No matter which side of the real estate coin you happen to be on, it’s worth it to have a licensed real estate agent represent you. Buying and selling come with their own set of challenges, which can leave you vulnerable to liability should you make the wrong move. A realtor will make sure you’re protected at all times.
Your real estate agent has the legal obligation — or “fiduciary duty” — to make sure that your interests are protected. They’ve got the training and the expertise to know how to avoid any legal ramifications so you don’t get caught up in potentially costly quarrels.
Disclosing Defects With the Property
Did you know that as a seller, you’re legally obligated to inform the buyer of any issues with your home? If you know that your home’s basement is vulnerable to floods, for instance, and you don’t disclose that in the contact, you could get yourself in trouble. The buyer could legally go after you once they move in and quickly discover issues with the basement’s foundation that allows water to pour in following a heavy rainfall.
Without a doubt, the biggest source of litigation involves the failure to disclose some type of property defect.
Every little piece of information about any damage or defect on the property needs to be thoroughly documented. Construction issues, leaks, improvements without permits, cracks, or nuisances should all be communicated to prospective buyers in order for them to make a more informed decision. Your realtor knows that, and will encourage you to fill out and sign a disclosure statement to cover yourself.
If you’re buying a home, you want to find out everything there is to know about the property before you sign on the dotted line. When you draft up a contract, it should include all the necessary contingencies that will give you an out in case something goes wrong during escrow.
One of the most important contingencies to include in a real estate contract is a home inspection clause. This will give you the opportunity to hire a licensed home inspector to check out all the details of the property in question, and uncover any issues that could be too large for you to deal with, and therefore potentially negate the deal.
Things like electrical and plumbing systems, roofs, septic systems, foundations, chimneys, and other major components will be inspected. If your inspector identifies any issues that could compromise the structure and the safety of you and your family, or are far too expensive for you to comfortably repair, you have the chance to back out of the deal. Without such a contingency, you’ll be stuck with the house if no contingencies are included in the contract.
An experienced real estate agent will understand the importance of such a clause, and will encourage you to insert it into the contract so you don’t have to go through the hassle of pursuing a legal suit afterwards to get the seller to fork over the extra money needed to make the repairs.
Ensuring Accuracy of Details in the Contract
A contract to buy or sell a house is legally binding. That means all the parties involved are legally responsible for holding their end of the bargain. With such a heavy amount of responsibility that comes with entering a contract, you want to make sure that every detail in it is accurate and represents your best interests.
Your real estate agent will go through the contract with a fine-tooth comb to make sure you’re not legally agreeing to anything that could put you in a precarious position after the fact.
Understanding Your Tax Obligations
Did you now that you could be stuck paying taxes on any profits that you make on the sale of your home? This all depends on how long you’ve called the property your primary residence, or if your intentions are to sell for investment purposes. Your real estate agent can help keep you in the loop about your tax obligations upon the sale of your home, and whether or not you could be faced with a big tax bill when it comes time to report your taxes to Uncle Sam. If you don’t pay up, be prepared to legally face the wrath of the government.
For instance, if you sell your home for more than what you bought it for, you’ll be required to pay capital gains taxes if the house was not your primary residence for two out of the last five years. Not only that, every sale of real estate that you make must be at least two years apart in order to avoid capital gains taxes.
Of course, the process is much more intricate than that. There are plenty more nitty gritty details involved in determining whether or not capital gains taxes must be paid. Your real estate agent can point you to an experienced accountant to fill you in on all of these details about capital gains taxes on the sale of real estate.
The Bottom Line
Unless you are a realtor yourself, your best bet is to seek representation in a real estate transaction. Whether you’re the buyer or the seller, you could easily put yourself in the position to get sued if you’re not careful. The truth is, the world of real estate and its accompanying contracts can be really complex. Instead of trying to figure things out for yourself, a real estate agent can guide you in the right direction and help you make informed decisions that will keep you legally protected.