Bought a home with problems? Part 2

Posted by on October 29, 2009 in Mom2KG Columns, Real Estate

Today is a continuation of yesterday’s post on what to do if you buy a home with a problem; a dialogue between myself and my regular columnist, Mom2KG. Today we talk about how real estate lawyers help (or don’t) and how to approach the vendor in solving problems in the house they are selling you.

My comments are in italics and Mom2KG in bold. Enjoy.

TMW: Yesterday we left off at how the real estate agent was helpful because she knew time was of the essence and got on top of the problem quickly. How about the lawyers?

Mom2KG: The lawyers, on the other hand, were a mixed bag at best. We ended up having four different lawyers, plus ourselves. The lawyer we retained to close the purchase does a very narrow type of work. He closes sales all day, and never deals with problem properties. This was way beyond his retainer. As lawyers, we understood his position.

TMW: Moral of the story is the business model of real estate lawyers is quantity, quantity, quantity with prices to match. Most retail real estate lawyers are ill equipped to deal with problem closings or closings which are out of the norm (shared drive-ways, properties with water frontage, very old homes etc). In this case, you need to pay a few extra dollars for a specialized real estate lawyer or you need to get a second opinion. So what did you do?

Mom2KG: We decided we had to retain a lawyer specializing in environmental law. The first guy we found was very good, again holding our hands and giving us options. He had to educate the vendor’s lawyer on their obligations (with us footing the bill on that call) and again made our position clear.

Unfortunately, he had to pass us off to someone else at his firm, and that lawyer was a complete train wreck. He was incapable of assessing risk, and refused to provide any advice on the real estate side of things. For example, he would not discuss anticipatory breach, claiming that was a real estate issue, and he did not do real estate. So, we had to retain a real estate specialist to help us assess the legalities of backing out or staying in the deal. It was really, really trying.

TMW: That sounds horrible. How could that lawyer have handled things differently? Why do you think the lawyers were less helpful than the agent?

Mom2KG: That second environmental lawyer provided almost no value. No context, no “real world” examples of what our real risk was. We got tons of education on the requirements of the environmental legislation, right down to the maximum parts per million of petroleum allowed in soil and water samples. Who cares? I wanted to know what the risks were in buying a property that was probably clean (after the sellers removed the tank and got in an expert to test the soil). But he simply would not help us with that.

That lawyer was clearly concerned with the extent of his own liability. He kept saying “I’m an environmental lawyer. I don’t do real estate.” Or, “I can’t tell you what to do. I can only tell you the law.” To some extent, that’s true, but lawyers are also supposed to be trusted advisors who can help with decision-making. Our agent, on the other hand, was more interested in helping us than in potentially getting sued. She actually endeared herself to us by freely admitting she had “missed” the oil tank when we first looked at the house. The lawyer, on the other hand, was primarily concerned with his own responsibility in the matter and was unwilling to take any risk himself.

TMW: With your lawyer’s hat on, what role did tackling the problem early help in dealing the vendor?

Mom2KG: We knew there was no time to lose when we first found the problem. We know getting environmental reports can take weeks, and we didn’t have that time. We had to give the sellers time to remedy the problem and satisfy us. You can’t wait to present a huge problem until the day of closing. We were also able to educate ourselves on our possibilities and choices. Finally, it meant we were able to send a consistent message for the weeks this took: we wanted the house, but without the tank or environmental damage.

TMW: What steps did you finally take to provide some satisfactory conclusion that you would be buying the house of your dreams?

Mom2KG: We advised the sellers, through their lawyers and agent, what we needed: the tank removed, and proof we could rely on that it was a clean property, free from oil contamination. We managed to get the purchase and sale agreement amended to say the sellers would do that, so we had some contractual strength. Then, we kept a close eye on what was happening. At every step, we consulted with our lawyers to assess how things seemed to be going. We used our second visit to the house to bring in our own environmental consultant to determine the progress. We continued to advise the sellers of what we needed and expected. We also ensured that the report provided by the seller’s consultant was addressed to us, so we could rely on it if ever there was another problem.

TMW:  What would you have done differently?

Mom2KG: I would have asked for an all-party meeting or mediation early on. It was very frustrating communicating through agents and lawyers. We all should have sat down together so we could present the facts, issues and needs with a more human face. We kept wondering if in fact the vendors were getting all the info we were lobbing over, and I don’t think they did. I think an early meeting would have helped thing along immensely. I would have kept it very low-key and agreed to have it as “no prejudice” – not admissible as evidence in court.

TMW: Let’s recall lessons learned then if you run into an issue purchasing or selling a home.

  1. Know what you want
  2. Time is of an essence
  3. Be specific as to remedy
  4. Don’t assume the other side will do your work for you. Be proactive in the solution.
  5. Use your professionals but always refer to #1.

Is that about it?

Mom2KG:  Yes, I think that’s it. You also have to have good communications with your partner, and you have to resist the temptation to lay blame. There a solution does not lie.

TMW:  Wow, you dropped some Yoda-sim on us. Thanks for sharing. It is a great home in a beautiful neighborhood. If you ever build a spare room over the garage, I will gladly play the Arthur Fonzarelli role and move in.

2 Comments on Bought a home with problems? Part 2

By Potato on October 29, 2009 at 11:53 am

So how much did the extra lawyering cost in the end? Would it have amounted to a % of the home price?

By Mom2KG on October 30, 2009 at 1:34 pm

It wasn’t so much a percentage of the home cost, but it wiped out money we’d earmarked for immediate renovations. Painting and a kitchen reno will have to wait. It cost us – are you ready – $21,000. And that was including a discount on the environmental lawyers’ rates because they felt sorry for us. I can’t imagine what would have happened if the tank had leaked more significantly than it had.

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