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Closing Issues That May Lead to a Real Estate Dispute

Here’s what you need to know about closing issues that often lead to a real estate dispute. Learn more from Cherewka Law.

Buying or selling your home can be stressful and seem complex. Real estate deals involve large amounts of money and important decisions are involved, and emotions can run high.  Emotional decisions can lead to poor decisions or cutting corners, which can cause disputes before or after your closing.  To avoid disputes and complications before they ever happen, it is crucial to work with a competent real estate attorney to protect you and your investment.

Here’s what you need to know about closing issues that often lead to a real estate dispute.

Most Common Real Estate Closing Issues 

1. Failing to Disclose the Defects
Pennsylvania law requires that all parties selling real estate must disclose any defects or problems with the property, that they are aware of.  When the property’s seller fails to disclose all the property’s defects.  Often Sellers will try to omit certain facts, downplay issues, conceal items that may show up in an inspection, or discourage a buyer from getting an inspection all together.  After closing, if a Buyer can prove that the Seller knew about a defect and didn’t disclose it or concealed it, they can be held liable for the cost of remedying the defect.

For Buyers, it is essential to have a home inspection done and to investigate the property for any potential problems or costs that could pop up down the road.  Buying a house is the largest investment most people will make and it is vital that they be aware of major damage or necessary repairs.  A home inspection can often become a negotiating point, especially in a seller’s market, and many buyers will opt to forego the inspection in order to present a better offer.  Consider some alternatives that allow for a home inspection while keeping the offer desirable to a seller:

  • If you are very interested in a particular home, ask the listing agent if you can bring a home inspector to showing before even making an offer. This allows you to have an inspection done without having to include any contingencies in an offer, if you make one.  The downside is that there is no guarantee that your offer will be accepted after having the inspection done and you will be responsible for the inspection costs.  Using this tactic several times can add up.
  • Consider a very short inspection contingency period (2-3 days), and have your inspections done quickly. To assure a seller you are not looking for small repairs or to “nickel and dime” them, you can add a clause stating that the inspection is for informational purposes only, this allows you as the buyer to back out of the sale during the 3 day inspection period if there are major issues such as water leaks or structural issues, but will not allow you to ask for repairs from the Seller.
  • As an alternative to an informational only inspection, offer an Inspection Aggregate, which is an additional deposit (usually $5,000 – $10,000) to be held by the Seller’s agent and used to cover any repairs requested by the Buyer. This shows that any small repairs that are requested before closing will be covered by the Buyer and not cost the Seller any extra money.

2. Problems with the Purchase Contract
Since selling a property is full of complexities, sellers usually use standard forms to streamline the process. These forms include many sections that agents must fill out correctly. However, some situations call for special considerations that aren’t always included in the contract. If any party provided inaccurate information, this might also lead to an issue in the agreement.

Many real estate agents will write in the margins of the contract, or include a small one or two sentence clause to cover a special circumstance.  Many times these clauses are ambiguous and left up to interpretation by the parties.  Ambiguity is never good in a contract because it can lead to disagreement and eventually conflict or litigation.  Often realtors will use additional forms or addendums to the agreement, provided by the Realtor’s Association, but these forms can be too heavily relied on and misused at times.

If you are dealing with a special situation like a Seller who wants to live in the property after closing, selling large amounts of equipment or personal property, unique inspections or contingencies, it is always a good idea to have the contract reviewed by a real estate attorney.  Remember that an attorney should review the contract BEFORE you sign it.

3. Issues With the Deposit
If the real estate transaction falls through, there is likely to be a disagreement between the buyer and the seller on whether the deposit should be returned or not. It is important to make sure the contract is clear about when the deposit should be returned to the buyer and when the deposit can be kept by the seller.  Usually the Seller’s only remedy is to keep the deposit and the buyer’s only remedy is to have the deposit returned to them.  If the transaction is a high dollar amount or the buyer is going to have significant costs involved in preparing for closing, they may want to consider a clause that requires the seller to cover their out-of-pocket expenses if they breach the agreement.

No Guarantees Regarding the Timing of Closing

The Date and Time of Closing can be very important for a buyer or seller.  A seller might be relying on the sales proceeds for the purchase of their next property, and a buyer may have arranged for the move of their furniture or may have no where to go unless closing takes place.  While real estate professionals such as lenders, title agencies, attorneys, and real estate agents will always make the best effort to meet deadlines and accommodate their clients, complications can arise and delays can happen.  It is always a good idea to build at least a few days cushion in to your plans.  Try to avoid closing on the sale of your house, and the purchase of your new house in the same day.  If you must close same day, make sure your second closing is much later in the day.  It is also important to confirm check and wire policies for both title companies, some banks have earlier wire cut off times like 3:00 or 4:00 p.m. and may not be able to wire funds until the next day.

Wire and Bank Fraud

The number one national problem growing within the real estate industry is banking/wire fraud and cyber security threats.  Cyber criminals understand that real estate is often where large amounts of money is changing hands very rapidly and use this as an opportunity to steal from unsuspecting buyers and seller.

Always confirm over the phone with the title company, real estate agent, or lender, anytime you are giving or receiving instructions for transferring or receiving money.  Confirm wire instructions with the title company or bank, confirm how checks should be written out, and make sure you are comfortable.  If something doesn’t look right, be cautious and confirm with someone.

The most common scam is email hacking.  The criminals will hack into an email, usually the customer and not the bank or title company who use secured emails with encryption and firewall protection.  They will intercept wire or check instructions before they ever make it to your inbox and swap them with fraudulent instructions so the buyer or seller will wire funds to them instead of the proper place.  Calling and confirming will catch this issue 99.9% of the time.  Remember when calling a bank, title company, or real estate agent, never use the phone number in the email you receive but look it up independently.  Fraudsters often include a fake number so when you call to confirm, they will pretend to be the person you were hoping to call.

Work With a Real Estate Attorney from the Beginning 

For a real estate transaction to be successful, it is essential to involve your real estate attorney from the very beginning. If you’ve progressed in your transaction to the point that you’re about to have a signed agreement of purchase and sale, be sure to inform your lawyer right away. Let them know you are thinking of buying or selling a home and you would like to have them act on your behalf. Your lawyer will then review the agreement before allowing you to sign, advising you on what the conditions should be. Many real estate attorneys have an in house title company that can handle the closing and provide title insurance at the same rate as other providers in the area.  The advantage of using a real estate attorney is that buyer can take advantage of their knowledge and experience without the added cost of a real estate attorney.

Protect Your Rights With a Real Estate Attorney 

Given the intricacy of real estate transactions, it’s best to have a real estate attorney with you from the beginning, as they will do everything in their power to make sure you are protected and the transaction goes smoothly and without conflict. By knowing the closing issues that frequently result in a real estate dispute, you can work with your attorney to prevent them, giving you a smooth transaction.

Our team of real estate attorneys at the Cherewka Law, P.C. are committed to helping our clients with real estate transactions of all size and type, whether you are a buyer or a seller investing in residential or commercial property. We work closely with our clients to reduce risk, prevent unexpected costs, and secure a smooth closing. Our office also has an in house title company Paramount Settlement Services, LLC to help you with your closing and settlement needs.  Contact us today for a consultation.

Jan 25, 2022 | Articles, Real Estate

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