While most sellers of real estate will not hire an attorney until the seller has accepted an Offer to Purchase, legal advice on a number of preliminary matters can protect a seller from loss down the road and help prepare for a stress-free closing.

Brokerage Agreements

Once engaged, a zealous listing broker is hugely important to the effective marketing of a property. But prior to signing the listing agreement, a seller should clearly understand whether she is granting to the broker an “exclusive right to sell,” requiring payment of a commission even if the seller procures her own buyer, or an “exclusive agency,” permitting the seller to obtain a buyer and avoid payment of a commission without the assistance of the broker. A seller must be particularly sensitive to the terms of the agreement where prospective buyers have already been introduced to the property before the broker was hired. A seller must also understand the meaning of a broker’s “dual agency,” if any, and the impact this may have upon the broker’s duty to the seller.

Perhaps the most important term of the listing agreement is when the broker’s commission is to be paid. Some listing agreements will obligate the seller to pay a commission upon the mere production of a “ready, willing and able” buyer, regardless of whether the sale actually closes. And, typically, listing agreements will require payment of a commission if the property is sold within one, two, even three months after the stated term of the listing agreement has ended, so long as the buyer was first introduced to the property during the term of the agreement. While it may be possible to displace the terms of an unfavorable listing agreement in the purchase and sale agreement, an attorney can ensure, early on, that the seller will owe a commission only upon the transfer of title and disbursement of funds at closing.

Brokers will require basic information and seller statements about the condition of the property to market the property on the multiple listing service (MLS) and elsewhere. In 2013, the Supreme Judicial Court held that written marketing materials produced by a listing broker, containing inaccurate information, may create a basis upon which a buyer could later sue, notwithstanding language in the purchase and sale agreement that the buyer did not rely on any of the seller’s representations when making the purchase. Therefore, when providing information about the property and its condition to the listing broker, a seller must be thorough and accurate. A seller should also be vigilant in overseeing how the property is marketed by the broker.

The Offer

This blog has previously explored the role of the Offer to Purchase. As noted in that article, the Offer will set forth, and bind the parties, to the essential terms of the sale. Frequently, Offers are prepared by “selling” brokers and salespersons (i.e. the broker working directly with the buyer) on standard, pre-printed forms. The seller’s review of an Offer, then, should consider not only the prospective purchase price and closing date, but whether any standard-form purchase and sale agreement will be required. Even though Boston is currently a seller’s market, a seller may nevertheless find herself bound to unfavorable “boilerplate” language contained in a form Offer agreement prepared in haste by the buyer’s broker. Moreover, many sellers are now attempting to market their property without the assistance of a listing broker. Such a seller should obtain legal counsel on the rights and obligations created by an Offer, as the seller may be unfamiliar with even the standard form Offer agreements.

Title Considerations

Under the terms of any purchase and sale agreement, the seller will be required to deliver to the buyer at closing “good and clear record and marketable title.” While the full meaning of that phrase is beyond the scope of this article, a seller can prepare to satisfy this obligation well in advance of ever signing a purchase and sale agreement, thereby reducing the risk of a problematic sale. With the assistance of her attorney, the seller may want to consider ordering a title examination, which may reveal unknown encumbrances and potential title problems. Seller or her attorney can then begin ordering, obtaining and recording outstanding discharges (i.e. “payoffs”), if necessary. If the title exam reveals a more substantial issue, the seller is in a better position to resolve the matter without being under the constraints of a purchase and sale agreement.

Seller’s Representations

Generally, as noted in our previous article, a seller has no duty to disclose information about the condition of the property to potential buyers. However, there are a number of statutory exceptions to this rule: the seller is required to disclose information about specific aspects of the property, including the presence of lead paint, the seller’s knowledge of underground storage tanks, and of urea formaldehyde foam insulation (UFFI), to name a few of the so-called “mandatory disclosures.” While brokers and attorneys are familiar with which disclosures forms are required, failure to complete mandatory disclosure forms accurately could create liability for the seller. And where the seller does volunteer non-mandatory information about the property, he has a duty to give such information fully and accurately. Seller’s attorney will attempt to limit seller’s liability for misrepresentations with certain provisions in the purchase and sale agreement, but the better practice is for the seller to be counseled on the law of representations prior to, and during, marketing the property for sale.

The Purchase and Sale Agreement

Once an Offer has been accepted, it is typically the seller’s attorney who will produce the first draft of the Purchase and Sale Agreement, which will set forth in detail all of the parties’ rights and obligations during and after the transaction. This article will not explore in depth the seller’s negotiating points in the drafting of the agreement. In short, a knowledgably seller’s attorney should be able to negotiate and finalize an agreement that essentially obligates the buyer to purchase the property (or provides for liquidated damages to the seller in the amount of the deposit) and, ultimately, shields the seller from liability for defects in the property discovered after closing. The attorney will be much more successful in achieving this goal if the seller has been adequately prepared and advised from the first moment the seller decided to sell the property, as explained above.

It is critical that a seller is represented by her own attorney throughout the transaction. When a seller has a question about her rights or duties, buyer’s and lender’s counsel are ethically prohibited from providing legal advice to the seller. These attorneys may attempt to guide the seller to an answer for the good of the transaction, but they will be doing so only in the best interests of their own respective clients. Real estate brokers, even the listing broker, are likewise prohibited from giving legal advice. A knowledgeable seller’s attorney will provide the guidance and confidence to successfully close the sale while minimizing the stresses and worries for the seller.

If you are in the market to sell your home, we would be glad to assist you in any aspect of the transaction, from review of a listing agreement or offer through closing.