Protect Your Commissions – Representations and Disclosures

Continuing in our series of “10 Steps to Protect Your Commissions” is another simple tip.

Representations and Disclosures:

All too often we “get on a roll” when we prepare contracts and simply fill in the blanks in the “standard” manner. This is especially true of Paragraph 7. Most agents routinely fill in “Yes”, “No”, “No”, “No” and “No”. It is easy to do so and 90% of the contracts need exactly that. However, these are representations upon which the Seller has the right to rely. If Purchaser is obtaining a gift, the Seller has the right to know because the Seller may not take the deal until the gift is transferred. Remember, that gifts are revocable. That means that the person making the gift can change his or her mind. As a Seller’s attorney, I require that the gift transfer be done within ten (10) days so we can quickly eliminate the donor’s right to revoke the gift.

If the Purchaser needs a gift, but the Contract does not disclose this fact, the Seller has an action against the Purchaser for misrepresentation and fraud in the inducement. The same is true, of course, if the Purchaser misrepresents his or her need to sell a house or discharge a mortgage. Save yourself from claims by carefully asking the questions in Paragraph 7 before you complete the Contract.

Protect Your Commissions – Finished Basements

Once again, I want to be sure that your commissions are protected and that you are able to adequately address some sticky contract issues. Another item to consider is:

Finished Basements:

More and more often this hi-tech entertainment equipment is finding its way into beautifully finished basements. I wonder, however, how many homeowners actually applied for and obtained Building Permits and Certificates of Occupancy for these finished basements. The Town of Amherst will permit a simple recreation room without a CO, but not if the room becomes an entertainment room. How do we know the difference?

In these cases, it is important to ask the Sellers at listing. Was the finished basement part of the original construction and included with the original Certificate of Occupancy? If the basement was remodeled after the original purchase, did the owner then obtain a CO? The State Building Code generally requires an additional means of egress with a fire escape window or door if a CO is needed. These can be expensive depending on the property’s terrain. Always ask the Seller at listing.

When you are the Selling Agent working with a Purchaser, you should also inquire and obtain a copy of that CO. If the Seller does not have the CO readily available, you should add language to Paragraph 20 of the Contract. I would suggest:

This Contract is contingent upon Seller providing to Purchaser, by ____________, a copy of the final Certificate of Occupancy approving the finished basement.