Pointers for Selling Your Home by Owner in Michigan...
Pointers for Buying Your Home...Tenant Rights in Michigan
Pointers for Selling Your Home by Owner in Michigan...PHASE I: Obtaining a Binding Sales Contract Forms You Need -- preferably on carbonless multiple duplication forms:
Mechanics of Filling Out the Sales Contract: When a prospective buyer appears persistently interested, and the parties agree on such basic terms as price, closing date and possession date, and major contingencies (financing, inspections), it is worth it for the parties to review together the Sales Contract form to work out additional details. Many of my clients find it helpful to meet with me for about 45 minutes, to thoroughly review the language of the Sales Contract, fill in what we know at that point, and then prepare to meet the buyer and fill in the rest. (But see also my advice below, to reserve an "attorney review of contract" contingency in your contract. In Washtenaw County, the Ann Arbor Area Board of Realtors® ("AAABR") makes available, through realtors and attorneys involved in a transaction, forms that roughly balance the interests of buyers and sellers. Because they are balanced, they tend to be more "marketable" than custom drafted forms that maximize your legal advantages and minimize your legal risks. Such widely-accepted forms also tend to reflect local practice. The trade-off for the ease of using forms is that forms may not always be adequate or in your legal interest for every transaction. One shortcoming of the AAABR form is that it allows a buyer to back out after an inspection not "satisfactory" to the buyer, a fairly subjective standard. I have seen alternative contract language that does not allow the buyer to terminate the transaction for inexpensive and aesthetic defects. However, see my comments below about the value of having a completely satisfied buyer. The stock forms contain blanks and check-boxes. Even though these forms are in relatively plain language, the advice of an attorney is necessary in order for most laypeople to understand the risks and opportunities flowing from this or that option. Assuming that the parties can manage to fill out the entire contract, each party should have their own attorney review it. Parties, whether represented by a realtor or not, should make the contract contingent upon the review and approval of an attorney within a certain number of business days. Filling out the Seller's Disclosure: The Michigan legislature designed this form to put buyer's on notice of problems and potential problems with existing housing. (A few transactions are not covered by the law, such as when a trustee sells a vacant home.) The way it is supposed to work, the sellers disclose only what they know about problems with the home, the buyer reviews the disclosure, promptly backs out of the contract if alarmed by the problems, or hires an inspector to learn the extent and cost to correct any defects. If the buyer is unhappy after the inspections, the contract might provide an opportunity for the buyer to promptly back out. Otherwise, the parties might save the deal by agreeing to reduce the purchase price, split the cost of repairs, or do other "horse trading." Note that the Michigan legislature occasionally revises the Seller's Disclosure Statement form. They usually allow a few months for the public to use up old forms, and print and distribute new ones. On a certain date, the use of the new Seller's Disclosure form becomes mandatory. One such mandatory changeover is scheduled for April, 2006. Make sure you have up-to-date forms. In this attorney's opinion, the all-to-common bad advice to sellers is to refrain from extensive or detailed disclosure in the Seller's Disclosure Form. Some sellers too often check "unknown" next to the name of a feature, system or appliance on the form, giving the impression that they're hiding something. It it also risky to discourage inspections by the buyer, in my opinion. Having handled litigation on behalf of buyers, and having defended such litigation on behalf of sellers, it seems to me more prudent to disclose defects, as well as possible defects. Encourage the buyer to have professionals inspect the home. That way, your buyer is as happy after the closing as they are when they received your disclosure. Intense surprise and disappointment is the catalyst for difficult closings, or worse, expensive and stressful lawsuits after closing. Lead paint disclosures are aimed at revealing hazards, especially to children, from housing constructed before 1978 --- housing most likely to contain lead based paint. I recommend that sellers fill out the form and give it to the serious potential buyer, regardless. The trade-off for making sure that the buyer is satisfied or breaks the deal trying, is that risk that your home will not sell as quickly as you had hoped. As a seller purchasing another home, you do not want to be stuck with two mortgages because your old home did not sell before you closed on a new home, any more than you want to move twice because your old home sold before your new home was ready. To manage this risk at all, you want to have a rough idea of your buyer's sincerity, sophistication and financial ability, before signing the Sales Contract. You might require that a buyer show a "pre-approval" or "pre-qualification" letter form a lender. Those letters don't guarantee that the buyer will actually obtain an affordable loan and close the purchase with you. In fact, they are usually based on information that the buyer furnished to the lender, before any credit check has been done. Nevertheless, a pre-approval letter shows that the buyer is not completely naive, and knows how to shop for a loan. And you will want to time the contingency deadlines in your Sales Contract, so that if you must terminate the contract because the buyer didn't obtain financing or was unhappy with inspection results, you can do so early on, make the property and terms more marketable, if need be, and find a more motivated buyer. Some sellers keep the card of a good realtor handy, to call in case their first attempt at a sale without a realtor falls through, and there is thus less time before they "must" sell. back to top PHASE II: Removing Contingencies, Obtaining the Title Insurance Commitment After the Sales Contract has been signed and dated by all parties and copies distributed, the parties should keep an eye on deadlines for removing "contingencies". Under the AAABR contract, if a contingency is not removed by the deadline provided by the parties, the transaction is "voidable" by written notice from either party. It is not automatically "void." In industry parlance, the parties are "out of contract", but one or the other party must act to "kill the deal" in a written notice. The other party gives a written removal of contingency. Unless a party wishes to terminate the transaction, or to take the risk that the other party will terminate the transaction, the party should remove contingencies in writing before each deadline. For more information on title insurance, please refer to Liberty Title for a plain language explanation of the issues involved. Shortly before closing, the title company generally provides for review the bulk of documents necessary to complete the transaction. back to top At the closing, the seller gives a warranty deed, and provides other written assurances to the buyer and the title company that the buyer is getting what the buyer bargained for. The buyer brings a certified check made out to themselves, executes many loan documents, if borrowing. The many legal formalities of the closing are driven by the Sales Contract provisions agreed to weeks or months before, the requirements of the buyer's lender's loan underwriter and federal regulations, and the title company's underwriter's requirements for insuring title. Future updates of this site will contain more information about typical closings. back to top Cost and Service Alternatives: Attorney Fees, Realtor Commissions Sellers consider selling "by owner" in order to save on realtor commissions totaling 5% to 7%, whether one listing agent or two agents (listing, and selling or buyer's agent) are involved. Naturally, not using an agent means that your property is not exposed in a professional manner to as wide a market. When would the benefits justfiy the cost of a selling broker's fee? If automatic referrals to services (such as a title company), relieving you of the burden of shopping for them, is important to you, and if obtaining a top sales price or a quick sale are important, using a full service brokerage office, with a listing agent with a track record of results and reputation for honesty, makes sense. As a compromise, there are "discount brokers" who charge less commission, or a flat fee, and provide listings through the Multiple Listing Service, but a minimum of services and active marketing. Some of my clients have successfully sold using online listing services.If you are unsure of the services and obligations your agent will owe you, have an attorney review a listing agreement before you sign. Beware of agents who discourage the involvement of competent lawyers experienced in residential real estate transactions. Perhaps they have had a bad experience with an obnoxious or incompetent "deal breaker" lawyer, and worse, the broken deal meant no commission for them. The question you might ask in return is "Why shouldn't I use an attorney, assuming that I know that lawyers are not free, but that I can exercise some cost control over your final bill? Will you protect my interests in the same way an attorney can?" (And it would be foolish not to use a lawyer if one is available through an employer-sponsored prepaid legal plant.) While you might be able to negotiate a flexible, services-as-needed arrangement with an attorney, a realtor's listing agreement fairly commits you to paying a commission based upon the sales price, even if you get cold feet and no longer wish to sell your home. I can think of few valid reasons for the advice "Oh, you don't need an attorney on this", except self serving ones. For agents, the arrangement is typically, no sale, no commission, whereas an attorney generally does not stand to gain anythingif the deal succeeds, and stands to lose if the deal goes through and the client is very unhappy about it. For a broker, a sale means a commission, regardless of whether the seller is happy at the end of it. The commission gained today may outweigh minor damage to the agent's reputation tomorrow. For my part, I never categorically advise "Oh, you really don't need an agent on this," though clients frequently tell me that agents have told them, "Oh, you don't need an attorney on this." I commonly refer clients to listing agents with whom another client has had a good experience, though without any guarantee of future performance by the agent. There are valid reasons for using or not using any professional, but the advice of one professional to exclude others should arouse suspicions, in my opinion. Sellers wishing to use only an attorney often ask for an estimate for the cost of legal advice or representation through closing, for one or two of the three phases of the transaction, as opposed to for just a specific document review or draft. My response is to quote my hourly rate and a broad range of final bills, given extreme examples. Attorney fees can be minimal if the property and terms of the sale are uncontroversial, and the parties are sophisticated, agreeable and financially flexible. As telephone calls, redrafts and negotiation setbacks proliferate, so too does the attorney's involvement, in my experience. Thus, I have been able to charge some sellers less than $100 on one transaction, and in the next one had to bill upwards of $1800. Sellers should be counseled on other costs of the transaction, such as title insurance and transfer tax, before making price comparisons. back to top Pointers For Buying Your Home By Owner In Michigan...I often represent buyers who are dealing with a "sale by owner" situation. We give a great deal of attention to making sure that the property is in a condition that will not unduly burden the buyer later on, and to making sure that the seller understands the documents and his or her obligations. If a realtor is used, the duties of that realtor, and the likely quality of his or her efforts on your behalf, can vary greatly. A movement is on in the industry to advertise the services of a "buyer's agent". Most of these agents work in the same office as listing agents, or list property themselves. The incentive, of course, is to expose the buyer primarily, if not exclusively, to the properties listed by the agent or office involved. Their listing agreements often provide that they can become "dual agents", representing both a seller and a buyer in a special sense. The buyer, under a dual agency arrangement, cannot count on receiving all information in his or her interest. Though it might not make a huge difference in a given transaction, clearly, the agent's loyalties are divided. One way to avoid this particular conflict of interest is to hire a truly exclusive buyer's agent --- one that does not list properties at all, nor works for someone who lists properties. If you are unsure of your arrangement, have an attorney review a listing agreement before you sign. Some buyers will risk the pitfalls of a "dual agency" situation, in order to be exposed to the realtor's listings --- listings that, overall, may be highly desirable. Exclusive buyer's agents generally encourage a thorough review of documents by the buyer's attorney, especially in complex situations such as new constructions, condominiums, and unusual title problems. Exclusive buyer's agents work to control the buyer's overall costs, for example, by negotiating a discount with a title company for closing services. Because the buyer's satisfaction is paramount to a true buyer's agent, it is expected that more transactions will fall through than if agent representation (loyalty, duty to make disclosures) is more geared toward serving the seller's interests. A buyer's agent may charge a modest fee to compensate him or her minimally for his or her efforts, in the event the buyer gets cold feet and generally does not cooperate in good faith with the agent's attempts to find an appropriate house and close the deal. A buyer's agent office might still incur a conflict of interest among the several buyers it represents, when one agent becomes aware of a property on the market that fits more than one buyer's needs. The agents may attempt to resolve the conflict by trying to determine which buyer came in first, and to expose the desirable property to that buyer first. back to top Additional Tenant Rights Under Local OrdinancesNote that certain municipalities provide for significant additional tenant rights. For example, Ann Arbor expands tenant privacy and non-discrimination rights, and requires landlords to provide written tenant rights information. For more information contact the Ann Arbor Tenants Union Tenant Counseling line at (734) 763-6876, or the City of Ann Arbor Building Department's Housing Office back to top |