. 10): I agree to verify any of the above information that is important to me by anindependent investigation of my own. I have been advised to have the property examined byprofessional inspectors.

5



The Agent’s Obligation

• BRRETA

– Seller’s Agent and Buyer’s Agent (pp. 11-12)

• To their own client: utmost good faith, loyalty and

fidelity; disclose all adverse material facts actuallyknown

• To the other party: no duty or obligation, except

disclose all adverse material facts actually known

– Transaction Broker (p. 13)• No requirements, unless acting as a designated seller’s

or buyer’s agent

6



The Inspector’s Obligation

• As of July 1, 2013, there will be no regulation of homeinspectors in Kansas

• Expect home inspectors to limit their liability to thepurchase price of the inspection ($300-$500)

• Limits of home inspections (pp. 14-15) – No educational or training requirements for inspectors

– Visual only

– Limited scope

–

Limited liability• Note: there are excellent, qualified inspectors

throughout Kansas. The key is asking for qualificationsand references.

7



The Title Company’s Obligation

• Issue Title Commitment (pp. 16-21)

– Commits the title company to issue a title

insurance policy subject to the requirements,

exceptions and conditions

• Issue Title Insurance Policy (pp. 22-28)

– Exclusions (p. 23)

– Conditions (p. 23)

8



Case Study: the Perfect Storm

9

Documents

Let the Buyer Beware in Real Estate Transactions