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Real Estate Law
Question: My husband and I signed a listing agreement with a REALTOR®, but now we are having second thoughts about selling our home. How do I cancel, and will it cost me anything?Answer: If you are considering canceling your active listing agreement, you should contact your REALTOR® right away to express your concerns and discuss contract cancellation. Each realty office should have an established procedure in place. Cancellation costs vary. Some offices have a set cancellation fee, while others might look for reimbursement based on the initial file setup expense, any advertising ordered and the amount of market time utilized. In the case of an honest change of heart, or change in circumstances—provided that you have not already entered into a serious negotiation with a buyer, or accepted an offer to purchase—you should be able to obtain a release from your broker with reasonable terms.
Before removing your home from the market, take time to explore the reasons behind your second thoughts to be sure that, in fact, you are really ready to stay in your current home. Once on the market, some folks simply panic at the thought of going through the moving process. Selling, buying and moving can be a very exciting adventure, yet at certain moments, can also be somewhat stressful and overwhelming. Others might discover while house hunting that the concept of their new dream house is simply beyond the budget. Everyone has reasons to sell, or not to sell. All are different and each is valid. Talk to your REALTOR®, explain your new situation and let their experience help guide you to an objective and equitable solution.
Dee A. Young
NEW DAY, the real estate company
Question: We are selling our home, and one of the potential buyers interested in our home has mentioned repeatedly that they have an attorney assisting them. We never used an attorney to buy either of our homes, and this makes me a little nervous. Is it normal to have an attorney participating in a home sale? Should we get one, too?
Answer: Although you may not realize it, attorneys are involved in every real estate transaction. They draw up the deed and other legal documents needed for closing the sale. However, they usually do not represent either party in the transaction. For your own protection, I would recommend that you find someone to represent you who is knowledgeable about Indiana Real Estate law, especially if you are not using a REALTOR®. I assume you are not, since you are interviewing potential buyers. REALTOR® know the laws involved in buying or selling a home, and although they cannot give legal advice, they can let you know when a lawyer may be necessary for your particular situation.
One of the many important functions of a REALTOR® is to facilitate your sale by coordinating the closing documents with title companies, attorneys and lenders. Using a REALTOR® will save you much time, trouble and worry. If it does become necessary to hire an attorney, make sure that Indiana Real Estate Law is his/her field of expertise.
Hats off to your potential buyers who realize they need a professional to represent them when buying a home. As I would not recommend that you do your own plumbing (unless you're a plumber,) I would also not recommend conducting a real estate transaction without a professional to represent your best interests and protect your most valuable asset—your home.
Lori Choate
RE/MAX CONNECTION
Question: I'm considering buying a home in Marion County in a neighborhood effected by Barrett Law. What is the law? Although I'm planning to stay in this home for 10 years or more, what is the potential long-term affect of the law on my property value or my resale possibilities?
Answer: Barrett Law is an Indiana Statute that was enacted in 1905. This law provides a detailed procedure to be followed when a local government seeks to make permanent improvements for the benefit of the public. Those improvements include construction of streets, alleys, sidewalks, curbs and gutters, sanitary sewers and other public works. Currently, the City of Indianapolis uses Barrett Law assessments for the construction of sewers and water supply lines.
Under Barrett Law, Marion County and the City of Indianapolis can charge or assess impacted property owners the construction costs of the project. The Barrett assessment can be paid by the initial owner in one of two ways: 1) cash within 30 days after project completion with no interest, or 2) the assessment can be paid over 10, 20 or 30 years with monthly or annual payments. As a buyer of a property with an existing assessment, you can negotiate payment of the assessment by the seller, or agree to assume the balance.
Installment payments require the payment of a fixed rate of interest currently at 3.5 percent. Until recently, the interest rate was 7 percent. Since the terms of the repayment cannot be changed or refinanced, you should find out what the rate is to determine how best to deal with future payments.
In almost every instance, the improvement financed by the Barrett assessment will increase your property's market value to cover the cost, and should make your home more attractive to prospective buyers in the future.
Roger Howard
1st Home Realty
Question: We recently closed on a new home that was for sale by owner. When we toured the home, we weren't told that there was anything in the home that wasn't included, and there weren't any special provisions in our closing paperwork. When we arrived back at our new house, though, the refrigerator was gone. We were stunned. Do we have any course of action now, or was this within the seller's rights? I always thought that appliances went with the house.
Answer: Oops. You're not the first buyer to find that your expectations and those of the seller were different. But your question does give me the opportunity to remind buyers and sellers that a contract in Indiana must be in writing to be enforceable. This situation is another example of how REALTOR® can assist buyers and sellers in sidestepping the pitfalls that can unwittingly trip them up.
You relate that you were not told that anything was not included. Were you told that anything was included? What were you told? Did you ask if the refrigerator was included? Did you receive a Seller's Residential Real Estate Sales Disclosure form? The form includes the following statement: "Indiana law (IC 32-21-5) generally requires sellers of one to four unit residential property to complete this form regarding the known physical condition of the property. An owner must complete and sign the disclosure form and submit the form to a prospective buyer before an offer is accepted for the sale of real estate." The form also says that the disclosure "is not intended to be a part of any contract between the buyer and the owner."
But don't give up yet. You may have some recourse if the seller provided a printed description of the property to be sold, and if the description included a reference to kitchen appliances. You may also have some recourse if the seller provided a "Seller's Disclosure" and did not indicate that the refrigerator was not included. Or you may have some recourse if the seller, when you call to ask about this, says, "Gee, we wanted you to have the fridge. Will you let us pay the freight bill to send it back to you?" (Hmmm, not likely!)
The standard purchase agreement used by Metropolitan Indianapolis Board of REALTOR® (MIBOR) members includes a paragraph that enumerates over 20 improvements and fixtures that should be included in the sale of the real estate. Refrigerators are not on the list. If you used this form and wanted to be sure to get the refrigerator, you should have used some of the six blank lines following the list to add the fridge. When in doubt, write it out!
To make a long story short, if the seller did not specifically say the refrigerator was included, taking it was within the seller's rights. Let me emphasize that buyers (and sellers) should always use a REALTOR®, a professional who sells several homes every year and is well prepared to help you ask the right questions and suggest strategies that will help you achieve your real estate goals. Real estate professionals represent your best interests and can help you avoid disappointments like the one you experienced.
Roger Howard
1st Home Realty
Question: If you work with a REALTOR® on building a new home, is the REALTOR® working for you or the builder? I understand that the REALTOR® is bringing you to the builder as part of their agreement, but is his obligation to you over the builder? Does your best of interest take priority, or the builder's? — Myrna Sandage, Noblesville
Answer: I wish I could wax lengthy and philosophical on this, but the answer is pretty simple. The laws of agency for the state of Indiana also govern representation with new construction. The REALTOR® is working as an agent of the buyer unless they have an existing established relationship with the builder.
For example, if a REALTOR® has a spec home listed for the builder, they would become a limited (or dual) agent. Indiana state law governs agency, or whose best interest takes priority. It's required that the choices are discussed up front, "at the first significant meeting," and the buyer has the right to choose how they want to be represented. In the case of an "on-site" salesperson representing a builder in a subdivision, that individual clearly represents the builder's interests.
Hope that helps!
Jeanne Tomlin
Tomlin, REALTOR®
Question: I'm confused. Can a broker sign an exclusive representation agreement with a buyer when he is also representing the seller as a dual agent? Isn't this a conflict of interest?
Answer: Indiana state license law for real estate agents and brokers allows a licensee to represent both the buyer(s) and seller(s), referred to as limited agency, provided that the parties to the real estate transaction consent in writing to this type of representation. When a limited agency relationship occurs the agent (licensee) may not disclose:
1. Any material or confidential information, except adverse material facts or risks actually known by the licensee concerning the physical condition of the property and facts required by statute, rule or regulation to be disclosed and that could not be, discovered by a reasonable and timely inspection of the property by the parties,
2. That a buyer will pay more than the offered purchase price for the property,
3. That seller will accept less than the listed price for the property,
4. Other terms that would create a contractual advantage for one party over another party,
5. What motivates a party to buy or sell the property.
With these rules in mind, a buyer entering into an exclusive representation agreement with a REALTOR® should make sure that limited agency is addressed in the agreement. Discuss with your REALTOR® any questions you may have. It is likely that the agreement can be modified to meet your needs after open, honest discussion.
Jan Endes
RE/MAX Legends REALTORS®
Question: "My lender says I need flood insurance, but our new home is nowhere near a river! Is it a scam?"
Answer: There is no such thing as a bogus flood zone. The Federal Emergency Management Agency (FEMA) establishes all flood zones. If your home is located in a federally designated 100-year flood zone, you must purchase flood insurance.
However, if your property sits at a specified elevation, you can apply to FEMA to have that home site reviewed, surveyed and possibly exempted. I am not familiar with the step-by-step process, but I have heard that it is tedious and somewhat lengthy. I would recommend you call FEMA in Indianapolis to clarify the process to have a property removed from the flood zone, and inquire how long it may take. They can be reached at 317-295-7501.
Jeanne Tomlin
Tomlin, REALTORS®
Question: My neighbor listed their home with a REALTOR® who eventually purchased the home himself through a buy out. How does that process work?
Answer: A guaranteed buyout is a service that some, but not all, REALTORS® can offer their clients. It's an agreement between the seller and the listing agent that if the home does not sell to an independent buyer within a specified time period, the listing REALTOR® will buy the property outright. The terms of sale—including price—are agreed upon at the time of the initial listing contract. Typically, that price is based on comparable sales in your neighborhood, or the average of the three most similar homes.
Your REALTOR® will market and promote your property to independent buyers in all the traditional ways. If the home does not sell for some reason, the REALTOR® will then purchase the property for that agreed upon price. It's a safety net of sorts that lets sellers who need to sell within a specified timeframe know they have a price to fall back on.
The process is a good option for people who need to sell within a specified timeframe—often because of an out-of-state move or construction on a new home. Since not all REALTORS® have the ability to offer this service and because those who do offer it may structure their agreements and marketing activities in different ways, it's a good idea to interview several listing agents about their processes and select a REALTOR® who has a proven track record in guaranteed buyouts.
Bart and Deborah Gauker
RE/MAX Real Estate Groups
Question: How much of a hassle is it to change REALTORS®? We have been working with an agent for a few weeks to try to find a home, and have gone on several showings. However, a friend of my husband's from work is also a REALTOR®, and says he can help us find a good deal. We have a relationship with him, so we want to try working with him instead. But I don't know how to "break up" with our agent—do you have any suggestions?
Answer: There are two different viewpoints on this issue. From the legal standpoint, if you have signed a buyer agency contract with the first agent, you may be obligated to pay that agent a commission for any home you buy during the term of the contract.
From the moral standpoint, this agent has invested precious time and energy into helping you find the perfect home. If they are not being thorough enough or following up as quickly as you like, then be upfront and tell the agent what you expect. Express to him or her what you expect and how often you want to be contacted by them. Give the agent the opportunity to turn around their performance.
If you're still not satisfied, and have not signed a buyer agency contract, then inform the agent that you are going to choose another REALTOR®.
Leslie Cooper Pyle
RE/MAX Real Estate Associates
Question: My son started school a year early, and will be graduating from high school at 16. He is going into business with his father and is eager to be out on his own. He has worked part time for the past few years and doesn't have any credit cards (or credit issues!), and is a very responsible kid. We'd like to see him be able to buy a home instead of starting out renting, but will this be possible because of his age?
Answer: Unfortunately, at age 16, your son can't enter into any legal contract and be legally bound to perform. For that reason, he can't get a loan. That doesn't mean he can't buy a house for cash, but he also would not be bound—as most buyers are—to close on an accepted purchase agreement. The sellers could be sued if they didn't close, but a buyer who is a minor could simply walk away. This is not my idea of a good buyer prospect.
I know of a few ways to make this work, if you as his parents want to be involved. But the solution would but based on huge number of unknown factors. The first and most important is what is the point of a minor owning real property? How much money will he be earning? How much does he have saved? Is it possible he will desire more education at some point? If he attends college, will this home be within driving distance?
This is only the beginning of the questions that need to be asked and answered before coming up with the appropriate solution. I wouldn't choose to offer an off the cuff answer at this point because I simply don't have enough information to give the best possible answer for those involved. I wish you and your son the best.
Jeff Maybee
F. C. Tucker Co.
