Each person on a deed must execute the Seller Brokerage Agreement
If two or more persons own the property, each name must be listed as a seller on the Seller’s Brokerage Engagement and each owner must sign it. Likewise, each individual buyer whose name will be listed on the title must be listed as a buyer on the purchase agreement, and each should sign it. In Georgia, which is not a community property state, even if a married person owns property individually, the spouse may still need to sign a seller brokerage engagement. That is because the non-owning spouse may have equitable rights to property held solely in the name of the other spouse. For example, if the wife is the only titleholder of record, the husband may nonetheless have an equitable interest in the property. As a precaution, most closing attorneys will require that the husband sign a quitclaim deed transferring whatever equitable interest the husband may have in the property before the property can be transferred.
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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 closing attorney 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. Duty To Disclose
A seller of residential property owes a duty to disclose to prospective buyers hidden or latent defects in a property of which the seller knows of or should have known and that the buyer could not discover upon a reasonably diligent inspection of the property. The GAR Seller Property Disclosure (SPD) forms are the created for this purpose. Disclosing latent defects (and arguable latent defects) on these forms protects the Seller against claims of fraud and breach of contract. Even if a property is sold “as is,” known latent defects must be disclosed by the seller. In the GAR form Property Sold with Right to Request Repairs, the buyer ‘s right to request repairs is limited to defects that were not disclosed in an SPD (so long as items are working). Further, a lawsuit for fraudulent concealment will not be successful if the Seller disclosed the defect on the SPD. The more the Seller discloses on the SPD, the less chance there is of an accusation of fraud. It is recommended that the long form be used whenever possible. We’ve had several Power of Attorney (POA) issues arise recently, so this week’s Broker Corner is a review of facts and issues to watch for in selling or buying real estate with a POA.
A POA to purchase or sell real estate must be in writing. Since a contract for the sale of land must be in writing, the power of attorney giving someone the authority to sign a real estate contract on someone else’s behalf also must be in writing. A POA must be witnessed and notarized if it to be used for the sale or purchase of real estate, but it is not required to be recorded. Because a deed must be witnessed and notarized, the power of attorney must also be witnessed and notarized. A party may (but is not required to) record a power of attorney. If a party chooses to record the POA, the power of attorney may be recorded as a supporting document for the property deed. Landlords and brokers in the City of Atlanta cannot refuse to rent based on someone’s source of legal income, which includes denying the acceptance of valid government vouchers.
The City of Atlanta is the first municipality in Georgia to pass such legislation. It was passed in 2020. The State of Georgia does not have a law against discrimination based on source of legal income. Of course, the State of Georgia does prohibit discrimination based on a home seeker’s race, color, national origin, sex, religion, familial status, or disability. The City of Atlanta has added this additional layer to prohibited acts. Security Deposits in Lease Transactions
Georgia law requires that the tenant, prior to tendering a security deposit, be presented with a comprehensive list of any existing damages to the premises. (F910, Move-In/Move-Out Condition Report) O.C.G.A. 44-7-33. Per Seth Weissman in The Red Book on Real Estate Contracts in Georgia, some landlords and their agents try to comply with this section of the law by characterizing the security deposit as a refundable lease administration or application fee that is then converted into a security deposit upon the completion of the move-in inspection. Whether temporarily giving the security deposit a different name alters its character is unclear and has yet to be ruled on by an appellate court. Adverse Action Letter Regarding Rental Application
If a landlord denies the prospective tenant’s rental application because of poor credit, the landlord is required, under Section 615(a) of the Fair Credit Reporting Act to provide a special notification to the prospective tenant that, among other things, provides the applicant with the name, address, and telephone number of the credit reporting agency; informs the applicant that the credit reporting agency did not make the adverse action and is unable to provide the applicant with the specific reasons why the adverse action was taken; and gives the tenant the right to obtain a free copy of her credit report from the credit reporting agency to dispute the accuracy or completeness of the credit report. This type of notice must also be given if the landlord charges the tenant an extra amount as a result of having bad credit (such as an additional security deposit or extra rent). The notice does not need to state the specific information in the credit report that was of concern to the landlord. Instead, it merely needs to state that information in the credit report was a basis for the denial of the rental application. The May 1, 2022 revisions to the GAR Forms have been released. There are 2 new Special Stipulations (SS) that should be of value to you. These can also be found in the GAR Special Stipulations.
SS 110 NO COMMISSION OWED BY THE BUYER Notwithstanding any provision to the contrary contained in this Agreement, Broker shall not look for Buyer to pay any portion of Broker’s Commission pursuant to this Exclusive Buyer Brokerage Engagement Agreement. 2.CONTINGENCY FOR RECEIVING CONDOMINIUM QUESTIONNAIRE As noted in a previous post, Fannie Mae and Freddie Mac have created additional conditions to the HOA Approval process since the terrible condominium collapse last year in Florida. Significant deferred maintenance at that condominium was a factor in the building collapse. Property management of condominiums will now be required to answer additional questions regarding deficiencies, defects, substantial damages and deferred maintenance, as well as other new questions. To protect a buyer’s earnest money, in the event that the approval process takes longer than the time limits of financing or appraisal contingencies, we recommend adding a Special Stipulation to all condominium purchase agreements that allows the buyer to terminate if the property cannot be qualified by FNMA or Freddie Mac. The following is a new SS released by GAR for this situation. Note that the SS calls for the buyer’s termination right based on a number of days from the binding date. The time period can, of course, be adjusted as the situation requires. Sellers are always anxious to get their property back on the market after it looks like the buyer won’t be closing. So long as the purchase agreement is properly terminated, the property can be relisted. Watch for these issues to be certain that termination is proper. If so, and the Seller terminates by a Unilateral Termination, the Seller can immediately relist. An improper termination could open the Seller to liability.
It is important to understand the differences between a breach of contract, an anticipatory breach of contract and a non-breach of the contract. Here are some common situations. Often sellers are not ready to move out on the date set for closing and require a Temporary Occupancy Agreement. In a seller’s market, the buyer usually agrees to win the property. The GAR Temporary Occupancy Agreement (TO) offers protections for the buyer against a seller holding over past the agreed occupancy period.
Temporary Occupancy Agreements are generally limited to 60 days. The reason behind this provision is that most standard deeds to secure debt and standard FNMA and FHLMC requirements provide that the buyer must occupy the property as their principal residence on or before 60 days from the date of closing. However, if the buyer pays cash for the property, the 60 day limit is not relevant. The buyer should consider, in the case of a cash sale, whether a lease would be more appropriate than a Temporary Occupancy Agreement. |
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