Mistakes happen in real estate sales, and they can be costly. The complexity of real estate transactions require attention to detail and specific knowledge of areas prone to errors. Mistakes in real estate transactions can cause a cascade of delays that often result in the sale falling through.
Having an experienced team of professionals on your side for the purchase or sale of real estate can bring peace of mind by avoiding closing delays, title issues, and contract errors. Read on for important tips from a Minnesota real estate attorney.
Common Mistakes in Property Purchases and Sales
The process of buying or selling property is similar across the country, but knowing the local market’s idiosyncrasies can make the difference between a smooth sale and an error filled debacle. Examples of common errors include:
- Torrens vs. Abstract. The researcher from the title company should know how Torrens and abstract deeds differ, and what issues to be alert for with each. For instance, errors or changes in property lines that affect Torrens-recorded properties cannot be corrected by a surveyor submitted form as a court order is required, which can significantly delay a planned sale. Likewise, Torrens titles are registered with the Registrar of Titles rather than the County Recorder, and items sent to the wrong office may not be reflected on the deed.
- Impartial Escrow agent. When parties agree to the sale of a property, funds are put into escrow, which means they are held by a disinterested third party. Sometimes the agent is an attorney for one side, which introduces a conflict of interest and can become a bigger problem.
- Human error in recording. The deed researcher should examine property titles for historical comparison, to determine if recording errors were made at any point. This can include unrecorded easements, unreleased liens, and outdated information about lenders.
- Deadlines. If the buyer’s mortgage company doesn’t come through with the mortgage approval before the deadline set in the purchase agreement, the seller can cancel the transaction and seek another buyer. Likewise, if the buyer doesn’t produce their earnest money for a downpayment within the agreed-upon timeframe, the seller may move on.
- Appraisal. The property may not be as valuable as the seller believes it to be. If the buyer’s mortgage company values (appraises) the property at less than the amount of the mortgage, it’s unlikely the mortgage company will follow through with the planned mortgage amount.
- Lack of Negotiation. Buyers and sellers must both be prepared to negotiate issues that don’t work out exactly as planned. For instance, if the buyer’s mortgage company refuses a mortgage as a result of a low appraisal, the parties can rework the selling price and seek a smaller mortgage for the buyer. Similarly, issues raised by the home inspector can cause the sale to fall through if the parties fail to negotiate and come to a resolution.
- Not Getting Title Insurance. Title insurance protects the homeowner from title defects such as incomplete property transfers and recording errors. Mortgage lenders usually require title insurance for new buyers but cash buyers and family members receiving a property are unlikely to incur the additional expense. In extreme cases buyers without title insurance may have to relinquish their property due to unresolved ownership claims.
- Breach of Contract. Any failure to perform delineated duties in a property transaction can be considered a breach of contract. Sellers may fail to provide the buyer with the title, or buyers may fail to have the home inspected as planned, and the entire arrangement can collapse.
Having an Ally in Property Transactions
An attorney experienced in real estate transactions can guide you through the buying or selling process, helping you avoid mistakes that could ruin a sale. The professionals at Waypoint Law PLLC can keep your property transaction on track for a seamless, low-stress closing by anticipating issues that may arise and preparing for them.