Real Estate Litigation: How to Stay Out of It

Recently it is generally an area of law I consider “happy law.”  It’s generally a win, win, win situation where a willing seller sells a property to a willing buyer and, if it’s not a cash deal, a happy bank helps create this American Dream.  While most real estate transactions work this way, there are people who try to take shortcuts and end up with a lawsuit.  Here are some tips to avoid real estate litigation.

1.       I cannot get approved for a mortgage but my friend can and is willing to help me out.  Should I buy the house?  I highly advise against this arrangement.  There is a saying that if you lend a friend money, you lose both.  This kind of transaction is called an installment contract.  I highly advise against this for both people involved because so many things can go wrong.  For the buyer, you are paying toward a home where you do not have legal rights since you are not on the mortgage or the deed.  For the seller, you are taking a risk on a person who a bank has deemed credit worthy.  Many times this transaction is largely verbal or the parties may discuss new terms.  This transaction relies heavily on two individuals willing to trust each other for a long time and not be swayed by market forces that either substantially increase the value of the home or substantially decrease the value of the home.  In the scenario with a substantial increase, the seller tends to want to renegotiate the sales price with the buyer or threaten to sell the property and leave the buyer SOL.  In the scenario with a substantial decrease, the buyer usually wants to pull out of the deal and can easily walk away since he/she has no skin in the game.  Be careful entering into these deals.  If you cannot qualify for a mortgage or buy a home with cash, it’s best just to rent until you can qualify for a mortgage or buy a home with cash.

2.       Do I really need an inspection?  No you don’t, but why not?  If you choose not to hire an inspector, you waive your right.  Should a major issue arise with the home after you have purchased it which could have been discovered with an inspection, you would be responsible.  If an inspection uncovers something that you had not anticipated, you can decide to walk away from the deal or know what you will have to deal with if you continue with the purchase. 

3.       My girlfriend and I want to buy a house together.  Be careful purchasing a home with someone who is not a spouse.  The reason why is because it is not easy to divide a house if you and your co-buyer no longer get along.  It’s not like you can cut the house in half.  You and your co-buyer could be involved in a partition lawsuit whereby the court determines how to untangle you and your co-buyer from each other.  If one person cannot buy the other person out, the house is typically sold and you and your co-buyer will have to determine how best to split the proceeds (if any) or debts. 

4.       I don’t want to pay for a lawyer or realtor.  Proceed with caution if the buyer and seller want to do this on their own.  Realtors typically assist with negotiating the sale price and assisting with purchasing a home that best suits a buyer’s needs.  Also, a home is typically the largest purchase most people make in their lifetimes.  Do you really want to make such a large purchase involving many documents without a lawyer?

If you would like to know more about real estate, please call (312) 546-5077 or [email protected].

Thank you for reading.  Until we meet again, love one another.

Janice