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 More Examples of Special Contracts 1. Defects Often many sellers will not disclose a defect, such as a structural or foundational problem, which they know of prior to the sale. Current law in most states now requires that such defects must be disclosed to the buyer. Additionally, many state laws now place a burden upon the real estate broker to either make certain an inspection of the premises occurs, or, in some states, to actually perform an independent inspection of the house in an effort to discover such substantial defects. If you have purchased a house, and six months later you discover that the former owner called a roofer to survey damage to the roof from a storm, but did not disclose this fact to you during the purchase, you may have a case to recover your damages, or even in some instances rescind the entire deal. Any litigation or advice in this area would almost require you to have a detailed discussion(s) with a Plan Attorney to review all aspects of your case before deciding all of your options. This is usually one of the places where it pays to seek legal counsel early, and to avoid the temptation to even try to resolve the matter without a lawyer. The author has seen cases where even the first letter sent to the seller bringing the problem to his/her attention contained a fundamental flaw in the legal analysis and led to the entire case being weakened substantially. 2. Title The second most common "defect" is in the title to the property. The buyer should always insist on title insurance to ascertain whether the buyer is really obtaining "clear title" to the property. In many instances, the buyer will make an offer and reach an agreement with a seller, only to find out that the seller did not have clear title to the property, such that another co-owner existed who has since died, for example. Depending upon how the title was held by the seller and the deceased co-owner, it may take many months to "clear title" to the property. Title problems are another area where legal advice can be one of your best friends, especially before any documents are signed. 3. Warranties Various warranties may be contained in the sale contract, or may be implied by the law of various states. Such warranties may come with new homes and should a problem be discovered after the sale, the manufacturer, contractor or developer should be called. Delay after the sale may affect coverage under the warranty. This area is a fertile ground for new state laws designed to protect buyers in real estate sales. Your Plan Attorney should be consulted if you believe a warranty problem may exist. 4. "Backing-Out" Often a purchaser, for various reasons, may desire to back out of a contract for a real estate purchase. This is precisely why an attorney is needed initially to draft or review the various legal documents. With properly drafted documents, a buyer may, for various specified reasons, be permitted to "get out of a deal." Unless these reasons are set forth in writing in the contract, however, a buyer may not be able to "back out" or may lose his/her deposit. Additionally, he/she may be subject to a lawsuit for any additional damages which the seller can prove, even if the buyer may not have anticipated these. For example, assume that a seller opened an escrow to purchase a new house, but because the buyer bails out of the sale of his old house, the seller has to back out of the second house. In turn, the buyer of the new house may choose to sue the seller, and the seller may, in turn, sue the original buyer who was the cause of the "bailing out." It is not clear that such a seller will always prevail at trial, however, and many other facts would have to be known before any predictions about the outcome of such a case can be drawn. Occasionally, a seller, after listing his/her property for sale and entering in an agreement with a buyer, may want to renege. This occurs particularly where, during the escrow, the seller reviews another higher offer for the property. Should a seller renege, the buyer usually has one of two options: (1) to sue for damages; or (2) to sue for specific performance. Such damages may include the difference between the price of this house and the cost of the new house which a buyer was forced to purchase. Damages may also include out of pocket costs which the buyer can prove he/she made. Specific performance is a lawsuit requiring the seller to sell the property to the buyer. You should know that timing is critical if this occurs in your house purchase. It is important to call your Plan Attorney for advice immediately. Handling such a matter without legal counsel may result in losing certain rights or advantages unless the aggrieved buyer is experienced in such matters. 5. One Last Problem - The $1,000 or $2,000 Deposit Which Is Not Being Returned to a Buyer Many sellers know that they may not have to return a deposit which they are otherwise obligated to return by law, since they know a buyer will not be able to pay the legal fees involved in a lawsuit for such amounts. Indeed, once in a while, however, a small amount of money involved makes it unaffordable to hire a lawyer. For example, if you paid a deposit of $1,500, and the seller decides to keep it. Naturally, no one wants to throw away $1,500, especially where your legal position is correct. WHAT SHOULD YOU DO? See the section on small claims for the information to give you the confidence to stand up to the seller and to pursue your legal rights if necessary - all for a fraction of the $1,500 which you might otherwise lose.
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