The process of buying and selling real property can be a very emotional experience. It may also be a very costly, time consuming, and disruptive of the goals you are attempting to achieve, if not done properly. My first piece of advice would be to engage the services of professionals, real estate brokers, attorneys, and home inspectors among them. To illustrate the point, let’s examine some common myths.
Myth #1: If I list my property with a broker for a certain price, financing terms, etc., and he shows the property to a buyer who is prepared to go to contract and meet these terms, I can still change my mind and not owe the broker a commission. False: The listing agreement is an employment contract between the seller and broker, and courts have awarded commissions to brokers where the seller has backed out of the deal. This is why I recommend that a seller solicit legal advice before entering into a listing agreement with a broker.
Myth #2: I do not have to pay the broker’s commission unless the title passes. False: Unless the listing agreement states that, courts have awarded broker’s commissions when title didn’t pass. To avoid this, an attorney would insert a clause in the listing agreement stating that a commission is not due unless title passes, except for willful default by the seller.
Myth #3: Once I have accepted an offer from a buyer and we are prepared to go to contract, the broker should stop showing the property. False: An offer by the buyer and an acceptance by the seller are not binding until a written contract has been signed by both parties. Even then, there are likely to be conditions that will have to be met such as financing, home inspection, title reports, before the parties are obligated to perform. The best one to determine when the broker should stop showing the house is the seller’s attorney.
Myth #4: If I have a title search done before I buy the property and everything is alright I don’t need title insurance. False: Title insurance insures the buyer against any ownership claims that may arise after the buyer has taken title. If a lender is involved they will insist that the buyer purchases title insurance protecting the lender equal to the amount of the loan. The policy that protects the buyer is equal to the purchase price. Both are paid for by the buyer.
Myth #5: If I tell the broker that I am selling the house “as is”, those words mean what they say. False: In a sense, they might mean what they say but the buyer’s attorney is going to insert into the contract conditions regarding marketable title, free of all liens and encumbrances as well as evidence that the property complies with local zoning and has certificates of occupancy required by the local Buildings Department. Other conditions regarding the property are likely to be inserted.
Myth #6: It is automatic for the seller to pay the broker’s commission. False: While it may be the common practice, either or both seller and buyer may pay the broker’s commission. It’s a matter of agreement between the broker and the seller and buyer. By anti-trust law, there is no such thing as a “standard” commission, which is not to say that there isn’t a typical commission.
Myth #7: The broker’s commission is earned when title passes. False: While it is typically paid at the closing when the title passes, it is earned when the broker has performed his responsibility. Commission disputes have often taken years to resolve in the courts, and when finding in favor of the broker, they have been awarded the commission plus interest.
Myth #8: If the light fixture, or washer or dryer that was supposed to go with the property has been removed, I don’t have to close. False: Like with any contract breach, you must allow the breach to be remedied, for example, a reasonable substitute if possible or a credit equal to the approximate value of the item.
Myth #9: If I list my property with a broker, I can refuse to allow buyer’s brokers to show the property to their buyer clients. False: The seller represented by a broker cannot refuse to cooperate with a buyer represented by a broker. However, the seller is not obligated to pay the buyer broker’s commission. That’s a business decision that should be discussed with the seller’s broker and attorney.
Myth #10: I can refuse to sell my house to whomever I want for any reason I want. False: Federal, State, and Local Fair Housing Laws apply in the sale and renting of real property.
These ten issues by no means constitute all of the myths and pitfalls with respect to selling and buying real property.
Caution should be exercised. Never assume. As stated earlier, look to the professionals for guidance.