Help consumers understand the terms in a real estate transaction

Like many of you, I remember when the Agreement of Sale was only one page and the transaction was much simpler. But things change, especially in the real estate industry! The Agreement of Sale is now 13 pages long and incorporates many of the changes we’ve seen.

It’s advantageous to review PAR’s Standard Forms on a regular basis. It’s a good way to refresh your memory so when you’re talking with your clients, you’re able to impress upon them the importance of carefully completing these forms. One excellent resource for Realtors® and consumers alike is PAR’s Consumer Guide to the Agreement of Sale. It’s a good idea to introduce this publication to buyers and sellers early in your interaction with them. For even more advanced reading, Realtors® should review PAR’s Guidelines for the Preparation and Use of the Agreement of Sale as well as the various addenda added to Agreements from time to time. These resources are available on PAR’s website.

Over the years, I’ve seen a few areas that can cause challenges in the transaction. Helping consumers understand terms and how the process works will keep everything running as smoothly as possible.

These are a few areas to highlight when working with buyers and sellers:

• Define “dual agency.” In Pennsylvania, dual agency is legal. To avoid having clients who are unhappy when they discovered their agent is representing both the buyer and the seller, it’s helpful to explain dual agency to them in terms they can understand. As we know, there are benefits to dual agency and it’s important that your clients understand what that means to them.
• Remind sellers to be detailed in description of fixtures and personal property.vWe’ve all seen transactions come to a halt because the buyer thought something was included with the sale of the property. We need to urge sellers to clearly identify fixtures and items that will not be included in the sale. If you’re working with the buyers, make sure they carefully review this list.
• Make sure your buyers understand the financial implications of their actions. So many times, buyers don’t realize that they can jeopardize their mortgage application process by doing something that alters their financial history. Now’s not the time to buy new furniture for the house! It is important for us to explain that to our buyers. Many are later surprised that their actions can cause problems with the transaction and those actions may put their deposit at risk as a result.
• Stress the importance of disclosure. Most sellers are required to complete a Seller’s Property Disclosure Statement and have a duty to disclose known material defects, such as flooding. Buyers will want to make sure they have received and signed a copy of the disclosure form prior to completing the Agreement of Sale. Buyers may want to use the disclosure to guide their decisions about any home inspections they elect. If the buyers believe something should have been disclosed, they can take that position during the Negotiation Period and even seek other remedies if necessary and appropriate.
• Inspections are a buyer’s choice. Inspections can be important to both buyers and sellers. Sellers may want to opt to have an inspection done prior to selling so they’re aware of any issues with the property. Buyers have the right to waive an inspection of the property, or elect to have every inspection available. It’s incumbent upon buyers to decide what inspections are needed to complete the transaction to ensure they know as much about the property as possible. The seller also has the right to decline the buyer’s offer based on the inspection.
• Explain the homeowners association. We all know that homeowners associations vary in their degrees of control within a neighborhood. It’s important to advise your clients to carefully review the association’s rules and regulations to determine what types of restrictions are in place.
• Ask about oil, gas and mineral rights. With the developing Marcellus Shale industry throughout the Commonwealth, ensuring the oil, gas and mineral rights are clearly defined is crucial as they vary greatly from one end of the state to the other. Urge your client to seek legal counsel if there are rights involved.