Why Smart Sellers Hire Real Estate Agents

San Antonio Texas Real Estate Attorney Trey Wilson wrote:

As a real estate lawyer in San Antonio -- and one who frequently deals with real estate brokers and agents -- friends and clients frequently ask me about the cost versus benefits of hiring a real estate professional when selling property.  Suffice it to say that I believe that the benefits of professional representation are numerous, and I never recommend that a friend, client or family member sells real estate without the assistance of a licensed professional.

The counter-arguments I receive from Sellers are: 1) that the San Antonio Real Estate market is "hot"and should result in a quick/easy sale;   2) that in the modern era of social media, Trulia, and Zillow, marketing real estate is "easy;" and 3) that not paying a real estate agent a commission helps the seller "save money." 

I don't find ANY of these arguments compelling.  Rather, I think that the following five (5) reasons, alone, justify using a real estate broker as a Seller's agent in every transaction:

1)  Real estate agents help establish a market-supported, realistic listing price.  It's no secret, most FSBOs are overpriced.  Virtually every Seller thinks that their home is WORTH the amount that they WISH TO RECEIVE. You know --  worth enough to satisfy the existing mortgage, pay closing costs, and still have enough for a tidy down-payment on a new property. The truth, however, is that the Seller's perceived value of the property is rarely the fair market value (what a willing buyer would pay).    

By contrast, a licensed real estate agent can establish a realistic asking price formulated by data produced from performing a market analysis of comparable listings and recent sales. Further, the agent doesn't assign an "emotional premium" on the property. Thus, a real estate broker's involvement may help the Seller avoid the common pitfall of overpricing their home.

2)  Real estate agents are not emotionally attached to your property.  In addition to helping you avoid a hefty, unsupportable price tag based on an "emotional premium" (which has no value to anyone except you -- the Seller), a broker will  not be offended by a low offer, a less than perfect inspection report, or critical statements from prospective buyers.  This helps the process become more of a business transaction, and less akin to parting with a beloved family heirloom.

3) Real estate agents understand the law.  There can be dire consequences to failing to make certain disclosures, not meeting deadlines and discrimination against certain categories of buyers.  Chances are, you don't know the real estate laws that apply to and bind you. A licensed broker does. This can save you lots of money and grief later -- especially if you avoid a lawsuit.  Further,  selling a property implicates lots of paperwork.  Having a broker explain the significance of each document is invaluable.

4)  Selling a property creates an adversary relationship with prospective buyers.  While there is no need to be nasty, it is axiomatic that the objectives of the Seller (get as much $ as possible) are naturally and necessarily adverse to the objectives of the Buyer (pay as little $ as possible).  To achieve their objectives, Buyers usually "focus on" imperfections in the property to argue that a lower price should be acceptable. Sellers don't like hearing how their most valuable possession has "fleas"  -- even when these statements are made in the course of price negotiations Having a real estate broker to "run interference" can remove some of the tension from this relationship.  

5)  Real estate agents achieve higher sales prices.  The statistics don't lie. The average Realtor-assisted sales price is significantly higher than the average sale by owner.  This difference usually more-than compensates the fees charged by the agent.

For all of these reasons, unless you want to enlist the services of a Texas real estate lawyer, a prudent Seller should engage a licensed and reputable real estate broker when it comes time to sell.

Landlocked Property? An Implied Easement May Exist By Operation of Law

San Antonio Texas Real Estate Attorney Trey Wilson wrote:

As a San Antonio lawyer with an active real estate law practice, I routinely field inquiries about landlocked property, and disputes concerning the existence (or non-existence) of easements for access.  Many times, an easement will exist by operation of law -- even if no written grant of easement is contained in a deed or other conveyance document.

WHAT IS AN EASEMENT? 

An easement is a liberty, privilege, or advantage without profit granted to a person, either personally or by virtue of his ownership of a specified parcel of land, to use another parcel of land for some limited purposes. Daniel v. Fox, 917 S.W.2d 106, 111 (Tex.App.-San Antonio 1996, writ denied). Most often, the limited purpose is for access to the easement owner's parcel of land over another owner's contiguous parcel.

When discussing easements, Texas  courts use certain terms whose legal meanings are significant. Two of the most important terms used in connection with easements are "servient estate" and "dominant estate."   The parcel owned by the grantor of the easement is called the servient estate and the parcel benefitted by the easement is called the dominant estate. Miller v. Babb,263 S.W. 253, 254 (Tex.Comm'n App.1924, judgm't adopted).  A simple example would arise when a piece of property (Tract A) abuts a county road , and is contiguous to a separate tract (Tract B) that does not touch the county road. When an easement is established over Tract A for the purpose of providing access to/from  Tract B from the county road, Tract B is the dominant estate, and Tract A the servient estate.  

HOW DO EASEMENTS ARISE?

In a perfect world, easements are obvious, identifiable and are the subject of an express grant in a written conveyance document. For example, the deed conveying ownership to Tract B (from the example above) would (in Utopian legal society) contain a clearly articulated grant of a right to cross Tract A (at a designated location) for the purpose of accessing the county road from Tract B.  

However, it is frequently that case that there contains no such express grant of an easement -- even when the owner of Tract B either sold to or bought from the owner of Tract A.  In these cases (and upon strict proof of certain elements), easements may arise by necessity and implication (operation of law), based upon the general principle that Texas law disfavors landlocked property.

EXAMPLES OF IMPLIED EASEMENT TYPES

Two types of easements arising by implication (and necessity) are an EASEMENT BY IMPLIED GRANT and an EASEMENT BY IMPLIED RESERVATION. Under Texas law, if a grantor seeks an easement by necessity over a part of the land she once owned, but has conveyed, she seeks a way of necessity by implied reservation. If, on the other hand, a grantee seeks an easement by necessity over lands once owned by a common grantor but conveyed to third parties, he seeks a way of necessity by implied grant. For a detailed discussion on the distinction between easements by reservation versus grant, see, e.g., Drye v. Eagle Rock Ranch, Inc., 364 S.W.2d 196, 205-09 (Tex.1962).

WHAT MUST BE SHOWN TO ESTABLISH AN IMPLIED EASEMENT?

A party seeking to establish the existence of an implied easement must show that:

(1) there was unity of ownership of the dominant and servient estates and that the use was 
(2) apparent, 
(3) in existence at the time of the grant, 
(4) permanent, 
(5) continuous, and 
(6) reasonably necessary to the enjoyment of the premises granted.** 

Bickler v. Bickler,403 S.W.2d 354, 357 (Tex. 1966); Drye, 364 S.W.2d at 207; Hoak v. Ferguson, 255 S.W.2d 258, 260 (Tex.Civ. App.—Ft. Worth 1953, writ ref'd n.r.e.); Miles v. Bodenheim, 193 S.W. 693, 696 (Tex. Civ.App.—Texarkana 1917, writ ref'd).

The elements of proof for each of the foregoing easement types (implied reservation vs. implied grant) differ. Most significantly,  an easement by implied reservation requires a showing of "strict necessity," while an easement by implied grant  requires only that the easement in question was reasonably necessary to the convenient and comfortable enjoyment of the property (dominant estate) as it existed at the time the severance was made.

HOW CAN I HAVE EASEMENT RIGHTS RECOGNIZED?

The most common way to establish the existence of disputed access easement rights is by filing a suit under the Texas Declaratory Judgment Act. Such a suit would seek to have the Court make a judicial declaration -- in the form of a Judgment -- that an easement exists. That Judgment would define the purpose, scope, location  and limitations of the easement, and would become part of the title chain of both the dominant and servient estates.

Cases concerning the existence of easements by necessity can be high-stakes, and difficult to prove. If you find yourself facing litigation concerning an easement, you should contact an experienced real estate litigation attorney.

Language in Deed Generally Supersedes that of Real Estate Purchase / Sale Contract

San Antonio Texas Real Estate Attorney Trey Wilson wrote:
As a San Antonio lawyer with an active real estate practice, I am frequently questioned about the legal effect of terms contained in a real estate purchase/sale agreement (earnest money contract) that do not appear in the deed. Some of examples of contractual provisions that may be omitted from deeds are:  rights of first refusal on adjacent property of the Seller,  easements or access reserved for the Seller, the right of the Buyer to cross adjacent property retained by the Seller, and the provision of a warranty on the property's condition.  The pattern is usually the same -- the parties negotiated a contract, and included certain "Special Provisions" in their written agreement, but those terms were never incorporated into the Deed recorded by the Seller after closing.

When this occurs, several legal doctrines may be implicated. This post focuses on the legal doctrine of MERGER.

It is the law in Texas that  a purchaser takes title to real property solely through a deed. See Stephens Cnty. Museum, Inc. v. Swenson, 517 S.W.2d 257, 261 (Tex. 1974). An instrument that does not operate as a present conveyance of title to real property is a contract to convey rather than a deed. See TEX. PROP. CODEANN. § 5.002; see also 30 Tex. Jur. 3d Deeds § 9 (2007). A contract to convey real property contemplates further acts leading up to the actual conveyance of title in the deed. See 30 Tex. Jur. 3d Deeds§ 9; see also Cont'l Royalty Co. v. Marshall, 239 S.W.2d 837, 840-41 (Tex. Civ. App.-Texarkana 1951, no writ). When a deed is delivered by the Seller and accepted by the Buyer as performance of a contract to convey real estate, the contract is MERGED in the deed.   

Though the terms of the  deed may vary from those contained in the contract, still the deed must be looked to alone to determine the rights of the parties. 2 DEVLIN, LAW OF DEEDS § 850a.  This principle is what Texas courts call "Merger. " See Baker v. Baker, 207 S.W.2d 244 (Tex.Civ.App. —San Antonio 1947, writ ref'd n.r.e.).

The Rule applicable in all contracts, that prior stipulations are merged in the final and formal contract executed by the parties, applies, of course, to a deed based 49upon a contract to convey. When a deed  is delivered and accepted as performance of a contract to convey, the contract is merged in the deed . Though the terms of the deed may vary from those contained in the contract, still the deed  must be looked to alone to determine the rights of the parties. No rule of law is better settled than that where a deed  has been executed and accepted as performance of an executory contract to convey real estate, the contract is functus officio and the rights of the parties rest thereafter solely in the deed .

Id. at 249-50, quoting 2 DEVLIN, LAW OF DEEDS § 850a.

Thus, when a Buyer accepts a deed as performance of an earnest money contract requiring the Seller to convey legal title top real property, it is the general rule that any collateral agreements contained in the contract are extinguished.  

This Rule, as most in the law, has exceptions.  For example, the Texas Supreme Court has held that the doctrine of merger may not be applied to defeat a cause of action under the DTPA for breach of an express warranty made in an earnest money contract and breached by deed.  See Alvarado v. Bolton, 749 S.W.2d 47, 48 (Tex.1988).  Likewise,  the doctrine of merger does not apply when a real estate contract was procured by fraud, accident or mistake in transactions leading up to the deed. ECC Parkway Joint Venture v. Baldwin, 765 S.W.2d 504, 511-12 (Tex.App.-Dallas 1989, writ denied);see also 1464-Eight, Ltd. v. Joppich, 154 S.W.3d 101, 104 n. 1 (Tex.2004) (disapproving court of appeals cursory analysis that based on merger doctrine earnest money contract was superseded by documents executed at closing).

The Practical Effect of Agreeing to Buy Real Estate "AS IS"

San Antonio Texas Real Estate Attorney Trey Wilson wrote:

Many boilerplate/form/template contracts providing for the sale of Texas real estate (including the TREC promulgated form 20-11) provide that the buyer will accept the property "in its present condition." See Section 7(D) of TREC Form 20-11.  Other real estate purchase and sale agreements expressly state that the Buyer is purchasing the property "AS IS."  

What does this mean, and what are the possible legal implications of buying Texas real estate on an AS-IS basis?

The Texas Supreme Court has held that when the terms of a Purchase and Sale Agreement (Earnest Money Contract) provide that the sale is one for the property in its "AS IS" condition, the buyer will be prevented from holding the seller liable if the thing sold turns out to be worth less than the price paid. Prudential Ins. Co. of Am. v. Jefferson Assocs., Ltd., 896 S.W.2d 156, 161 (Tex. 1995).  See also, e.g., Prudential Ins. Co. of Am. v. Jefferson Assocs., Ltd., 896 S.W.2d 156, 161 (Tex. 1995) (refusing to hold a seller responsible for alleged misrepresentations when the buyer was a sophisticated real estate purchaser who agreed to purchase the property "as is" and assumed the risk of properly determining the property's value); Isaacs v. Bishop, 249 S.W.3d 100, 110 (Tex. App.-Texarkana 2008, pet. denied) (suggesting the appellee was negligent for failing to read a promissory note, but still upholding rescission based on fraud by the appellant).   

That is, the risk of the property being different than the Buyer believed it was before the transaction is consummated is borne by the Buyer. By agreeing to purchase something "as is," a buyer agrees to make his own appraisal of the bargain and to accept the risk that he may be wrong. Mid Continent Aircraft Corp. v. Curry County Spraying Serv. Inc., 572 S.W.2d 308, 313 (Tex.1978). The seller gives no assurances, express or implied, concerning the value or condition of the thing sold.See Tex.Bus. & Com.Code § 2.316(c)(1) ("as is" agreement excludes implied warranties in contract covered by UCC).

Texas courts have also interpreted contract language stating "in its present condition" to be an agreement to purchase the property "as is." See Cherry v. McCall, 138 S.W.3d 35, 39 (Tex. App.-San Antonio 2004, pet. denied) (construing "in its present condition" as an "as is" agreement); Larsen v. Carlene Langford & Assocs., Inc., 41 S.W.3d 245, 251 (Tex. App.-Waco 2001, pet. denied) (construing to be "as is" certain contract language stating that "[b]uyer accepts the Property in its present condition. Buyer shall pay for any repairs designated by a lender"); Fletcher v. Edwards, 26 S.W.3d 66, 75 (Tex. App.-Waco 2000, pet. denied) (construing "in its present condition" in earnest money contract to be an agreement to purchase the property "as is"); Smith v. Levine, 911 S.W.2d 427, 431 (Tex. App.-San Antonio 1995, writ denied) (construing "in its present condition" to be an agreement to purchase the property "as is"); see also Sims v. Century 21 Capital Team, Inc., No. 03-05-00461-CV, 2006 WL 2589358, at *2 (Tex. App.-Austin Sept. 8, 2006, no pet.) (mem. op.) (construing "in its current condition" as the plain-English equivalent to "as is").

Thus, a valid "AS IS" clause will often work to the advantage of a Seller and the detriment of the Buyer.  

As with most legal topics, however, this is not universal -- especially where fraud is used to induce the Buyer to enter the "AS-IS" agreement:

A buyer is not bound by an agreement to purchase something  "AS IS" that he is induced to make because of a fraudulent representation or concealment of information by the seller. Weitzel v. Barnes, 691 S.W.2d 598, 601 (Tex.1985); Dallas Farm Mach. Co. v. Reaves, 307 S.W.2d 233, 240 (Tex.1957); see Cockburn v. Mercantile Petroleum, Inc., 296 S.W.2d 316, 326 (Tex.Civ.App.—Dallas 1956, writ ref'd n.r.e.). A seller cannot have it both ways: he cannot assure the buyer of the condition of a thing to obtain the buyer's agreement to purchase "AS IS", and then disavow the assurance which procured the "AS IS" agreement. Also, a buyer is not bound by an "AS IS" agreement if he is entitled to inspect the condition of what is being sold but is impaired by the seller's conduct. A seller cannot obstruct an inspection for defects in his property and still insist that the buyer take it "AS IS". In circumstances such as these an "AS IS" agreement does not bar recovery against the seller.

 Prudential Ins. Co. of Am. v. Jefferson Assocs., 896 S.W.2d 156, 161 (Tex.1995).

Tucson Man Guilty for Real Estate Fraud

The office of the US Attorney, District of Arizona, reports that a Tucson, AZ man was found guilty of real estate fraud.  Dino Sisneros, 42, was charged with three counts of wire fraud and two counts of money laundering greater than $10,000.

Sisneros will be sentenced September 5, 2013.

Sisneros masterminded a real estate fraud scheme between 2006 and 2008.  He told investors that he would invest their funds in real estate and they'd receive a large return on their investment.  Instead of investing the funds, Sisneros allegedly used a large portion of the funds for his own personal use.  The indictment alleged that Sisneros received approximately $861,000 in loans from the investors to invest in real estate, but he he failed to pay the victims as he had promised.

The indictment against Sisneros states that five separate victims  loaned him money to invest in real estate, but that Sisneros failed to pay them as he promised.

The Arizona US Attorney's office stated that, " An indictment is simply the method by which a person is charged with criminal activity and raises no inference of guilt.  An individual is presumed innocent until competent evidence is presented to a jury that establishes guilt beyond a reasonable doubt."

The investigation was conducted by the Criminal Investigation Division of the IRS.  The prosecution is being handled by Jonathan Granoff, Assistant US Attorney, District of Arizona, Tucson.

Pakistan Native Charged in Real Estate Fraud

As reported by various news publishers, A South Florida resident, formerly from Dublin, OH, was charged with a $13.8 million dollar real estate fraud scheme.  He is being held without bond for fear he will flee the country.

Zafar allegedly convinced an investor, Patwinder Sidhu, to send him $10 million, beginning in 2008, to purchase property in Pakistan.  Zafar purported that his uncle was the Defense Minister in Pakistan. Zafar told Mr. Sidhu that his uncle told him that the Pakistani government was going to buy the land.  Zafar convinced Mr. Sidhu that they could purchase the land and then sell it back to the Pakistani government at a huge profit.  Mr. Sidhu sent him nearly $8 million in 2008 and 2009, and later, another $2 million.

Zafar filed no income-tax for 2008 & 2009, but reported zero income for 2006 and 2007.   Zafar's wife, Cynthia King-Zafar, filed taxes separately from Zafar and reported earnings of $5,849 in unemployment income in 2009.

Zafar put the money into an account in his father-in-law's name, Jacob R. Johnson of Delaware; however, he controlled the account and used the money for his extravagant lifestyle.  Zafar spent the money on expensive luxury cars, expensive diamonds and watches worth an estimated 200,000.00, and an extravagant night club life.  He rented expensive cars, including one that was shot at in a drive-by shooting that killed a budding rapper.  He purchased a Lamborghini, a Rolls-Royce and an Aston Martin.

The Pakistan Native, Haider Zafar, 35, is charged with wire fraud, money laundering and tax evasion. 

Sued by Buyer for Failure to Disclose Alleged Property Defect? Their Pre-Sale Inspection May Save You

San Antonio Texas Real Estate Attorney Trey Wilson wrote:

Sometimes buyers discover issues, problems or defects in real property after closing a purchase/sale. When these problems prove serious or costly to repair (or when good ole' Buyer's Remorse rears its head) buyers frequently file suit against the seller/former property owner.  

The usual allegations are that the Seller is liable for damages based on "failure to disclose," "misrepresentation by non-disclosure," fraud, breach of contract and/or violation of the Texas Deceptive Trade Practices Act ("DTPA").  Suits are most common when the Seller's written disclosure does not identify the alleged property defect.

However, in many instances, a Buyer's pre-closing inspection (preformed by a third-party inspector) may absolve the Seller from liability.  This is particularly true when the third party inspector is retained by the Seller, conducts a thorough inspection, and has a reasonable opportunity to discover the alleged defect.  Whether or not the defect is actually discovered is often immaterial.

The law requires a Buyer seeking to recover from a Seller's non-disclosure to prove that he or she relied on a misrepresentation (including by failure to disclose) of the Seller in consummating the purchase. Eagle Props., Ltd. v. Scharbauer, 807 S.W.2d 714, 723 (Tex. 1990).  However, a line of court cases establishes that, in the eyes of the law,  a buyer's inspection of a house's condition may constitute a new and independent basis for the purchase of the property, which intervened and superseded the seller's alleged misrepresentation. "The common thread of the decisions reaching this conclusion is that, regardless of the result of his investigation, the buyer's decision to undertake such an investigation indicates that he or she is not relying on the seller's  representations about the property." Bartlett v. Schmidt, 33 S.W.3d 35, 38 (Tex. App.-Corpus Christi 2000, pet. denied).

Texas courts have held that -- even when false and fraudulent representations are made concerning the subject matter of a contract -- when the person to whom they are made conducts an independent investigation into the matters covered by the representations before closing, it is presumed that reliance is placed on the information acquired by such investigation and not on the representations made to him.  Marcus v. Kinabrew, 438 S.W.2d 431, 432 (Tex. Civ. App.-Tyler 1969, no writ); see also Kolb v. Tex. Emprs' Ins. Ass'n, 585 S.W.2d 870, 872 (Tex. Civ. App.-Texarkana 1979, writ ref'd n.r.e.); Lone Star Mach. Corp. v. Frankel, 564 S.W.2d 135, 138 (Tex. Civ. App.-Beaumont 1978, no writ); M.L. Mayfield Petroleum Corp. v. Kelly, 450 S.W.2d 104, 109-10 (Tex. Civ. App.-Tyler 1970, writ ref'd n.r.e.).   

Thus, when faced with a claim for failure to disclose a condition of real property formerly owned by them, a prudent response is to seek out the Buyer's property inspection and call an experienced real estate lawyer.  With a little luck and a well-presented defense, many times a pre-sale inspection may save you from liability.

RECOVERING UNDER THE TEXAS REAL ESTATE RECOVERY TRUST ACCOUNT

San Antonio Texas Real Estate Attorney Trey Wilson wrote:

The statute allowing recovery under the Real Estate Recovery Trust Account is found in Chapter 1101 of the Occupations Code. See generally TEX. OCC. CODE ANN. ch. 1101, subch. M & N (West 2012). The statute states that the Trust Account is maintained "to reimburse aggrieved persons who suffer actual damages" at the hands of a license holder. TEX. OCC. CODE ANN. 1101.601(a) (West 2012).  

Texas appellate courts agree "[t]he purpose of the Account is to `guarantee the fidelity and honesty of the real estate salesman in his dealings with the public and to insure and indemnify any member of the public against damages or injury caused by a violation of the Act.'" Wilson v. Bloys, 169 S.W.3d 364, 366 (Tex. App.-Austin 2005, pet. denied) (quoting State v. Pace, 640 S.W.2d 432, 433 (Tex. App.-Beaumont 1982), aff'd, 650 S.W.2d 64 (Tex. 1983)). The statute requires the claimant to show "that the judgment is based on facts allowing recovery under this subchapter." Id. § 1101.607(1) (West 2012).

Simply put, a person who obtains a judgment for actual damages caused by the misconduct of real estate license holders can, when certain specified statutory conditions are met, obtain reimbursement from the Account if the license holder is unable to pay the judgment. Tex. Occ.Code Ann. § 1101.601.  

To recover under the Act, a person who has an uncollectable judgment against a real estate broker may file a verified claim in the court in which the judgment was rendered and, upon notice to the commission and the judgment debtor, apply for an order directing payment out of the fund. Id.  A hearing is then conducted on the application at which the commission is authorized to appear for the limited purpose of protecting "the fund from spurious or unjust claims...." Id.  At this hearing, the claimant must show, among other things, that its prior judgment is against a licensed real estate broker who caused the claimant's damages while acting as a broker. Id. § 8, part 1(a) and part 3(c). 

NOTE:  TEX. OCC. CODE ANN. § 1101.602 provides that when a license holder is selling property in his own name instead of as an agent for someone else, a claimant may not recover from the Trust Account unless the license holder engages in the following enumerated wrongful conduct:

1101.653(3):  acting in bad faith;

1101.652(a)(3): engaging in misrepresentation, dishonesty, or fraud when selling, buying, trading, or leasing real property in the name of himself, his spouse, or his relatives; 

1101.652(b): See list here;

1101.653(1): engaging in dishonest dealing, fraud, unlawful discrimination, or a deceptive act;

1101.653(2):  making a misrepresentation; or 

1101.653(4):  demonstrating untrustworthiness.