legallines BRYAN LYTLE
When worlds collide
Q:
Who signs?
A: There are two types of seller situations that give
agents fits about who is to sign the contract: estates and divorces. Quite often these result in the listing agent either having the wrong parties sign, or having last-minute crises near closing. In Virginia, when the owner of property dies, absent a survivorship provision in the deed, that property is transferred in one of two ways: by will or by intestate succession (no will). If there is a will, then the will must be recorded in the land records in order to transfer title to the persons named in the will (called devisees). If there is no will, then a list of heirs (at a minimum) must be prepared and recorded in order to vest title in those heirs. Determining the heirs by intestate succession requires an attorney because it is not always who one might think. In my experience, one of the children, or someone in a similar capacity, goes to an agent and says “I am the heir” or “I am the executor” and wants to sell the property. Rarely does the agent actually determine if that is in fact true, and in many cases it is not true. (For example, the “executor” may not have actually qualified, may not have the power to sell the real estate, there may be step-children with an interest, etc.). In far too many cases the documentation necessary to vest title has not been recorded, and the day before 10 July/August 2011
closing is too late to get it done. So whenever you consider taking an estate listing, you must have the prospective clients contact an attorney early in the process to ensure your clients actually have authority to sign your listing and sell the property, and to make sure that the documentation will be ready at any subsequent closing. With respect to divorces, typically what happens is one of the parties says “I got the house in the divorce and I want to sell it.” That may be true, and usually is, but the problem is that most divorce attorneys are not familiar with real estate and do not prepare a deed to properly vest title in the spouse who got the property in the divorce. In other words, the divorce decree or separation agreement may say that your prospective client got the house, but that divorce decree and/or separation agreement does not vest title in your client — there must be a deed from the ex-spouse. What happens? You get near closing only to find out that that divorce deed was never prepared and executed and you have to hunt down the ex-spouse in order to obtain a deed. I don’t think it would surprise you that many ex-spouses are not very cooperative — especially if they got burned in the divorce and lost the house. The solution is simple: Whenever anyone, including a prospective client who recently got divorced, asks you to list their house, you should ask for a copy of their deed. Unless a lawyer tells you differently, every person listed on that deed must sign your listing and any subsequent contract. If they do not have a deed, then ask your favorite settlement agent to get you a copy from the clerk’s office. If no one can provide you with a deed with just your prospective seller’s name(s), that should tell you there is a problem, and you should have your prospective client consult an attorney as soon as possible. As always, if you are in any doubt about a prospective client’s ability to sign, or how they sign, then the time to ask an attorney or your broker is sooner rather than later. Remember, it would be both a Real Estate Board and Code of Ethics violation for you to list property for sale where you do not have the authorization and consent of all of the owners. www.VARealtor.com
Bad Fences, Bad Neighbors
Q:
Does a listing agent have a duty to disclose that his seller’s fence encroaches on the neighbor’s lot? A: Oh, those pesky, nosy, neighbors.
Imagine this: A neighbor makes a point of contacting the listing agent during the listing to advise the agent that his client’s fence encroaches on the neighbor’s lot. While there was some disagreement, the neighbor’s recollection was that she had agreed with the seller to have the encroachment resolved if either one of them sold their property. The listing agent, aware that the buyer was obtaining a survey, and uncertain whether the fence encroached and to what extent, decided to wait and see what the buyer’s survey showed. The buyer’s survey said nothing about an encroachment. The transaction closed without incident. But after closing, the furious neighbor contacted the listing agent’s broker and threatened a complaint on the grounds that the listing agent had a duty to disclose the encroachment to the buyer. Did she? As always, we look to Va. Code § 54.1-2131(B) regarding a listing agent’s duty to disclose to a prospective buyer: A licensee engaged by a seller shall disclose to prospective buyers all material adverse facts pertaining to the physical condition of the property which are actually known by the licensee. As used in this section, the term “physical condition Volume 18 ● Issue 4
of the property” shall refer to the physical condition of the land and any improvements thereon, and shall not refer to: (i) matters outside the boundaries of the land or relating to adjacent or other properties in proximity thereto, (ii) matters relating to governmental land use regulations, and (iii) matters relating to highways or public streets. Let’s assume for the moment that the encroachment was material and adverse. Whether it constituted a “fact” actually known by the listing agent, strictly based on a neighbor’s comments, is questionable, but let’s assume it was. The question in my mind is whether a fence encroachment is something that “pertains to the physical condition of the property.” It seems to me that “physical condition” literally pertains to the
The term “physical condition of the property” shall refer to the physical condition of the land and any improvements...
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July/August 2011 11
legallines
NEW NUMBER!
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condition of the property (land and any improvements) not its location. In other words, the fence was not in bad shape, it was not falling down, so I do not believe it meets either the spirit or intent, much less the technical wording, of the disclosure statute. An encroachment is more (if not entirely) a title problem than a physical condition, and agents are not obligated to make title disclosures. Perhaps this is an issue upon which reasonable people, including the Virginia Real Estate Board, might differ. In close cases, the best course of action is to discuss the matter with your client and seek permission to disclose, because in almost all cases it will be in the client’s best interest to make the disclosure anyway — deal with it early and avoid lawsuits later. Should your client forbid you to make the disclosure then seek the advice of your broker and company counsel for a determination. There is a lesson in most disclosure cases. In this case the broker intervened with the neighbor, calmed everyone down, obtained the buyer’s survey (it turns out the encroachment is very minor), talked to the seller, and it seems likely that a solution will be reached that satisfies everyone involved. Addressing client and third-party concerns is always the best course of action, because it’s when people feel ignored that complaints and lawsuits ensue. ●
Bryan lytle has been a Virginia lawyer for 27 years, as well as a settlement agent and VReBlicensed instructor. you can see Bryan live at the Real show, where he’ll be teaching courses on “Agents in Jeopardy” and “Reos: Addenda, Practice & Procedure.” Register at REalShow2011.com. 12 July/August 2011
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