Let the Buyer Beware in Real Estate Transactions

Edward L. Robinson Joseph, Hollander & Craft LLC Wichita, Kansas

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Expectations v. Reality
The sellers will be forthcoming with negative information about the property The real estate agents will disclose what they know about the property The inspectors will catch any problems The title insurance will cover what didnt get disclosed

Expectations v. Reality
If there is a problem with the property, the sellers have little incentive to disclose it The disclosure obligations of sellers are limited The disclosure obligations of agents is limited The scope of property inspections is limited The coverage of title insurance is limited

The Bottom Line

Real estate buyers must be vigilant and not expect to have a safety net if something goes wrong. The best way to do this is hire the best professionals and know the limits of their services.

The Sellers Obligation

Contract for Purchase and Sale of Real Estate (pp. 1-7)
20 (p. 4): The Buyer has carefully examined the Property and the Improvements, and in making the decision to buy the Property, the Buyer is relying wholly and completely upon Buyer's own judgment and the judgment of any contractors or inspectors Buyer may have selected. 20 (p. 4): Buyer agrees that the purchase price was negotiated after consideration of all defects in the Property of which Buyer was aware or reasonably should have been aware. 20 (p. 4): The parties agree and the Buyer represents that once the Contract has in fact been closed, that Buyer in all respects again has acknowledged that Buyer has accepted the premises without condition or qualification.

Sellers Property Disclosure

(p. 8): The Seller discloses the following information with the knowledge that even though this is not a warranty, prospective Buyers may rely on this information in deciding whether, and on what terms, to purchase the subject real property. (p. 10): I agree to verify any of the above information that is important to me by an independent investigation of my own. I have been advised to have the property examined by professional inspectors.

The Agents Obligation

BRRETA
Sellers Agent and Buyers Agent (pp. 11-12)
To their own client: utmost good faith, loyalty and fidelity; disclose all adverse material facts actually known To the other party: no duty or obligation, except disclose all adverse material facts actually known

Transaction Broker (p. 13)

No requirements, unless acting as a designated sellers or buyers agent
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The Inspectors Obligation

As of July 1, 2013, there will be no regulation of home inspectors in Kansas Expect home inspectors to limit their liability to the purchase price of the inspection ($300-$500) Limits of home inspections (pp. 14-15)
No educational or training requirements for inspectors Visual only Limited scope Limited liability

Note: there are excellent, qualified inspectors throughout Kansas. The key is asking for qualifications and references.
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The Title Companys Obligation

Issue Title Commitment (pp. 16-21)
Commits the title company to issue a title insurance policy subject to the requirements, exceptions and conditions

Issue Title Insurance Policy (pp. 22-28)

Exclusions (p. 23) Conditions (p. 23)

Case Study: the Perfect Storm