Maximizing Real Estate Transactions: Expert Tips from CBPR’s Legal Counsel, Mike Stoberski
As real estate professionals, we plot course through a maze of legal considerations with every transaction. While some issues may seem small, they can turn into major hurdles if not handled properly. Mike Stoberski, CBPR’s trusted legal counsel from Wilson Elser Law Firm, shared crucial insights during a recent sales meeting that every agent should keep in mind to avoid legal pitfalls. From solar contracts to property inspections, here's a breakdown of the key takeaways for real estate transactions, each offering a practical tip that could save you and your clients from costly mistakes.
Meet the panelist:
Solar Contracts: Not Just a "Solar Flare"
You’ve probably seen it – the moment when a seller doesn't know if their solar system is owned or leased. This confusion can derail a deal before it even starts. Mike shared his personal experience with SolarCity, now part of Tesla, emphasizing the complexities involved when solar contracts are part of the transaction.
The problem? Sellers often don’t know whether they own or lease the solar system, which can significantly impact the paperwork and transfer process. As Mike put it, “You must know if it’s leased or owned before listing the property. It’s a big deal.” If you're working with a seller who has a solar system, get the facts straight before anything is listed. The worst-case scenario? A delayed closing when a solar company requests extra time or documents at the last minute—something that could easily be avoided with upfront documentation.
Mike also stressed that buyers should request solar contract details during the due diligence phase to avoid nasty surprises when escrow is about to close. “You’ll want to have all the solar paperwork in place well before the closing date,” he advised. If you’re on the buyer’s side, make sure to ask for those documents early to prevent unnecessary delays.
Property Inspections: Let Clients Choose Their Inspectors
The importance of a property inspection is something we all know, but Mike brought a unique perspective on this issue. He warned against interfering with a buyer’s right to choose their preferred inspector. “Let the client choose,” Mike emphasized. This might seem like common sense, but he pointed out that some sellers (and even agents) may try to push back on the choice of inspector, which can lead to frustration down the line.
What’s worse, Mike highlighted a case where a contractor, not a certified home inspector, was hired as a home inspector. “They gave a free bid for plumbing, but they’re not actually inspecting the house as a professional would,” Mike noted. Make sure your clients get the proper inspection from someone qualified. Don’t let subpar contractors undermine your client’s confidence in the process.
Know Your Boundaries: Don’t Overextend Duties
As agents, it’s natural to go the extra mile for clients, as we just basically encouraged you to do, but taking on roles outside your professional scope can lead to unintended consequences.
Due Diligence: While guiding clients is essential, avoid performing their research or making definitive recommendations for home inspectors, contractors, or repairs. For example, suggesting only one contractor or inspector might result in liability if issues arise later.
Document Interpretation: Refrain from interpreting HOA documents, inspection reports, or other legal paperwork for your clients. Instead, encourage them to review these materials thoroughly and share their concerns. You’re there to advise, not to decide.
Why does this matter? In the face of unexpected issues, even the best client-agent relationships can sour. Lawyers often name all involved parties in lawsuits, including agents who overstep their duties. Protect yourself by staying within your professional role.
The SRPD: Your Most Important Legal Document
The Sales Disclosure Statement (Seller’s Real Property Disclosure Statement or SRPD) is often the root of many legal disputes. “This form is the number one cause of lawsuits,” said Mike. Many agents, particularly on the seller's side, fail to fill it out properly, potentially leaving themselves exposed to legal challenges later on. Mike emphasized that a full discussion with the seller is essential to complete this document accurately.
One common oversight? Water-related issues. Sellers may think minor water incidents, like an overflowing dog bowl, don’t need to be disclosed. But as Mike explained, “If it’s water-related, disclose it.” Even if the issue was resolved, disclosing it upfront is better than dealing with it later in court.
“If you’re not sure, check yes and provide an explanation,” Mike advised. It’s a simple step that can save you from a lawsuit down the road. And remember, even if a seller doesn’t have to disclose something legally, doing so can provide peace of mind and help prevent future complications.
The Hidden Dangers of Not Discussing the Details
Mike’s advice went beyond just filling out forms. He talked about how crucial it is to engage in detailed discussions with your clients about these documents. “You have to have the conversation,” he stressed. A simple check on the SRPD can lead to serious legal consequences if not done properly.
For example, if a seller checks “no” to water damage on the SRPD but there’s a history of a small overflow, failing to disclose this could lead to a lawsuit. According to Mike, if a buyer later finds proof of water damage, the seller could be seen as having lied. The seller’s lawyer will need to prove that the damage wasn’t significant enough to warrant disclosure, which is always a tricky situation. It’s a much better approach to disclose everything upfront and avoid potential litigation.
Final Thoughts? The Fine Line Between a Great Advocate and Over-Involvement
At the core of these lessons is the balance agents must strike: being a strong advocate for clients while avoiding over-involvement in their decisions. By maintaining this boundary, agents can provide excellent service without exposing themselves to liability.
Takeaway for Agents: Be thorough, document everything, and remember your role. Clear communication and adherence to professional boundaries will save you headaches and safeguard your career.
By following these guidelines, you can minimize the risk of legal issues and keep your transactions running smoothly. But as Mike cautioned, the details matter. Legal issues don’t just happen—they arise when these details are overlooked.
Want to hear more of Mike’s invaluable advice on how to handle these issues? Don’t miss the full sales meeting video. Trust us, you’ll want to take notes!
