Look Before You Leap…Into A New Listing!

Real estate transactions can often be quite complicated and confusing for even the most savvy of Sellers and their agents. You would think that the most basic and straightforward step in the process would be determining who are the owners and who has the authority to convey the property and sign related paperwork, such as the listing agreement, contract, and closing documents. You might be surprised to learn just how often we encounter situations, where an improper party is signing on behalf of an owner, or a party thought to be an owner, is in fact not an owner at all. These situations typically occur when the property is owned by a trust or an entity such as an LLC or a corporation, and these issues are often not revealed until the attorney or Closing Agent has a chance to review the trust or corporate documents, as well as the title commitment.

Similarly, one might think that gathering accurate information about the property itself would be a straightforward task. After all, the owners live there and one might assume they know all there is to know about the property. However, far too often serious and previously unknown issues with the property are only revealed after a property inspection is conducted and a title commitment is produced. In order to avoid finding yourself in one of these unenviable surprise situations during the closing process, take these simple steps prior to executing a listing agreement and contract:

Do not simply take an owner’s word. This is not to say do not trust an owner. Oftentimes an owner simply forgets how the property is titled or that certain things might be wrong with the property. Search the appropriate county property appraiser’s website to download the prior deed in order to determine who are the actual owner(s) of the property.

Avoid surprises.  In order to avoid surprises when the property inspection report comes out, suggest that the owner(s) have the property inspected prior to listing it. It may seem like an unnecessary expense, but learning about potentially serious issues before getting too far into the closing process may be a worthwhile and prudent expense for many sellers. Similarly, if you suspect that there may be serious issues with regard to title, ordering a title search report and learning about any such issues prior to taking the listing can be well worth the expense.

Obtain necessary documents at the outset. If the property is owned by a trust or an entity, it is very important to obtain a copy of the trust or the entity’s operating agreement. The trust will establish the name of the Trustee(s) and the authority granted to the Trustee(s). An operating agreement will establish the structure of the entity, a breakdown of its management and membership, and the authority granted to its managers or members. Oftentimes managers or members of entities are other entities, which themselves have separate operating agreements. These layers can make determining who actually has the authority to sign on behalf of an entity quite complicated. This makes obtaining and reviewing an LLC’s operating agreement(s) and other corporate documents extremely important. Additionally, the Closing Agent will also need to review these documents as part of the closing process, so it’s a good practice to have them ready for this reason as well.

There is much to remember when representing a Seller in a real estate transaction, but remembering to “look before you leap”, and adding these few steps to your pre-contract practice, will help to avoid potentially serious issues and delays in the closing process. As always, should you have any questions about these or any additional steps you can take to avoid surprise issues in the closing process, we encourage you to consult with a reputable real estate attorney.


Berlin Patten Ebling, PLLC

Article Authored by Andrew Conaboy, Esq.,aconaboy@berlinpatten.com


This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.

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