Author Archives: Craig Blackmon

About Craig Blackmon

I am an attorney in Seattle, where I have practiced real estate law for over a decade. I own and operate my law firm, Seattle Property Lawyer, where I help people buy and sell homes without an agent (plus handle other legal issues relating to owning a home). I maintain the FSBO Law Center a web site for "for sale by owner" sellers and buyers. I am a licensed real estate broker and innovator in the real estate industry.

Buyer's remorse

Posted on by
10

We’ve all been there: we’ve signed up for a major purchase when we think, “Wait a sec — was that REALLY a good idea?”  Given the costs associated with the purchase of a home, this moment of doubt can be downright crippling when it occurs after you’ve signed a purchase and sale agreement (PSA).  Usually, we get over it and press ahead with the purchase.  But what if you don’t — what if you really want to back out of the deal?

Most people in this situation will turn to their agent for advice.  Before you do so, however, recognize two facts.  First, you’re hoping to avoid a legal obligation without incurring liability.  The analysis of your situation — i.e. a determination of whether and how you can avoid your legal obligation — constitutes the practice of law.  Your agent, though, is almost certainly not a lawyer.  Second, your agent has an interest in seeing you go through with the purchase, as your agent only gets paid for his or her efforts if the deal closes.  Many agents — and certainly those who contribute to RCG — recognize that the interests of the client are paramount, and they would not permit their own self interest to interfere with the service and guidance they provide to their clients.  There are, however, other agents who, whether consciously or subconsciously, will allow their own self interest to influence the advice they give.

On the other hand, legal counsel can be expensive.  In most instances, the PSA indicates that, upon buyer’s default, the seller’s sole remedy is to retain the earnest money.  If that’s not the case in your situation, and if your agent did not bring this option to your attention before you signed the offer, then you may have a claim against your agent for negligent representation.  However, assuming you have so limited your liability, you should compare the cost of hiring a lawyer to the amount you stand to lose under the PSA.  If you put up $1000 in earnest money, then you can walk away from the deal relatively pain-free, and there may be no need for legal advice.  If you put up something more significant, however, it is probably worth at least consulting an attorney so that you can identify your options.

Typically, every PSA contains one or more contingencies.  Common contingencies include financing, inspection, and title.  If one or more of these contingencies remain open (i.e. neither waived nor satisfied), then you may have an easy way out.  If some of these contingencies at least arguably were not satisfied (e.g. a letter from the lender indicating that you did not qualify for financing, but which does not satisfy the specific requirements as spelled out in the PSA), then you at least have a position from which you can negotiate. 

There may be other factors that give you some leverage over negotiations for the return of your earnest money.  For example, I helped clients who rescinded a PSA for a newly constructed home.  Their agent was the “designated buyer’s agent” for the development.  This agent provided remarkably poor representation.  Even though my clients had a weak argument, at best, that they were entitled to the earnest money, they had a fairly good claim against their agent.  So, in my demand letter, I pointed out that, if the matter went to court, my clients would assert claims against this agent and would explore the relationship between that agent and the developer.  Apparently, the developer decided that this was not a battle worth fighting, and it returned all of the earnest money, a substantial sum.

Ultimately, a call or letter from an attorney carries signficantly more weight than from the buyer or the buyer’s agent.  If you want out of a contract and you want to avoid liability for doing so, it’s probably worthwhile to consult an attorney.

This post does not constitute legal advice or counsel.  Consult an attorney about the particular facts of your situation.

When real estate agents practice law…

Posted on by
18

Bad things can happen. I recently worked on a matter where seller signed an offer. The offer included an escalation clause and indicated that the the legal description was “to be attached.” However, the offer also included the tax parcel number. The listing agent attached a new addendum stating the sale price as a sum certain (calculating the price based on the terms of the escalation clause) and attaching the legal description. The seller initialed these “changes” and sent them to the buyer for the buyer’s approval. All other terms of the offer were unchanged and accepted by the seller.

Before getting a response from the buyer, the seller received another, substantially better offer from a second buyer. The listing agent informed his client that he could still revoke the first offer and accept the second because, when the offer was returned with a legal description and a sum certain sale price, it constituted a counteroffer. Thus, according to the agent, as long as the seller rescinded the “counteroffer” before it was accepted by the buyer, there would be no contract with the first buyer and the seller could enter into a contract with the second buyer.

Unfortunately, the seller took the listing agent’s counsel and proceeded to rescind the “counteroffer” and sign the second offer. The first buyer promptly hired an attorney, who promptly threatened legal action. The buyer’s attorney reasoned that, when the seller signed the offer, there was mutual acceptance of the terms of the offer, and thus a contract was created. The contract contained a tax parcel number, thus satisfying the requirement for a legal description. Moreover, to be enforceable, a contract requires either a specific price or a mechanism by which a specific price can be determined. Because the offer contained an escalation clause, it probably satisfied this legal requirement as well. This attorney’s reasoning was sound and the seller had a significant legal problem as a result of selling the same house twice.

Thus, the seller was subjected to potential liability on a breach of contract claim by the first buyer (or the second buyer, depending on which contract he breached when he sold to the other buyer). While real estate agents are allowed to engage in the limited practice of law by completing blanks in pre-printed forms, they are not allowed to provide legal analysis or counsel to their clients. In this situation, the agent did just that. If you have a question or concern about your legal rights and obligations at any point in the transaction, you rely on your agent’s input at your peril. An agent, no matter how experienced, is not an attorney and may not give you good — or even competent — advice.

Escrow agents and how they protect themselves

Posted on by
14

When you choose an escrow company (or “closing agent,” the person who does the work necessary to close the transaction), you look for several qualities: competence, service, location, etc. One factor you probably don’t consider is whether the escrow company is willing to be responsible for its own significant errors.

When escrow is opened, the closing agent sends both buyers and sellers a copy of its standard escrow instructions. These instructions supplement the purchase and sale agreement and instruct the agent as to how the transaction should be closed. There appear to be only a handful of templates used by the many different escrow companies, as it is very common to see the same set of instructions regardless of the escrow company. In the vast majority of those instructions (perhaps 85-90%), there is a little-noticed sentence, typically in the “Disputes” paragraph: “The parties jointly and severally agree to pay the closing agent’s costs, expenses and reasonable attorney’s fees incurred in any lawsuit arising out of or in connection with the transaction or these instructions, whether such lawsuit is instituted by the closing agent, the parties, or any other person.” The exact language of this sentence may vary somewhat, but the gist is the same: if anyone sues the closing agent for any reason, buyer and seller will be responsible for the closing agent’s attorney’s fees and costs.

The effect of this language is to insulate the escrow company from any liability that arises out of the closing agent’s negligence. Say, for example, the closing agent neglects to pay off an existing lien on the home. When buyer takes title, the buyer will now have to deal with this lien that was incurred by the seller. A reasonably prudent closing agent would have insured that all liens were satisfied at closing, and the agent’s failure to do so probably constitutes negligence. Under normal circumstances, the agent (and escrow company) would be liable to the buyer for the harm caused by this negligence. However, if the instructions contained the above language, the agent almost certainly will avoid liability. Why? Because if buyer were to file suit against escrow in this situation, buyer would be responsible for paying escrow’s attorney’s fees and costs in the lawsuit. As anyone who has used an attorney to defend them in litigation knows, attorney’s fees can be very, very expensive. Thus, the above language is an incredibly strong disincentive to seeking compensation from escrow, even in those instances where escrow’s negligence causes harm. I believe this is simply not fair to the buyer and seller.

In my experience, most (but not all) escrow companies are willing to modify the above language so that it does not effectively bar a suit against escrow based on escrow’s negligence. It’s certainly an issue you may want to address when deciding which escrow to use in your transaction. Needless to say, an attorney can quickly negotiate a change in these instructions on your behalf. [This post does not constitute legal advice. Consult a lawyer regarding your particular situation.]

Legal Description, Revisited

Posted on by

Way back in January, I authored a post on the legal description of property. People say that blogging generates business, and they’re right. I recently picked up a new case because an agent read that post and referred his client to me. This new case illustrates the complexity of the legal description issue (which I address below), as well as the dangers associated with relying on an agent — or the internet — for legal advice (a topic I will address in another post later this week).

My original post discussed the general principle that a legal description must be included in a contract for the sale of real property in order for that contract to be valid. The point of the post was to encourage buyers and sellers to include the legal description in the contract from its inception so that there was an unequivocally binding contract upon mutual acceptance. Thus, I did not discuss the exceptions to the general rule. In fact, there are several, one of which is frequently applicable given the format of the widely used NWMLS forms.

A contract for the purchase and sale of land need not contain a legal description if it references another document that contains such a description. Bingham v. Sherfey, 38 Wn.2d 886, 889 (1951). This rule is well established. See, e.g., Sunreal, Inc. v. Pong’s Corp., Inc., 2003 WL 21500730 (Div. 1 2003) (quoting Bingham). In the Bingham case, the contract at issue did not contain an adequate legal description. However, it did contain the tax parcel number for the lot at issue. The Court held that the tax assessor in the particular county presumably performed the assessor’s statutory duty and included a legal description for the property in the tax records. Bingham, 38 Wn.2d at 889. Thus, the Court found that reference to the applicable public record (i.e. the property tax records maintained by the county) “furnishes the legal description of the real property involved with sufficient definiteness and certainty” such that the contract was valid. Id.

The NWMLS form contract contains a space to insert the tax parcel number for the property at issue. Thus, even if the contract does not contain a legal description, it very well might contain a tax parcel number. If it does, then the contract probably falls within the exception created by Bingham, and the contract is binding despite the absence of a legal description.

Admittedly, one could make a counterargument. In Key Design, Inc. v. Moser, 138 Wn.2d 875 (1999), the Supreme Court reaffirmed the legal description rule first announced in Martin v. Siegel, 35 Wn.2d 223 (1949). Key Design, Inc., 138 Wn.2d at 881-84. Quoting Martin, the Court held that “every contract or agreement involving a sale or conveyance of platted real property must contain . . . the description of such property for the correct lot number(s), block number, city, county, and state.” Id. at 881. Thus, in light of this language, one could argue that a tax parcel number is insufficient. However, Martin was decided two years prior to Bingham. Moreover, the Court in Bingham specifically noted that its holding was consistent with Martin. Bingham, 38 Wn.2d at 889. Thus, a court is unlikely to apply a bright line rule to the legal description requirement. Rather, a court will probably enforce a contract that contains the property’s tax parcel number.

Every purchase and sale agreement should include a legal description so that there is no issue. However, if you are going to dispute the validity of a contract on this basis, you need to be aware of the exeptions to the general rule. As I will discuss further in my next post, you should always consult an attorney — directly, not by reference to a blog — before reaching a conclusion about the validity of a contract.

Please note that this post is not legal advice. You should consult an attorney for specific legal counsel.

Free classes

Posted on by
4

On the fourth Thursday of every month, I offer a free one-hour class at the Phinney Neighborhood Center, where I offer my attorney-perspective on the purchase and sale of real estate.  The classes are interesting, and everyone always thanks me after the class for taking the time to do it.  Of course, I’ve got a little self interest: I do it to promote my law practice, which is focused on the purchase and sale of residential real estate.  After my last post, I promised Dustin I’d post on some of the questions I have heard and answered.  Unfortunately, a brief summary is not possible.  Questions run the gamut, from ultra-basic to super-sophisticated, addressing every stage of the process from beginning to end. 

For you real estate service providers out there — agents, attorneys, inspectors, mortgage brokers, title insurers, escrow providers, etc. etc. etc. — consider investing the two hours per month (and about 40 bucks) as a marketing endeavor.  Attendance at my class runs about 5-7 people.  So over the course of a year, I’m able to introduce myself to 60-80 potential clients (some of whom have become actual, paying clients), and all of them will hopefully mention my name to their friends, family, etc.  Small, but then again Rome was build one marble block at a time…

Free Class!

Posted on by
2

If anyone is interested, I am offering a free class tonight at the Phinney Neighborhood Center (Blue Building Room 6, 6532 Phinny Ave. N. in Seattle) from 7:30-8:30. I’ll be addressing legal issues relating to the purchase and sale of a home, as well as the advantages and disadvantages of buying or selling without an agent. I hope to see you there!

A Closing Date without a closing

Posted on by
255

(This post is authored by Craig Blackmon, an attorney and real estate broker in Seattle whose practice focuses on residential real estate — see his web page or his blog for more information. Please note that this post is not legal advice. You should consult an attorney for specific legal counsel.)

Your purchase or sale is scheduled to close on the Closing Date. What happens if, for some reason (perhaps a delay with the lender), the transaction does not close on the Closing Date? What are the rights and obligations of the buyer and the seller?

time essenceA discussion of this scenario begins with the “time is of the essence” clause. Virtually all purchase and sale agreements (including the forms used by the MLS in Seattle), contain a clause indicating that time is of the essence. When a contract does not contain such a clause, the law affords the parties some flexibility in regards to performance of their contractual obligations. With such a clause, however, the law requires the parties to perform as indicated by the contract. Thus, assuming the contract indicates that time is of the essence, the transaction must close on the closing date or there will be problems.

If the transaction fails to close because a contingency was not satisfied, such as a financing contingency, then both parties are absolved of their contractual obligations. A contingency is a “condition precedent” — i.e. a condition that must be satisfied before the contract binds the parties. So, if the contract includes a financing contingency, and the transaction fails to close because the buyer did not get financing in time, then neither party is in breach of the contract. The contract simply expires. If the parties want to proceed with the transaction and close beyond the closing date, they need to so agree in writing by amending the contract prior to its expiration.

If the transaction fails to close because one of the parties did not live up to their obligations, however, then the other party may have an action for breach of contract. For example, suppose the seller fails to execute the documents necessary to convey good title to buyer. If, at the time of closing, buyer has performed its obligations, then buyer has a breach of contract claim against the seller. Note, however, that the buyer must have tendered performance — i.e. deposited the funds with escrow to purchase the property — in order to have a breach of contract claim (with two exceptions noted below). If neither party has performed its obligations by the closing date, the contract expires.

If buyer did not tender performance, buyer may still have a claim if seller either waived the “time is of the essence” clause, or otherwise acted in a manner inconsistent with an expectation of performance on the closing date and the seller relied on that action in not performing (the legal term is “collateral estoppel”). In either case, the law concludes that the buyer has a claim because the seller has acted in a manner inconsistent with enforcement of the closing date.

Finally, note that these are exactly the sort of questions that should only be answered by an attorney, not a real estate broker. And when an answer is needed, it’s needed now. If a buyer needs to scramble to get an attorney on board and up to speed, the buyer may not get answers soon enough. So a prudent buyer will have a team of two real estate professionals – a real estate broker and an attorney – in place at the start of the process so that the buyer is fully informed and protected, particularly when the deal gets off track.

Romancing the (City) Home

Posted on by
2

In September, my wife and I bought a condo/townhouse across the street from the Pike Place Market. There’s lots to love — the beautifully landscaped interior courtyard (it’s in Market Place North), the great neighbors, the not-so-grueling commute (a 7 minute walk). However, best of all is living by the Market. Last night on Rick Steves’s travel show, he featured Paris in the springtime. Accompanied by a Parisian guide, he walked around the Rue Clare neighborhood to the many food merchants (the butcher, the fromagier, etc. etc. etc.). The Parisian talked at length about the superiority of such merchants in comparison to a supermarket. “Hey!” we said, “it’s just like our house!” Now if only my cooking skills approached the food resources at my doorstep…

We love you, Home! Happy Valentine’s Day! xxoo
Tiff and Craig

Fruit at Pike Place Market

The Legal Description of Property

Posted on by
9

(This post is authored by Craig Blackmon, an attorney in Seattle whose practice focuses on residential real estate — see his web page or his blog for more information. Please note that this post is not legal advice. You should consult an attorney for specific legal counsel.)

The legal description — it’s just an address, right? Unfortunately, it’s significantly more complicated than that, and it’s important to know the difference if you’re trying to create a binding contract.

In England more than 300 years ago, Parliament passed the Statute for Prevention of Frauds and Perjuries, which required that certain contracts be written and signed before they would be enforced by the courts. Thus, one was prevented from committing fraud and perjury by falsely convincing a court that there was an enforceable oral contract. In other words, absent a written and signed agreement, there would be no enforceable contract, regardless of whether the parties actually created an oral contract. Today, attorneys and other legal scholars refer to the legal principle first enunciated by that English law as the “statute of frauds.”

Our legal system in this country is largely based on the system in England. Thus, all states have adopted in one form or another laws that reflect the statute of frauds. Here in Washington, certain statutes relate specifically to the conveyance of real property. Per RCW 64.04.010 and RCW 64.04.020, every conveyance of real property must be in writing, and it must be signed and acknowledged by the party to be bound (i.e. the party selling or otherwise conveying the property).

The courts have also adopted the statute of frauds and repeatedly found (over many, many years) that a contract for the conveyance of land must contain a description of the land sufficiently definite to locate it without relying on other evidence. See Tenco, Inc. v. Manning, 59 Wn.2d 479, 485(1962); Green v. Escene, 108 Wn.App. 1045 (2001) (not reported). Indeed, in a case decided nearly 60 years ago, the State Supreme Court specifically rejected the contention that a property’s address was a description sufficiently definite to satisfy the statute of frauds. Martin v. Seigel, 35 Wn.2d 223, 229 (1949). Fifty years later, in 1999, the Court reaffirmed this rule, despite its unusual strictness. Key Design, Inc. v. Moser, 138 Wash.2d 875, 882-83 (1999).

Therefore, when drafting a purchase and sale agreement, it is imperative to include the legal description and not just the property’s address — which, of course, begs the question: what is a legal description? In most instances, the legal description is based on the lot, block and subdivision of the property. Here is a typical legal description for a home in Seattle: “Lot 15, Block 21, Gilman Park Addition, according to the plat thereof recorded in Volume 3 of Plats, Page 40, Records of King County, Washington.” Where the home was not built as part of a subdivision, the legal description may reference a government survey or use “metes and bounds,” a method of describing the property with reference to landmarks, angles, and distances. To obtain a legal description, you can turn to the preliminary title commitment or a previous deed of the property (which is usually available online at the King County Recorder’s Office.

And if you don’t include a legal description? The purchase and sale agreement is not a binding contract, and either the buyer or the seller can walk away without any consequences. The MLS form purchase and sale agreement widely used in Seattle includes language indicating that the legal description can be included after creation of the contract by the buyer’s agent, the seller’s agent, or the escrow agent. If your purchase and sale agreement includes such language, then the legal description can be added at a later date to create a binding contract. However, until the legal description is included, there is no contract, and either party can walk away. Therefore, it behooves any serious buyer or seller to include the legal description from the contract’s inception.

Terminating a Contract

Posted on by
4

(This is a guest post by Craig Blackmon, an attorney in Seattle whose practice focuses on residential real estate — see www.lawofficeofcraigblackmon for more information. Please note that this post is not legal advice. You should consult an attorney for specific legal counsel.)

Last week, the Washington Appellate Court decided a case dealing with a buyer’s termination of a purchase and sale agreement. The case will not be published, and accordingly it has no precedential value for similar cases in the future. Nonetheless, the case does provide some interesting insight on the factors a buyer should consider before walking away from a purchase and sale agreement.

In Silvers v. Lee, the seller (Ms. Silver) and the buyers (Mr. and Mrs. Lee) entered into a standard MLS form purchase and sale agreement (the “PSA