Listing Agent Demands for Property Inspection

This article, and the situation that inspired it, is didactic in two categories. It considers how to describe the subject property in an agreement of sale; it also explores whether imposing one’s practice standards on cooperating agents is a wise and lawful practice. The situation arises from the demand of a seller agent that all offers include a copy of the last recorded deed in its entirety. An offer will not be considered in its absence.

Property descriptions in sales agreements are a source of problems and a frequent subject of litigation. Often, the “Property” identification section on page one of the Standard Agreement (ASR) is devoid of anything other than a street address. This works most of the time. But then I recently defended a buyer agent who described a property by its street address only to learn from the lawsuit that the matching garage was not included because of a prior subdivision and purchase by a neighbor. 123 Oak Street, once two-thirds of an acre with a home and garage was now a half-acre with no garage. I could provide a hundred examples where poorly described properties led to major problems with little effort.

Including more information in the Property box helps. Identifying the property by its uniform parcel identifier, tax identification number or by reference to the last recorded deed (usually by volume and page book where it appears in the county recorder of deeds office) is precise. Yet, as specific as that identifier may be, is it for the property that the buyer and/or seller intend to purchase/sell? One can insert the wrong number as what happened when a seller subdivided ten acres into a seven acre unimproved lot she intended to retain, and a three acre parcel with a rundown house she was selling. Oops, the agreement of sale referenced the larger of the two parcels, not the smaller. Couple this mistake with the integration language of the agreement that says that the written agreement controls and that prior representations (here that the property being sold was the 3 acre tract with the old house and not the larger parcel) do not control, and you have…..a mess.

You could also add descriptors to the property street address: 123 Oak Street, consisting of no less than two-thirds of an acre with house and garage. When the title search reveals a subdivision and prior sale of the garage, the buyer has recourse as the seller cannot/did not convey what she promised in the agreement of sale. At a minimum, buyer agents should describe what\ their buyers anticipate they are purchasing by minimum acreage and improvements. When I took Real Estate Transactions in law school, it was suggested that the parties identify the property with a formal description as would be included in a properly drafted deed. Simply incorporating the last recorded deed will work if there are no mistakes in that deed (happens more frequently than you’d imagine) and that it is the correct deed for the property being conveyed. A practice in commercial transactions is particularly helpful. The property is described with the specificity of a deed description. The buyer then has a due diligence period that allows for specific analysis of the property description, boundaries, restrictions, zoning, easements and other matters to assure that it is what the buyer intends to acquire. This has been made available to the residential buyer in the ASR where one can elect to have “inspections” of Deeds, Restrictions, and Zoning and Property Boundaries (inspection options available in paragraph 12 of the ASR). Then, within the inspection period, the agent and buyer can obtain descriptions (ask for a plot of property), restrictions, easements, acreage calculations and even a survey. If buyer is dissatisfied for any reason, buyer can terminate. Since the buyer will likely obtain title insurance, some of this process will occur anyway. It is essential, however, that the property description assessment is completed in the inspection period as the buyer loses the right to terminate by its end (the Title clause in the agreement only promises “marketable title” and does not protect against easements that impact the property, or acreage discrepancies, restrictions, etc.).

Now, let’s move to the second lesson: dealing with imposing one’s requirements on others. In the initial paragraph I referenced an agent, who when representing sellers, requires buyer agents to assure that the last recorded deed is attached to the agreement of sale. It can be a good practice, assuming the listing agent is assured that the description is correct, that no subdivisions or takings have occurred since the last conveyance, and so on. It is good, too, as some deeds include restrictions that may not appear elsewhere. But it can be bad if the deed is flawed or for a different property. Will or can the listing agent verify that the deed provides an accurate description? Another problem is that unique practices, and I assume demanding that buyer attach and initial each page of the last recorded deed to the agreement is unique, can produce unintended results. The listing agent wants to assure accuracy in describing the property (a good thing) but his requirements may dissuade cooperation (more likely in a buyers’ market) and earn this agent “the smartest-man-in- the-room” moniker.

I recently wrote about confusion arising from the Escalation Addendum and how one listing agent noted in the MLS that she won’t present an offer that includes one. That the addendum is good or bad wasn’t the issue of that article. Rather, it was whether a listing agent has the authority to not present a written offer. The conclusion, no, applies to an offer that describes the property in a manner different from what the listing agent prefers. Few of us want the reputation of a know-it-all and there are more benign ways of protecting your seller. Why not counter an offer with one that says, in the Property box, “see legal description, attached, which describes the Property.” The attached can include the legal description and exceptions, restrictions, etc. It is not dissimilar from what this agent seeks; yet the agent himself provides what he’s after and comes across as far less condescending.

The smartest-agent-in-the-room syndrome affects us all from time to time. If you are going to make demands based on a belief that you better know how to do your business or protect your client then you have to be certain of your practice. Having assured yourself the deed description is complete, accurate, and up to date may give you the assurance to follow through with the demand for attachment. I’m guessing, however, that there are more friendly or benign ways of asking. And of course, you cannot refuse to present an offer that offends you or your practice. Present it but make clear to your seller why you find an offer objectionable. Let your seller be an active part in the process.

As always, share your comments with me. And, happy spring.