How Can a Seller Cancel a Real Estate Transaction?

As complicated as real estate transactions can be, it might sometimes feel surprising that any of us ever complete one. Luckily, even with all of the potential financial and legal pitfalls, most real estate transactions do close. But what if the seller decides to back out? Can the seller actually cancel once the transaction is open?

The simple answer is generally no, a seller cannot back out of the sale of a home unless it is done pursuant to the contract. There is no inherent right of a seller to change their mind. A seller can cancel only in the following limited situations:

  • The contract was not yet signed by the Seller. In order for a transaction to proceed both parties must execute the contract.
  • One of the seller’s contingencies was not met. Contingencies, written into the contract, function as a legal “escape” in the event that the deal is not working out for the seller. For example, the seller might specify that the sale of the home is contingent upon the seller finding another satisfactory place to live.
  • The buyer fails to remove a buyer’s contingency, such as securing a loan to purchase the property, and the seller thereafter properly cancels under the procedure set forth in the contract.
  • The home inspection uncovers some problems. In this case, the buyers might request repairs or a credit from the seller to cover the cost of repair. The seller can refuse to provide a credit or make repairs, in which case the buyer might cancel the transaction which relieves the seller of the obligation to sell the property.

If one of the above events occurs, seller or buyer can cancel the transaction. There are specific steps that must be followed in order to cancel the transaction, however, and your real estate agent should handle those steps on your behalf.

Occasionally, a seller might try to get out of the contract for another reason, and that situation can end up in court. The “specific performance” provision in most real estate contracts will legally force the sellers to complete their end of the transaction, should the buyers wish to take them to court.

Forcing a seller to sell the property is an expensive alternative for buyers. But as available properties become scarce, more buyers are seeking this remedy. A seller should seek legal advice before making the decision not to go forward with a sale because there are significant potential negative legal consequences for this action. The seller could end up not only having to sell the house, but also be responsible for the buyer’s attorney fees and costs.

Call our real estate attorneys for more information on buying and selling real estate. In particular, ask us to review any sale contract before signing it, so that we can best protect your interests in the transaction. If you do need to cancel a sale, we can advise you on how to legally proceed.

What Are Home Sellers Required to Disclose?

Selling a home is mostly viewed as a financial transaction, but it’s a legal one as well. Because sellers want the transaction to be finished on closing day, with no further entanglements, it is critical to disclose all known facts about the property during the sale process. Otherwise, it is possible to end up in court, defending oneself against allegations of concealing important information. The law requires most types of information to be disclosed, with many facts falling under the following categories. The legal standard is anything that might affect the value and desirability of the property.

Lead paint. According to federal law, both seller and buyer must sign a lead paint disclosure if the home was built before 1978. This rule applies in California, whether or not the seller believes there is lead paint in the house. On the other hand, if the structure was built after 1978 and the seller is not aware of whether lead paint was ever used within it, you are not required to investigate the issue any further.

Pests. In most cases, the seller is required to notify the buyer of any ongoing infestation within the home. Of course, this information is often uncovered during a home inspection .

Death on the property. If there was a death on the property within the past three (3) years, the seller must disclose this. The seller does not need to disclose the manner in which the death occurred. If the buyer specifically asks about deaths within the home, the seller must supply the history even if the incident occurred more than three years ago. This is particularly important if the death was the result of a murder or other criminal activity which would have been publicized in the news

Drainage problems. Ironically, water can be one of the most destructive forces on earth. If the house routinely floods, nearby development has led to standing water in the yard, or the home has any other issues with drainage, it is best for the seller to disclose it. These issues can come and go, tempting many sellers to “omit” the information during the sale. But if a buyer can prove that the seller was aware of the problem and failed to disclose it, the seller can be found liable for damages.

Boundary disputes. It might seem like a small issue, but even a “friendly” boundary dispute with a neighbor can turn sour over time, and these often become extremely expensive to resolve. Even if the dispute is minor, sellers should always disclose such disputes to buyers, just if legal problems arise later.

Hauntings. This sounds absolutely silly to most people, but courts have actually dealt with cases involving “haunted houses.” If the seller suspects paranormal activity within the home, disclosing it is still the safest way to go. Luckily, many buyers aren’t bothered by such information.

Disclosures. The Real Estate Transfer Disclosure Statement and the Seller Property Questionnaire are the best documents for the seller to use when making disclosures. There are many items on these documents which will trigger your memory as a seller. The point is to include as much as possible in the disclosures.

With regard to disclosing facts about a property, it’s usually better to be safe than sorry. You really can never over-disclose. A buyer is more likely to accept defects in the property during escrow and close the transaction. Once the transaction is closed, a buyer will not be as forgiving. If you have to ask yourself if you should disclose or not, that means you should disclose! To learn more about which information you must disclose to a buyer, call our real estate attorneys. We can guide you through this process.

What is the Role of a Real Estate Agent?

Most of the time, when you want to purchase an item you simply head to the store (or your favorite website) and make your choice. Likewise, if you want to sell an item you might advertise it on a website or in the newspaper. But when selling or shopping for a home, most people seek the services of a real estate agent. It makes sense, because real estate is one of the biggest investments most people ever make.

At the same time, you might be wondering what services does a real estate agent performs? Do you really need an agent, and if so, how does this expert guidance benefit you?

The home search. The home search can be one of the most exciting, but also frustrating, aspects of buying a home. A real estate agent who is familiar with the properties for sale in your area can often help you shorten this process and avoid unnecessary disappointments. Not everything that is for sale is listed on the Internet and as a home buyer you could be missing out on that perfect home unless you have a real estate agent who can access these properties.

Marketing. If you’re selling your home, marketing it correctly and accurately can help you sell it faster (and potentially for a higher price). Real estate agents are experienced in marketing homes, and can provide you with the industry tips and tricks that would be difficult to discover or access on your own. They also connect with other real estate agents, some of whom might have clients searching for a home just like yours.

Negotiation. A skilled real estate agent can help you negotiate the best possible price and terms when selling your home, or the lowest possible price and most beneficial terms if you’re buying. Legally, a real estate agent owes fiduciary duty to his or her client, which means that the real estate agent must act in your best interests above all other interests.

Disclosure. A real estate agent is also legally bound to disclose all known facts that materially affect the value or desirability of the property that you’re considering. This helps to protect you from unseen defects or other negative aspects of the property, which will assist you in deciding whether to move forward with the purchase.

The transaction. Selling or purchasing a home is a complex legal transaction that offers many opportunities for missteps. One of the real estate agent’s primary tasks is to guide you through all steps of the transaction, from escrow to closing day. Your real estate agent will handle most of the finer details, so that you can focus on the tasks you must perform personally.

Real estate agents provide support and guidance during one of the most important decisions (and investments) you will ever make, so it just makes sense to work with one. Of course, we also urge you to contact our real estate attorneys, who can offer more detailed legal guidance to help protect your interest.

What is the Role of a Real Estate Agent?

Most of the time, when you want to purchase an item you simply head to the store (or your favorite website) and make your choice. Likewise, if you want to sell an item you might advertise it on a website or in the newspaper. But when selling or shopping for a home, most people seek the services of a real estate agent. It makes sense, because real estate is one of the biggest investments most people ever make.

At the same time, you might be wondering what services does a real estate agent performs? Do you really need an agent, and if so, how does this expert guidance benefit you?

The home search. The home search can be one of the most exciting, but also frustrating, aspects of buying a home. A real estate agent who is familiar with the properties for sale in your area can often help you shorten this process and avoid unnecessary disappointments. Not everything that is for sale is listed on the Internet and as a home buyer you could be missing out on that perfect home unless you have a real estate agent who can access these properties.

Marketing. If you’re selling your home, marketing it correctly and accurately can help you sell it faster (and potentially for a higher price). Real estate agents are experienced in marketing homes, and can provide you with the industry tips and tricks that would be difficult to discover or access on your own. They also connect with other real estate agents, some of whom might have clients searching for a home just like yours.

Negotiation. A skilled real estate agent can help you negotiate the best possible price and terms when selling your home, or the lowest possible price and most beneficial terms if you’re buying. Legally, a real estate agent owes fiduciary duty to his or her client, which means that the real estate agent must act in your best interests above all other interests.

Disclosure. A real estate agent is also legally bound to disclose all known facts that materially affect the value or desirability of the property that you’re considering. This helps to protect you from unseen defects or other negative aspects of the property, which will assist you in deciding whether to move forward with the purchase.

The transaction. Selling or purchasing a home is a complex legal transaction that offers many opportunities for missteps. One of the real estate agent’s primary tasks is to guide you through all steps of the transaction, from escrow to closing day. Your real estate agent will handle most of the finer details, so that you can focus on the tasks you must perform personally.

Real estate agents provide support and guidance during one of the most important decisions (and investments) you will ever make, so it just makes sense to work with one. Of course, we also urge you to contact our real estate attorneys, who can offer more detailed legal guidance to help protect your interest.

Are Home Inspections Really Necessary?

If you’re in the market to purchase a home, at some point your real estate agent will probably recommend that you obtain a home inspection. Prospective buyers usually might make an offer contingent upon a satisfactory home inspection. The home inspection is viewed as a possible “deal maker” or “deal breaker”, depending upon the results.

Many prospective buyers are tempted to skip this step, particularly if the home they’re considering is newer or has been renovated recently. They might wonder if a home inspection is really necessary, given the appearance of a seemingly well-maintained house and yard.

The short answer is that yes, a home inspection should be performed any time you’re considering a home purchase.

Even when a home appears “move-in ready”, looks can be deceiving. A professional home inspector might uncover potentially expensive or even dangerous problems with the structure’s electrical wiring, plumbing, HVAC, roofing, insulation, and more. Discovering these problems before the closing date could save you from the burden of costly repairs, or even buyer’s remorse after the close of escrow.

However, there’s another very important reason to conduct a home inspection: If the report does uncover significant problems with the home, but you feel up to the challenge of repairing them, you now possess a valuable bargaining tool. By pointing out the cost of necessary repairs, you might be able to negotiate a lower price on the home of your dreams (or, at least, a house that will become the home of your dreams).

It is important to remember that a home inspection will uncover structural and systemic problems, but you should  consider conducting a separate termite inspection. Depending upon your geographic area, radon testing (for a radioactive, gaseous waste product) might also be recommended as well as asbestos. Also, some home inspectors will perform tests on the structure’s well water, gas tank, and septic tank, but some do not. If the house you are thinking of buying has a pool make sure you also have a professional inspect it as well as all the pool equipment. Make sure to ask whether these services are included, or can be added to the overall inspection process.

A home is often the most significant investment that many of us ever make. Fully investigating every aspect of your decision to purchase can prove to be vitally important not only during the negotiation process but also after you’ve made the purchase. 

So make sure before you sign those loan documents that you’ve satisfied yourself that the property’s condition meets with your approval. For more details on home inspections and the home purchase process, contact our real estate attorneys. We can help you evaluate every aspect of this life-changing decision.

What is Mediation?

Sometimes, when legal disagreements arise, one or both parties might suggest mediation before taking the case to a courtroom. Whether or not the case has already been filed with a court of law, mediation before the court date can often result in a settlement that is satisfactory to both sides.

Participation in mediation is voluntary, except in cases governed by statute or contract clause. Some examples of cases that frequently benefit from mediation are:

  • Divorce
  • Domestic relations
  • Workers compensation
  • Labor or employment cases
  • Personal injury
  • Commercial transactions

Why choose mediation? A skilled mediator can help all involved parties identify their primary goals, and work to craft a solution that is agreeable to all. Often mediation will allow both sides of the conflict to wrap up the case more swiftly, and avoid lengthy court proceedings. Mediation might also feel more “safe”, because involved parties have an opportunity to contribute to the eventual solution, rather than leaving the entire case (and judgment) in the hands of a judge.

Often, because mediation saves time and reduces court proceedings, both parties can save money on legal expenses by pursuing this course of action.

How does mediation work? At any point before the final court date, involved parties can agree to attempt mediation. Obviously, more time and money are likely to be saved when mediation is attempted early on in the dispute.

Mediation is held at a neutral location, and both parties are allowed (but not required) to bring legal counsel. Each side presents their account of the facts and circumstances that led to the conflict, and the mediator helps each to identify areas of agreement. Areas of dispute are weighed and negotiated as a settlement gradually takes shape.

If a settlement agreement is indeed reached, court proceedings and judgment are successfully avoided. If a settlement cannot be reached, the case will likely proceed to court.

Mediation does not solve every problem, but is often successful if both parties can keep an open mind. Rarely does anyone completely “get their way” in mediation, but most people feel more satisfied with a win-win solution to which they contributed, rather than leaving the whole matter in a judge’s hands.

For more information on mediation, contact our attorneys. We can help you decide if mediation might be the right way to proceed with your dispute.

 

Avoid These Pitfalls as a Landlord

Everyone makes mistakes. Whether you’re a car salesman, a teacher, a surgeon, a retiree, or any other occupation, you will make mistakes. Landlords are certainly not exempt from this rule, especially considering how complex real estate law can often be.! But since some mistakes are more common than others, we put together a list of the eight most common pitfalls of property management. While you cannot prevent all mistakes and problems, if you keep these in mind, you will be less likely to find yourself in litigation.

Failing to create a system. Based on your knowledge and experience in property management, you should develop an established system for dealing with every phase of renting a property… and don’t deviate from it.

Not screening tenants. It’s better to allow a property to sit vacant a bit longer, than to skimp on tenant screening out of desperation. Failing to thoroughly screen tenants often leads to some of the worst problems in property management.

Creating insecure leases. Your lease agreements should be airtight as well as lawful. Without a solid lease contract, your investment is unprotected.

Undercharging rent. Most of your operating income is derived from rents… So know how much your property is worth! Use the appropriate tools, like rental market surveys, to gauge your market, so that don’t risk undercharging.

Failing to enforce rules. A rule that is not enforced is not a rule at all. Since the purpose of any rules you’ve created is to protect your investment, you can’t afford to play the “nice guy” (although you can certainly enforce rules “nicely” and ethically). When you’re tempted to overlook violations, ask yourself this question: “Am I running my properties, or are my properties running me?”

Not understanding or following Fair Housing laws. These are federal and state laws that apply to everyone, and violations can be costly. Know the laws before you lease.

Improper and costly maintenance. It costs much less to properly maintain your properties, than it does to repair major problems. Routine maintenance checks are essential to keeping maintenance costs down.

Forgetting to educate yourself and stay up to date on real estate laws. Real estate law is not only complicated; the rules often change just when we believe we know everything. When you fail to stay on top of changes in laws and procedures, you cost yourself money.

For example, imagine that you’re trying to evict a non-paying tenant, but you keep making small errors in legal procedure…. Each of these errors can result in days or weeks of delays! And all that time, you’re losing money.

We can help with all of these items, especially that last one. Call our real estate attorneys to discuss your property management practices, and we can help to ensure that your leases are airtight, your procedures are legal and efficient, and you’re up to date on all laws and regulations that affect your business.

 

How California Law Views Residential Substance Abuse Treatment Homes

As a property owner, at some point you might find yourself concerned about residential substance abuse treatment homes. Perhaps you’ve just learned that one of these facilities exists in your neighborhood, or you are considering leasing your own property for this purpose. Whatever your concern, it’s important to understand how California law defines and protects these group homes.

Number of residents is paramount. Two primary distinctions exist with regard to licensing such facilities, although many other complex types of licensing exist. For the purposes of this blog, the main distinction is this: All licensed facilities serving six or fewer individuals must be treated as single-family homes for zoning purposes.

In other words, if the home houses six or fewer residents, it will be treated as a single-family unit with regard to local zoning laws.

Disability laws will apply. Individuals who are undergoing treatment for drug or alcohol addiction are defined as “disabled”, per the Fair Housing Act. These laws apply to both detox centers and recovering individuals who reside in “sober living homes”.

Local governments must comply with state laws. Licensed group home facilities, housing six or fewer residents, must be treated by local governments as a single-family home in all residential zones. Local governments may not discriminate with regard to parking requirements, design standards, and so on. No special permits can be required of these homes.

Homeowners’ Associations must also comply. HOAs cannot enforce restrictive covenants to restrict group homes for the disabled, so long as those homes serve six or fewer residents. HOAs may impose all fines or other penalties normally applied to the rest of the community, so long as they do not discriminate between licensed group homes and other single-family homes.

Group homes serving more than six residents fall under different rules. When the group home serves more than six residents, different licensing laws will apply. In addition, these facilities are not considered, by law, a single-family residence. Therefore, such homes may not fall under the same protections as homes serving six or fewer residents.

Laws regarding group home facilities can become rather complicated, with regard to licensing, zoning, and so on. This blog is simply an overview of a few primary considerations. Consult with our real estate attorneys for more information on this subject, and we can explain California law as it relates to your specific concern.

 

How Does the New Marijuana Law Affect Landlords?

You’re certainly heard the news by now: Proposition 64, which legalized recreational marijuana use in California, passed and has been instituted throughout our state. Of course, as with any new law, we will continue to watch and see how this affects all of us in numerous ways. As real estate attorneys, our specific interest lies in how Proposition 64 impacts landlords.

Landlords can forbid possession and use of marijuana on their properties. Proposition 64 made this issue clear. However, as we all know, forbidding something within a lease and enforcing the terms of the lease are two different issues!

All leases should be reviewed and amended, if the landlord wishes to include marijuana smoke within “no smoking” rules (property owners might also wish to address “vaping” at this time).

If a property is not already “smoke free”, landlords should consider whether they wish to make that move at this time, or at least prohibit smoking of marijuana. It is possible to allow one type of smoking while banning another type, if that is what an owner wishes to do.

Landlords might also wish to address the issue of growing plants within dwellings. Under Civil Code 1940.10, tenants in single family homes or duplexes have the right to pursue “personal agriculture” within portable containers, as approved by the landlord, subject to certain conditions. However, since this law specifically excludes marijuana, landlords are not required by law to allow marijuana plants.

When creating lease provisions with regard to growth or use of marijuana, landlords should carefully describe the consequences of breaking these rules. Real estate attorneys can aid in making these changes lawfully.

Proposition 64 did not change California’s standing medical marijuana laws. With regard to housing, we’ve yet to see this issue fully fleshed out in our courts. Theoretically, however, landlords run the risk of discriminatory housing suits filed by medical marijuana patients if they are not allowed to grow and possess plants while complying with the law.

Landlords should also be aware that Proposition 64 did not modify the existing Federal laws which prohibit use, sale, and cultivation of marijuana. This is an additional issue that should be discussed with our real estate attorneys.

 

Tenant Rights Regarding Service Animals

Landlords are often tasked with the decision to allow, or not allow, pets within their rental units. Many factors are considered before establishing a final policy, such as age of the units, past experiences with pet owners, possibility of repair expenses… and even a tenant’s right to disability accommodations.

Legally, a service animal or emotional support animal is not considered a “pet”, and does not fall under the same rules as pets. According to California state law, those with disabilities are free from discrimination in the sale or rental of housing, and landlords are required to provide “reasonable accommodations” to those with disabilities. Sometimes these rules mean that landlords must change policies, if necessary for a person with a disability to use and enjoy the housing.

In other words, even in a housing unit that does not otherwise allow animals to be kept as “pets”, an exception must be made for a service or emotional support animal.  No additional deposits may be requested for service or emotional support animals.

Service animals versus emotional support animals. The line does become slightly blurry, however, when considering the difference between a service animal and an emotional support animal. A service animal is one specially trained to perform specific tasks for its owner, whereas an emotional support animal provides comfort but is not trained in a specific manner.   A service animal has full public access rights whereas an emotional support animal has access rights only in housing and on airplanes.

Service animals must be allowed in nearly every situation, unless the landlord has reason to believe the animal poses a threat to others, or would fundamentally alter the nature of the housing. The law is so supportive of service animals, in fact, that a landlord can only inquire whether the animals is required due to the tenant’s disability, and what tasks the animal has been trained to perform on behalf of the tenant.  The landlord may not inquire as to the nature of the tenant’s disability.

Usually a landlord will be required by law to bend a no-pet policy to allow emotional support animals as well. However, the accommodation must be considered “reasonable”. Some situations which are considered “unreasonable” would include:

  • The emotional support animal poses a direct threat to other tenants
  • The animal causes substantive harm to the property
  • The animal imposes an undue financial or administrative burden on the leasing company or property owner
  • The animal will fundamentally alter the nature of services provided by the landlord

A Landlord may request that a Tenant with an emotional support animal provide a letter from a medical provider stating that the support animal is required by the Tenant.
Owners of emotional support animals are tasked with the responsibility of complying with local and state animal control laws, and does not become a danger or nuisance to the community.

The bottom line is this: Service animals must nearly always be permitted within rented housing units. In most cases, emotional support animals should also be allowed, but within certain reasonable limits. In both instances, the Tenant is responsible for keeping the animal under control at all times, and for any damage that the animal may cause.

Landlords should consult with our real estate attorneys in order to maintain compliance with discrimination and housing laws.

 

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