Due  Diligence  in  Seller  Representation  in  Residential  Real  Estate  Transactions

RE97R15

Jody  OBrien

Definition

due  dil·i·gencenounLAWreasonable  steps  taken  by  a  person  in  order  to  satisfy  a  legal  requirement,  especially  in  buying  or  selling  something.

Agent – Attorney -­ Consumer

• Role  of  the  agent

• Role  of  the  Attorney

• Role  of  Buyer/SellerSpecial  Needs

Diligence

Other  Providers

You  are  not….• Home  Inspector• Septic  designer,  installer  or  inspector• Town  official• Plumber,  electrician,  contractor,  roofer  etc.• Appraiser  or  Assessor• Engineer• Surveyor…….

Unless  you  say  you  are…..then  you  are!

• DeWolfe V  Hingham  Center  Realty

• Zonning• Commercial  v  residential

• Representation  made  in  writing  (ad  &  MLS)

• Representation  made  by  agent  in  verbally  to  buyer

• Quinlin V  Clasby• Zoning• Multifamily• Representation  made  by  agent  in  MLS

• Representation  made  during  showing

• No public records verification

• Disclosure becomes your representation

• Public records obtained

• Owner interviewed• Disclosure becomes

others

DUE  DILIGENCE  CHECKLIST

Public  Record• Have  a  checklist• Have  a  reason  for  more  or  less

• Don’t  forget  to  read  and  review  the  gathered  documents

• Don’t  interpret,  advice  or  explain  beyond  your  scope  of  expertise

• Document  all  discoveries  and  activities  beyond  your  checklist

Checklist• How  does  your  checklist  compare  to  the  definition?

– “Reasonable  effort”• What  are  the  boundaries  of  your  research?• What  are  the  red  flags?• What  documentation  will  your  checklist  produce?• What  responsibility  will  the  seller  have?• Does  the  seller  acknowledge  that  responsibility?• What  responsibility  will  the  buyer  have?• Does  the  buyer  acknowledge  that  responsibility?

• Lets  look  at  some  items  you  may  want  to  consider  on  your  Due  Diligence  Checklist…….

Registry  of  Deeds• Deed  review  

– Rights  of  way,  easements  – Ownership– Life  estates  – Restrictions,  covenants  – Legal  description  of  property

Registry  of  Deeds• overview  

– Liens  – Orders  of  Notice  – Plot  Plans– Title  V  restrictions

Town/City  Hall• Field/Assessor’s  card  review

– Accuracy  – Owners– Dimensions

• Lot  size• House  square  footage

• Taxes– Paid/unpaid– Betterments

Town/City  Hall

Permits• Filed  and  fully  executed  

– Building,  plumbing,  electrical,  etc.  – Completed  and  signed  off  

• Special  permits  or  variance

Sellers’  Statements  – Who  should  fill  out  the  form  

– Full  disclosure  of  all  known  defects  

– Yes  – No  – Unknown

Home  Inspection– Accompany,  or  not?  – Reports– Negotiation– Repairs– Documentation– Disclosure

CONDOMINIUMS

Condominiums  

• Master  Deed  • Declaration  of  Trust  • Unit  Deed  • Bylaws,  Rules  and  Regulations

• Budget,  Special  Assessments,  

• Pending  litigation• Owner  occupancy,  Number  of  units,  owned  by  more  than  one  owner

• Reserve  Study• Minutes,  etc.  • First  right  of  refusal  • 6d  Certificate  • Rental/pet  restrictions  • Management/Trustees  • Certificate  of  Insurance  

• HUD  approvals  

MULTI  UNIT  DWELLINGS

Multi-­Unit  Dwellings  

• Tenants– Tenancy  agreements/Leases  

• In  writing  v  verbal  • Notice  required  to  accommodate  sale,  or  transfer  

– Pending  litigation  or  evictions  – Security  deposits/Last  month’s  rent  held  in  MA  banks,  if  held  

• Occupancy  certificates  • Verification  of  units  permitted

In-­laws  and  Accessory  Units  • Community  zoning  bylaws  vary  • Restrictions  • Transferability  

Environmental   Issues• Contamination,  mold,  Asbestos,  EMF,  Radon• Underground  tanks  • Wet  Lands

– Local  -­ Conservation  Commission  – State  -­ DEP  (Department  of  Environmental  Protection)  

– Federal  – EPA  or  Army  Core  of  Engineers– Documentation

• Orders  of  Condition  • Certificate  of  Compliance

• Rivers  Protection  Act  

Lead  Paint  Disclosure  – Required  disclosure  for  sellers  of  houses  built  before  1978

– “Does  this  house  have  lead  paint?”– Proper  completion  of  the  form  – Documentation

• Inspection  report• Certificates  of  Compliance,  • Risk  Assessment• Letters  of  Interim  Control

CONTRACTS  TO  PURCHSE

Offers  and  P  &  S• Dates• Note  specific  clauses  and  the  bases/origins  for  the  language  

• Not  an  abdication,  or  waiver,  of  your  common  law  duties  

• Verification  of  accuracy  of  information  – Names,  addresses,  Book/Page   references  

• “AS  IS”  CLAUSES  – If  willful  non-­disclosure  of  known  defect  is  found,  clause  may  not  survive  in  court  

PRE  CLOSING  TO  CLOSING

• Final  utility  readings  (electric,  gas,  water/sewer,  etc.)  • Smokes  and  carbon  monoxide  • Tax  Stamps  • Municipal  Lien  Certificate• Title  V  • TRID  timeline• Walk-­through  

THINGS  TO  CONSIDER

• Walking  the  line  between  licensee  and  attorney• Agency  relationship  and  Fiduciary  DutiesLearn  to  recognize  red  flags  and  guide  Sellers  to  the  proper  authoritative  source  

• If  you  do  not  know  the  information,   know  where  to  find  the  information  

• Recognize  the  limits  of  your  own  knowledge  • Do  your  homework  and  research  • Be  the  source  of  the  source  • Remember,   licensees  are  not  attorneys  unless  they’ve  passed  the  bar!  

Resources• NAR

– Legal  Scan  – quarterly  review  of  legal  cases

• Richard  Vetstien’s Blog– Massrealestatelawblog.com

Jody  O’BrienThe  RE/Education  Company

Committed   to  Professionalism  in  Real  Estate  through  Education

Blogwww.reeducator.com

Presentationwww.slideshare.net/ReEducationCompany

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