Below is a list of the most frequent topics of dispute that can often be softened with the assistance of a real estate attorney:
1. Repair Items.
In most residential real estate transactions, the buyer has the opportunity for a home inspection. Findings can range from the identification of major structural defects in the roof or foundation to minor items such as sticking doors and windows. Buyers, who understandably want their new home to be as close to perfect as possible, often ask that seller fix everything, or reduce the price so buyer can complete the work. Sellers, who have lived with the minor problems for years, often take the position that what was good enough for them is good enough for the buyer. In some cases, sellers feel insulted. An experienced real estate attorney can guide the parties through this common area of dispute and help both sides find common ground. *Beware of “as is” language. If the home is being sold “as is” we still recommend having a home inspection so that you are fully aware of the condition of the systems and structural integrity of the home. However, the conditions that may be uncovered in the inspection are not open for negotiation. The price usually reflects that the home is not in top condition.
2. Holdback of Funds.
In cases where the parties agree that repairs will be done prior to closing, a frequent issue arises when the closing date arrives and the work is either unfinished or doesn’t meet the buyer’s expectations. The issue is even more common with a newly-constructed or renovated home. In this instance, buyers are likely to request that a portion of the money due to seller be held in escrow as a sort of insurance policy that seller will complete the unfinished work, or be made available to buyer to pay for completion. Sellers, particularly with new construction where the work is warranted, take the position that their obligation is by contract, and a holdback is unnecessary. We strongly recommend that in transactions involving repairs or construction, the holdback issue be clearly and specifically addressed in the purchase and sale agreement, in order to avoid a disagreement at the closing.
3. Appliances and “Built Ins”.
This issue has two sides, depending on whether appliances are updated or “tired.” In cases of new or updated appliances, seller will sometimes want to exclude them from the sale. When they are “tired” the buyer will want them removed, and will try to negotiate a price reduction. The rule of thumb is that the stove, dishwasher, and built-in microwave stay; washing machine and dryer go with seller, and the refrigerator goes if it is freestanding, and stays if it is built-in. The standard form also determines that “built in” items stay with the home. Sellers often try to negotiate to take their favorite lighting fixtures and curtain rods with them.
4. Deposit Amount
The deposit amount may or may not become a topic of dispute. Generally, if the closing date is scheduled within a month or less of the signing of the P&S, it’s a fairly minor issue. When the closing isn’t scheduled for more than a month, however, buyer will try to reduce the amount of their money that is held in escrow for the deposit. Seller, however, has an increased incentive to keep the amount of the deposit high (around 5%) because if the closing doesn’t occur the damages are limited to the amount of the deposit. The longer the house is off the market without selling, the more a seller stands to lose.
5. Closing Date
There are several factors that create disputes, or at least negotiation, over the closing date. Seller is often concerned about coordinating the closing of the sale with the closing of their next purchase. Typically, seller must have access to the funds from their sale to buy their new home. The availability of the funds can sometimes be delayed a few hours or even a day until documents can be recorded. Buyer might be in a similar position; waiting on proceeds to put toward the new purchase. The suggested remedy from seller’s perspective is to reach an agreement where seller remains in the property for a day or two until the funds clear and they can buy their new home. These agreements, typically called “use and occupancy agreements,” are more favorable to sellers than buyers. Melanie Hagopian & Associates strongly advise a purchaser of new property to speak to a real estate attorney before entering into a use and occupancy agreement.
Another frequent point of contention surrounding the closing date arises when the closing involves new construction. There are many reasons why new construction may take longer than expected, and builders load their proposed purchase and sale agreements with all sorts of extending provisions to allow them the extra time. Buyers must be diligent in these instances to limit extension periods in which extensions affect the buyers’ interest rate and other important deadlines. It would be foolhardy for Buyers of new construction not to have legal representation during the negotiation of a purchase and sale agreement.
While disagreements during the Purchase and Sale process can result in war stories for lawyers to tell, the prudent approach is to create an agreement that will govern the rights and obligations of the buyer and seller should the unexpected occur.