Ways To Reduce The Legal Risk Of Your Real Estate Transaction ...

From a legal perspective, real estate sale agreements are the way in which buyers and sellers allocate the risks attached to the purchase and sale of real property. For example, the seller ordinarily bears the risk of a casualty loss (fire, storm damage, vandalism) on the property until the date of closing. This allocation of risk is evidenced by a contract term requiring the seller to maintain insurance on the property until the closing of the sale.

Disclosures

Buyers usually always assume the risk of latent (hidden) defects in the property by way of an ?as-is? clause in the purchase and sale agreement. To mitigate this risk, Oregon law and, to some degree, the sale agreement (depending on the sale agreement form) provide that most sellers of Oregon residential property must disclose known information about the property?s condition to potential buyers. If the seller fails to disclose a known defect in the property, the buyer may have a claim against the seller for breach of contract and, possibly, fraud. In other words, in Oregon ?as-is? means ?as-is, subject to the seller?s disclosures?.

Of course, the word ?defect?, like ?beauty?, is in the mind of the beholder. What is a quirk to the seller (sticky faucet) may be a defect to the buyer. Therefore, to mitigate the seller?s risk of a legal claim, the seller should disclose everything the seller knows about the property?s condition, past and present, defect or not. This is because, even if the seller is not liable for failing to disclose the sticky faucet, he or she likely will have to hire an attorney to defend the claim.

Inspections

Another mitigation of the buyer?s risk is his or her right to have the property professionally inspected. There are many kinds of inspections available for a buyer to choose from. If you are a typical real estate broker, you will recommend that the buyer have a general professional home inspection by a person licensed in Oregon to conduct such inspections, and you will rely on the general inspector to tease out the need for other inspections. However, general home inspections have their limitations. Fences, decks and outbuildings usually are not included. Sewer or septic tank inspections also are not included or cost an additional fee. And, as you may know, the inspector is not necessarily qualified to evaluate electrical, plumbing and HVAC systems. The inspector also will not move furniture, boxes and the like which may be particularly problematic when he or she is inspecting a basement or attic filled with boxes and old furniture. General inspections also do not include air quality or lead based paint inspections.

How To Proceed With Your Client

These limitations mean that, as a broker, you should discuss with your buyer how much information he or she needs about the house to be comfortable in going forward and advise the client to select the inspections needed to ensure that comfort. No one can eliminate all risk associated with the purchase of a new home but a candid conversation about the limitations of a general inspection and the buyer?s specific needs may result in the additional inspections the buyer needs to be assured that, for example, there are not high levels of allergens in the home the buyer?s asthmatic toddler will live in.

By the way, I recommend that buyers purchase all of their own inspections. Terms like ?seller will inspect and repair the furnace as necessary? are like candy to litigators who would want to know ?necessary in whose opinion??, ?what if it can?t be repaired?, etc. If the buyer schedules and pays for the inspection, the buyer will know exactly what work should be done and can negotiate for the exact repairs he or she wants.

Source: http://brookelawoffice.com/uncategorized/ways-to-reduce-the-legal-risk-of-your-real-estate-transaction

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