26 Sep 10 Ways to Mess Up a Real Estate Transaction
Anyone who has been involved in real estate for any length of time will tell you there are a seemingly endless number of ways to foul up a real estate transaction.
Commercial real estate transactions can get complex. Each city and county has its own special rules, regulations, taxes, forms, and procedures. Each of these must be followed or problems and extra expenses will ensue.
Here are ten of the most common errors.
- The seller does not have authority to sell the property.
This sounds simple, but you would be amazed at the ways this problem can occur. Sometimes it’s due to legal intricacies of inheritance, marriage or partnerships.
- The purchase and sale agreement contains an incomplete or inadequate legal description.
An ambiguous or incomplete description of the property that’s changing hands can cause all sorts of problems as the deal is in the closing stages. The mailing address is not an adequate description of the property.
- Zoning is inconsistent with intended use.
Ignorance of zoning laws in effect in a particular area can make a property completely wrong for its intended use. When buying or leasing a property you must be thorough in your understanding of the applicable zoning laws.
- Failure to pay earnest money or follow earnest money provisions
Earnest money is money the buyer pays the seller to show good faith when offering to purchase a property. If that money is not paid by the agreed upon date, or is paid by a check that is dishonored by the bank, that is considered a breach of contract and can stop the transaction in its tracks.
- No meeting of the minds in the purchase and sale agreement
If one person makes a written offer to purchase a property and the other person makes changes to that written offer, there is no agreement until both parties agree to and initial any changes.
- Balance of the loan will be paid off with promissory note and deed of trust and then the note and deed of the trust are not attached.
The purchase and sale agreement will be financed by a promissory note and secured with a deed of trust. If these are not attached at closing then there is no sale. All documents must be collected together and in order at closing, including the promissory note and deed of trust.
- All agreements are not in writing.
Everything, every part, every important agreement in a real estate transaction must be written down. As Samuel Goldwyn said, “a verbal contract is not worth the paper it’s written on.”
- No one confirms that seller disclosure form is filled out correctly.
It is a legal requirement that the seller of real estate certify that any existing defects of which they are aware have been disclosed to the buyer, and that any prior defects have been repaired. A buyer must make sure this information is provided, is thorough, and is certified. The types of things this includes are cracks in the foundation, electrical defects and plumbing problems.
- Allowing seller to stay in possession after closing without an airtight possession agreement.
The inclusion of a “possession due on sale” clause is highly advisable. Without this, many potential legal and logistical problems can ensue.
- Failure to clearly indicate what objects on the premises the seller is entitled to remove.
You need to have a written addendum to the purchase and sale agreement clearly indicating what fixtures and other movable objects stay and which ones the seller may take with them.
Whether you’re interested in buying, selling or leasing in the Northeast Los Angeles area, give me a call and I can help guide you through the process and help you avoid the pitfalls and errors that are a natural part of real estate transactions.
“Let us help you make an informed real estate decision on your next transaction. Whether you’re buying, selling or thinking of leasing commercial space or just have a few questions that need immediate answering, give us call. We are here to help you make the right move”.
Mike Tolj (323) 258-4946
You can read more on this subject at the American Bar Association Website: