If your buyer discovers unpermitted structures or renovations during their due diligence, they need to do some investigation before moving forward with their purchase. It’s possible that the appraiser will not be able to give value to the unpermitted structures in the home.
Unpermitted work refers to construction or renovations done without obtaining the necessary permits from local authorities. Cost is among the top reasons people skip obtaining permits for renovations. Not only the price of the permits but also not having to pay for the increased property tax assessment. Besides a surface-level inspection, how does the buyer really know that the area in question was built properly and is structurally and operationally safe? What about obtaining insurance? Calls to the local building department must be navigated delicately and could set off an investigation with possible fines levied against the seller. A building inspector isn’t going to simply go out and put his seal of approval on unpermitted work without further investigation. They will likely want walls opened up and structures torn apart to inspect. Legalizing non-permitted work typically involves retroactive measures to bring the construction or renovation into compliance with building codes and regulations. Legalizing home improvement projects usually starts by filing an application with the relevant building department or permitting authority. Depending on the jurisdiction, individuals may be required to pay fines or penalties for nonpermitted work before it can be legalized. Hiring a licensed contractor or a qualified professional is often recommended to ensure the work meets safety standards and the proper building code. Detailed documentation of the existing structure, including plans, drawings, photographs, and descriptions, may be required during the legalization process. Inspections and evaluations by building inspectors and other relevant professionals are commonly conducted to assess the quality and safety of the construction projects. Additional steps, like securing approval from homeowner associations or community boards, may be necessary for certain types of remodeling, such as illegal additions or alterations. Timeframes for legalizing work can vary depending on the project’s complexity and the permitting authorities’ workload. Once the necessary approvals are obtained and any fines or penalties are paid, local authorities consider the formerly nonpermitted work legal and officially recognized. If the buyer decides to move forward with the purchase without addressing the unpermitted work, they will likely need to address these issues when it’s time to sell the property.
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Kick-Out Clause Explained A kick-out clause is when there is a sale (or lease) of the buyer’s property contingency, but it allows the seller to market the property. If another buyer makes an offer to purchase the property that the seller wants to accept, the seller gives notice of the offer to the first buyer who must then timely submit an amendment to remove certain contingencies and possibly the Due Diligence Period from the agreement and in some cases pay additional earnest money to the seller. If the first buyer does not do these things within the pre-agreed time frame, the seller can then “kick-out” the first buyer, terminate that contract, and sell the property to the second buyer. If the buyer meets the pre-agreed requirements of the kick-out clause, then the original contract remains in force subject to the terms of amendment signed by both parties. If the Kick-Out Clause is Exercised If the kick-out clause is exercised, the seller must give the buyer written notice that they have received an acceptable offer, and the buyer has the pre-determined amount of time to submit an amendment removing the specified contingencies. Whether all contingencies and the due diligence period get removed or just some of the contingencies and the due diligence period is a matter of negotiation between the parties. In the event the buyer does not deliver the amendment and the additional earnest money (if referenced in the kick-out clause), the agreement shall terminate, and the buyer shall be entitled to a full refund of the buyer’s earnest money. A couple of things to remember:
A general Notice form (F816) can be used. Example verbiage for notice: Per Exhibit (C), paragraph 7, Seller is hereby providing notice that he has received an acceptable offer and is executing the 72-hour kickout clause. Buyer has 72 hours to remove the contingencies set forth in Exhibit (C). Verbiage for Amendment Removing Contingencies: Amendment to Agreement (F701) should be used. Example verbiage for amendment: Buyer agrees to remove the contingencies set forth in Exhibit (C) to include the sale or lease of buyer’s property contingency and the due diligence period. Every real estate negotiation or transaction is unique by nature of the individuals involved and the property itself. Therefore, Special Stipulations are often needed to customize the transaction to the situation.
The Georgia Real Estate License Law does not require that any specific contract forms be used, only that they are written by legal counsel. About forty percent (40%) of Georgia Real Estate Licensees are members of the Georgia Association of Realtors® and as members they have access to the GAR® Contract forms. They do provide many Special Stipulations that address common contract issues. However, not everyone uses these forms and not every situation is common. In those cases, the real estate Licensee must create a Special Stipulation for the specific situation. Although a Licensee is not authorized to practice law and draft legal documents, the Licensee in Georgia is allowed to write Special Stipulations for a contract that is written by an attorney. Consider the following tips for writing a Special Stipulation:
Article From Dec 2023 GREC Newsletter The federal Fair Housing Act (FHA) protects the rights of people with disabilities which includes the rights to reasonable accommodation. These rights are protected under both state and federal laws to ensure that landlords do not discriminate against tenants with service animals & emotional support animals. Under the law, you can’t be discriminated against in the rental, lease, or purchase of housing.
The FHA requires housing facilities to allow both service animals and emotional support animals, if necessary, for a person with a disability to have an equal opportunity to use and enjoy the home. A service animal must perform tasks or services to aid the owner to qualify for FHA protection. And to be covered under the law, the emotional support animal must alleviate the emotional effects of the owner’s disability. To have a legal right to be an ESA, owners need to first obtain a signed prescription letter from a licensed psychologist, therapist, or psychiatrist. This letter must state that an ESA is needed to alleviate at least one symptom or effect of the owner’s mental health condition. Keep in mind that no one is allowed to request medical documentation about the tenant’s condition or ask them to state the details of their disability; a letter verifying need for an ESA is the most information about their condition they are required to supply. For service animals, the ADA limits the requirements of the owner. When it is not obvious what service an animal provides, only limited inquiries are allowed. There are two questions that may be asked: (1) is the dog a service animal required because of a disability, and (2) what work or task has the dog been trained to perform. You may not ask about the nature or extent of an individual’s disability. You may not require proof that the animal has been certified, trained, or licensed as a service animal. You may not require the animal wear an identifying vest or tag nor can you ask that the dog demonstrate it’s ability to perform the task or work. Can a landlord require a pet deposit for a service animal or emotional support animal? The landlord can't require the tenant to pay extra in the form of a pet deposit to have a service dog or emotional support animal. And any "no-pet" policies don't apply to an ESA or guide or service dog. But the tenant is liable for any damages the service animal or emotional support animal causes to the property or another person. Is there a difference between an emotional support animal and a service animal? Only animals who have received specialized training to perform a specific task or tasks for an individual with a disability are considered service animals. This is the key difference between a service animal and all other types of working animals, including therapy, comfort animals, and emotional support animals. Service animals are usually dogs, but all kinds of animals can be classified as an emotional support animal including but not limited to dogs, cats, miniature horses, rabbits, and hamsters. The only requirement for an ESA is that they are well-behaved and non-aggressive to other animals. Penalties for Misrepresentation of an ESAIn Georgia, there is no legal punishment for misrepresenting your pet as an emotional support animal like there is in other states. However, animal owners may face evictions from housing or university, or expulsion from public areas as a consequence. The GAR Purchase and Sale Agreement provides users with rules on how the Agreement should be
interpreted. In the event of internal conflicts or inconsistencies in this Agreement, the following rules for how those conflicts or inconsistencies shall be resolved will apply:
When interpreting the contract and trying to determine what controls, special stipulations control over both exhibits and the main body of the agreement but handwritten changes control over pre-printed or typed provision. If an FHA or VA exhibit is included with the contract, any amendatory clause shall control over inconsistent or conflicting provisions contained in a special stipulation, another exhibit, or the main body of the agreement. The amendatory clause gives the buyer the right to terminate the contract without forfeiting the earnest money if the appraised value does not meet or exceed the sales price. It cannot be removed or changed in a special stipulation. This should help resolve questions that have arisen when attempts have been made in special stipulations to amend or override the amendatory clause. The amendatory clause includes language making it superior to all other provisions of the contract. This language helps make it clear that a special stipulation cannot change the amendatory clause regardless of the verbiage that is used. In summary, special stipulations control over both exhibits and the main body of the agreement but any amendatory clause in an FHA or VA exhibit shall control over inconsistent or conflicting provisions contained in a special stipulation, another exhibit, or the main body of the agreement. The GAR real estate contract is valid in most cases whether there is an earnest money deposit or not. While a contract, to be valid, must have consideration, earnest money is not the only consideration included. Earnest money is a good faith deposit and may not be necessary to have a valid contract. The consideration can be the mutual promises of the parties to perform their respective obligations under the contract (i.e., a promise for a promise).
Generally, the purpose of the earnest money is to provide the seller with compensation in the event the buyer terminates the contract or fails to close through no fault of the seller and in violation of the agreements in the purchase and sale agreement. According to the GAR purchase and sale agreement C.2.(a), the seller’s sole remedy shall be to retain the earnest money as full liquidated damages. Furthermore, the seller expressly waives any right to assert a claim for specific performance. If earnest money is not included with the terms of the contract, the seller really doesn’t have much of a remedy. GAR purchase and sale agreement F201: 2. Default. a. Remedies of Seller: In the event this Agreement fails to close due to the default of Buyer, Seller’s sole remedy shall be to retain the earnest money as full liquidated damages. Seller expressly waives any right to assert a claim for specific performance. The parties expressly agree that the earnest money is a reasonable pre-estimate of Seller’s actual damages, which damages the parties agree are difficult to ascertain. The parties expressly intend for the earnest money to serve as liquidated damages and not as a penalty. The GAR Contract provides that the contract shall be for the benefit of and binding upon the parties and their heirs, successors, legal representatives, and assigns. Dying does not extinguish the obligation to perform a real estate contract.
In most cases, if it is the seller who passes away, the contract signed is still valid. While the deceased seller cannot sign the closing documents, their estate is responsible for the seller’s obligations and the buyer has the right to take ownership of the property at closing, according to the terms of the contract. Property rights must be determined before the contract can be fulfilled, and upon death, the estate of the deceased must be administered. If a probate process is necessary, the closing could be delayed, especially if it involves tracking down heirs and giving notice. If the buyer is not willing to wait for the probate to finish, which could take weeks or even months, the contract can, in most cases, be terminated and the earnest money will be returned to the buyer. If it is the buyer who dies before closing, the contract they signed is also binding. The buyer’s estate is responsible for contractual duties entered into before their death. Many contracts state that the seller’s only remedy is to keep the earnest money deposit so the seller may not be able to easily enforce the contract against the buyer’s estate. Although it is possible for the seller to file a claim against the buyer’s estate for lost profits, it is rare that a seller is successful in winning a case against the buyer’s estate. Every situation is different so it is recommended that the parties consult with their attorney so they know the best course of action and how they should proceed. In Georgia, here are the most common ways in which you can hold title to property:
Sole Ownership: owned entirely by one person, even if the owner is married. If the person becomes incapacitated due to injury or illness, a spouse or family member typically would need to conduct business with regards to the property. The family member would not be able to do business transactions and they would be unable to act until a court appoints someone to act on behalf of the sole owner. Many people assume if there is a will, it will address the problem, yet a will does not go into effect until after a death and is not in effect if the owner becomes incapacitated. Tenants in Common: allows for two or more people to hold title to real estate with equal rights during their lifetime to enjoy the property. A tenant in common title creates shares of ownership, and those shares will be distributed as directed in a will upon an owner’s death. Upon death, the decedent’s interest passes to his or her heirs named in the will who then become new tenants in common with the other tenants in common. In the absence of a will, the property goes to the heirs of the owner. As a tenant in common, the individual holds title for a respective part of the property and they are at liberty to dispose of said owned property or encumber it at will. The owners of their respective shares are permitted to use their portion of their property as collateral or in financial transactions. They may also have creditors place liens on only their portion of the property. Joint Tenancy: a form of co-ownership where property is owned by two or more persons at the same time in equal shares. Each joint owner has an undivided right to possess the whole property and a proportionate right of equal ownership interest. When one joint tenant dies, his/her interest automatically passes on to the surviving joint tenant(s). This type of title is widespread among but not exclusive to married couples. Unmarried couples may also hold joint tenant title as can parents and their adult children. In the case of a couple, the death of one automatically transfers full ownership to the surviving owner without probate. In the event the surviving owner dies without adding another owner, or if both owners die at the same time, probate is almost certain to occur before the property can go to the heirs. Being a co-owner means that to sell, refinance, or take any action to the property, both owners must agree to the business action. If there is disagreement or in the event your co-owner becomes incapacitated, the court will become involved to resolve the disagreement or to protect the interest of the one who has become incapacitated. Court involvement will occur even in the event the incapacitated owner is your spouse. Joint tenants also expose the property to both co-owners’ obligations and debts. If a creditor successfully sues your co-owner, you could lose your home. A will does not control any jointly owned assets, and you may mistakenly disinherit your family when your co-owner inherits your share, particularly in the case of second marriages with children from a previous union. Trusts: While not technically a form of ownership, you may own real property through a Living Trust. Upon your passing, your interest would pass to successor trustees and/or beneficiaries you have designated in your trust. State laws determine methods of holding and owning title to real estate property. Research should be done to determine the best method to acquire and hold title to real estate in the state you live. Assessing the best way to hold title to property may require the advice of a real estate, legal and/or tax professional. In a transaction in which the buyer is getting a mortgage, the closing attorney is representing the lender. If there is a dispute between the parties, the closing attorney, acting as Holder, has the same rights and duties of any other holder and holder may disburse the earnest money after 10-day letters and upon a reasonable interpretation of the Agreement.
It gets a bit more complicated when the transaction is all cash. In that event, there is no lender to represent, so the lender is representing either the buyer or the seller. If the transaction is written on GAR forms, the Purchase and Sale Agreement states that the closing attorney in an all-cash transaction represents the buyer. Fiduciary Duty. Unlike Realtors®, who do not own fiduciary duties to clients, attorneys in Georgia do owe fiduciary duties to their clients. Therefore, attorneys must protect the best interest of their client and cannot act against their best interests. If there is a dispute, the closing attorney therefore has a potential conflict of interest. Per the GAR F510, Closing Attorney Acting as Holder of Earnest Money, the closing attorney’s only remedy is to interplead the funds into a court of competent jurisdiction. (GAR F510 p.8). Things happen. The cash buyer could default and the parties can’t come to an agreement regarding the earnest money. The closing attorney is blocked from disbursing funds to the seller because of fiduciary duty. So, the attorney must interplead the funds. Then the parties wait, pay the costs of filing and litigation, possibly lose the interpleader and then pay the other parties costs of litigation. A waste of both client funds and everybody’s time. Here’s the takeaway. If you want to avoid an interpleader in an all-cash transaction, consider NOT naming the closing attorney as the holder of earnest money. Your clients will thank you. When and how to use Dual Brokerage can be confusing. Let’s break it down.
RMAA Policy Does Not Allow Dual Brokerage First, RMAA policy does not allow dual agency where one Agent represents both parties in a real estate transaction without prior written approval by the Broker. Potential Dual Agency situations can occur when (1) a buyer comes to the listing Agent’s open house, (2) an agent is an on-site builder representative, (3) the listing agent receives a direct solicitation from a potential buyer from a sign-call, ad-call, or other similar contact, or (4) a buyer is interested in a for sale by owner. In situations like 1, 2, and 3, the Associate involved will represent the seller as a client, and in situations like 4, the Associate involved will represent the buyer as a client. The other party in these situations would be treated as a customer, and no dual agency should occur. Should the other party insist on client representation, RMAA’s preferred policy is to assign another agent from our office to work with that party. Any compensation sharing between agents should be agreed upon in writing in advance and a copy should be given to the office. With this preferred policy, different agents affiliated with our office act as Designated Agents to exclusively represent different clients in the same transaction. The office has the right to assign such agents in order to have a designated agency situation rather than dual agency situation. Each agent so assigned shall ensure that they each represent their respective clients in accordance with BRETTA, as well as the respective brokerage agreement. Regarding designated agency, the Company has adopted a policy that the Associate identified in the listing agreement is automatically assigned to represent the seller as a client and that the Associate identified in the Buyer Brokerage Agreement is automatically assigned to represent the buyer as a client. Exceptions for Unique Situations Sometimes the preferred method of Designated Agency is not appropriate. An example would be if the agent has executed client relationships with both the buyer and the seller. That is, a buyer that is looking wants to make an offer on a property listed by the same agent. In that case, an exception can be made so long as one of the Broker Team approves the Dual Agency and both the Buyer and the Seller consent to the Dual Brokerage. Consent to Dual Brokerage is generally not included at the time Brokerage Agreements are entered because it is not an allowed type of agency allowed by RMAA. Therefore, both the Buyer and Listing Brokerage Agreements would have to be amended for the clients to give informed consent to Dual Brokerage. Do It Right NAR’s Code of Ethics and Standards of Practice offers guidance for conducting a lawful and ethical dual agent transaction. Articles 1-12 and 1-13 state that agents should discuss with clients even the potential of circumstances for a dual agency situation to arise, well before it ever does. Because the RMAA policy is not to use dual representation, it should be discussed as a unique situation that requires additional permission from the RMAA Broker Team and marked on the Brokerage Agreement as an agency that RMAA does not offer. However, if it is required in those limited circumstances, the Brokerage Agreements can be amended to include it. Disclose, Disclose, Disclose. Disclose everything you can, to both sides, so they know exactly what you can and cannot do in a Dual Agency. The GAR Brokerage Agreements include specific language that should be discussed with the client: Dual Agency Language in the GAR Agreements The GAR language includes that the client is aware that Broker is acting as a dual agent in this transaction and hereby consents to the same. The client must be advised that: (1) In serving as a dual agent, Broker is representing two parties, the seller and the buyer, as clients whose interests are or at times could be different or even adverse; (2) Broker will disclose all adverse, material facts relevant to the transaction and actually known to the dual agent to all parties in the transaction except for information made confidential by request or instructions from either party which is not otherwise required to be disclosed by law; (3) The client does not have to consent to dual agency. The consent of the Client to dual agency has been given voluntarily and the client has read and understands the agreement. (4) Notwithstanding any provision to the contrary contained herein, the client hereby directs Broker, while acting as a dual agent, to keep confidential and not reveal to the other party any information which could materially and adversely affect their negotiating position except as required by law. (5) Broker or Broker’s affiliated licensees will timely disclose to each party the nature of any material relationship with other party other than that incidental to the transaction. A material relationship shall mean any actually known personal, familial, or business relationship between Broker and a party which would impair the ability of Broker to exercise fair and independent judgment relative to another client. The other party whom Broker may represent in the event of dual agency may not be identified at the time the client enters into this agreement. If any party is identified after the agreement and has a material relationship with Broker, then Broker shall timely provide to the client a disclosure of the nature of such relationship. (6) Upon signing this brokerage engagement with the dual agency disclosures contained herein, Seller’s consent to dual agency is conclusively deemed to have been given and informed in accordance with state law, provided that the client has consented to Broker acting in a dual agency capacity. Confidentiality Must Be Maintained The RMAA Policy on Confidentiality follows BRETTA. As required by the Brokerage Relationships in Real Estate Transactions Act (BRETTA), Associates must maintain confidentiality of all personal and financial information and other matters identified as confidential by the client unless otherwise required by law or if the buyer permits disclosure of the information by subsequent word or conduct. An Associate should treat as confidential any information provided by the client that may reasonably be expected to have a negative impact on the client’s real estate activity. Licensees should pay attention not to make unauthorized or offhand comments about a client's situation or property in a way which could be considered a violation of the duty of confidentiality. Four areas considered of importance are:
Publicly Available Information is Not Confidential Agents can still counsel their clients based on publicly available information. If information is in a public record, or it’s anything that the buyer or seller says can be shared, then that information is not confidential. Confidentiality Can Be Hard! Buyers and Sellers can be relentless! They’ll beg you to reveal the other side’s position. If the information is confidential, you can’t do it! |
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