Real Estate

When a property is listed on a multiple listing service (MLS), there may be six individuals involved:

• The Seller
• The Listing Broker (Represents Seller)
• The Listing Agent (Agent who works for the Listing Broker)
• The Buyer
• The Selling Broker (Broker who represents Buyer)
• The Buyer’s Agent (Agent who works for the Selling (Buyer’s) Broker)

When the seller successfully closes on the sale, the Listing Broker is entitled to the commission specified in the listing agreement. In the St. Louis area, this is typically around 6% of purchase price. The seller is generally responsible for paying this at closing.

The Listing Broker shares the commission with the Selling Broker, and each Broker pays their own agents.

For example, assume a home purchase price of $500,000. The 6% commission would be $30,000. The Listing Broker distributes half, or $15,000, to the Selling Broker. Then the Listing Broker pays their Listing Agent. Percentages vary depending on the brokerage, but for simplicity sake, let’s say they split it. The Listing Broker takes $7,500 and pays the Listing Agent $7,500.

The Selling Broker also pays their agent. Again for simplicity, let’s assume they split the $15,000, each taking $7,500.

At the end of the day, on a $500,000 home purchase, the typical compensation breakdown would look like:

• Listing Broker: $7,500
• Listing Agent: $7,500
• Selling Broker: $7,500
• Selling Agent: $7,500

Who pays the commission? All states have different practices, but in Missouri, commissions for both sellers and buyers agents/brokers are typically the responsibility of the Seller. The Buyer pays nothing to their agent/broker.

This sets up a bizarre dynamic for the Buyer’s agents/brokers, who are actually getting paid by the other side (the Seller). If you are on the buying side, beware of this potential conflict between you and your agent/broker. You are not the one paying their bill.

If you have questions about your situation, whether you are buying or selling a property, please feel free to contact our office through this website or at 314.862.2237

No, you should not ask your Real Estate Agent or Broker legal questions. Real Estate Agents and Brokers are not attorneys and are, therefore, prohibited by law from practicing law or dispensing legal advice.

Missouri Law states that “no person shall engage in the practice of law or do law business, as defined in section 484.010, or both, unless he shall have been duly licensed therefor and while his license therefor is in full force and effect…” Any person or entity that violates this prohibition is guilty of a misdemeanor and subject to a fine and treble [triple] damages. RSMo. § 484.020.

In plain English, this means that only licensed attorneys can practice law or advise on legal matters. Any non-attorney doing so will be breaking the law and subject to prosecution.

Asking legal questions to your real estate agent or broker is not only prohibited by law, it is a bad idea. First, it puts your agent in an uncomfortable position. Although they are licensed to engage in real estate agency or brokerage, they are not trained lawyers, and therefore not qualified to dispense legal advice. Not wanting to disappoint you or their broker, your agent may feel compelled to answer you in an area their training and licensing does not support.

If you ask your agent or broker a legal question, but their answer does not accurately reflect the law, you may have little recourse if you suffer damages from relying upon it. You may not be able to successfully sue your agent or broker for engaging in the unauthorized law business, because you 1) knew they were not a trained lawyer; and 2) likely signed a brokerage agreement indicating that the agent/broker was not engaged in the practice of law. Even when you have an excellent claim against an agent or broker, lawsuits are often very difficult or expensive to pursue.

Your agent/broker and lawyer have different, but complementary roles. Your agent helps you locate properties (if you’re a buyer), or locate buyers (if you’re a seller). State statute also permits agents and brokers to fill in legal forms that have been approved by legal counsel, and to use their own experience to aid you in  negotiations.

Your lawyer, on the other hand, advises you on the contract terms, reviews the title work and survey, reviews closing documents from the lender and title company, and negotiates the detailed terms of the agreement, even altering pre-printed forms and clauses, to ensure the deal makes sense for you. Lawyers and Agents are both on your team, but they have different responsibilities.

If you have a legal question regarding a home purchase or sale, please feel free to call our office at 314.862.2237.

Yes – It is highly advisable to have a lawyer review your title work, because a lawyer can review the title insurance commitment from the title company and negotiate with the company to ensure that the policy sufficiently protects your interests.

Title work first begins with a “Title Search” to determine who has title (or ownership) of the property. Typically a title company examines all of the deeds, public records and other documents that pertain to the particular property. The title company is trying to locate any potential defects in the chain of title that would raise a question as to who actually owns the property.

Defects might include: 1) a significant variation in the legal description of the land on a prior deed; 2) a deed that was improperly executed; or, 3) a deed that was executed by someone who lacked capacity to convey the property. The title search may also determine if any liens exist on the title and if the owners are subject to any judgments in the county where the real estate is located.

Once the title search is complete, a title insurer (usually a national insurance company and not necessarily the local title company you are familiar with) will issue the Title Insurance Policy. Title insurance is an insurance contract that protects the policyholder from losses caused by both on-record and off-record defects in existence on a specific date. There are two types of policies: 1) The Owner’s Title Insurance Policy, which protects the owner from losses due to title defects; and 2); The Lender’s Title Insurance Policy, which insures that the lender’s mortgage has a certain priority.

The title insurance policy insures the property subject to exceptions. These exceptions are concerns that the title company has regarding something on the chain of title, or off the record.

A lawyer can work with the Title Company to delete these exceptions in several ways. The lawyer can bring forth evidence to show that a defect has been cleared up, or can limit an exception, by showing the defect only effects a limited part of the property. Your attorney can also work with the surveyor to get a more accurate picture of encroachments on the property and use that information to negotiate coverage with the title company.

Your lawyer can also work with the title insurance company to obtain endorsements. Endorsements are agreements by the insurer to bear increased risk for certain events. For example, an endorsement may overturn an exception stated elsewhere in the policy or may modify a condition in the policy. Some typical endorsements deal with zoning, surveys, condominiums and subdivisions, or those that extend coverage to other parties, such as LLCs or other limited liability entities to whom you wish to transfer title.

If you are in the home buying process, and have questions about title work, please contact us at 314.862.2237

 

Yes –Any real estate contract that is referred to as “standard” was drafted by somebody and for somebody. In most cases, the contract was purchased online or at an office supply store, or it was supplied by a member of the Realtors® Association, whose legal counsel drafted if for its members’ use. All real estate contracts can be negotiated, including a contract provided to you by a real estate agent/broker. In fact, contracts for the purchase or sale of a residential property are often negotiated. Perhaps more importantly, the failure to fully negotiate such contracts could effectively waive your rights to later complain about or sue over the contract terms.

That said, only you or your lawyer can make changes to the contract. A real estate agent or broker is not permitted to do so in Missouri.

Missouri law only permits real estate agents and brokers to fill in the blank spaces for the parties, write on the blank lines at your direction, and fill in property location and other necessary terms. Doing more than this may constitute the unauthorized law practice in violation of Missouri law. Agents and brokers are therefore unable to cross out any of the contract language, and substitute it for something else. They are also unable to substitute contracts in the event the “standard” forms are not appropriate for the particular deal, unless such forms are pre-approved by their own legal counsel. But you, the client, can do that with the help of your attorney.

Many people buying or selling a home will therefore hire a lawyer to help them review their contract, negotiate its terms and make changes that are more favorable to their position. Real estate contracts can be complicated, and it is highly advisable to hire a lawyer who is experienced in this area of the law.

Our firm has helped numerous clients negotiate many so-called “standard contracts,” or “standard terms,” including but not limited to: the type of inspections allowed, who pays for them; dates for deadlines, and what happens in the event closing is delayed.

If you are either purchasing or selling property, or are an agent or broker assisting someone, and would like to discuss obtaining or making changes to a contract, please feel free to call our office at 314.862.2237.

Recently, we have seen a number of “Rent-to-Own Contracts” or “Lease Purchase Agreements” in our office.  In these contracts the owner of the property agrees to rent to the tenant for a certain amount of time, giving the tenant the option to purchase the property for a price that was agreed upon at the beginning of the lease.  Depending upon the contract, the tenant can either exercise their option to purchase the property during the lease term, or at its conclusion.

This type of contract provides the owner, who may have been unable to sell the property, rental income and a potential buyer.  Likewise the tenant has the opportunity to live in a place they see themselves living in long-term, without the immediate financial obligation to purchase.

In rent-to-own contracts, a portion of the rent is often called “Option Price Money.” If the tenant purchases the property, this money will be credited to the purchase price; if the tenant does not purchase the property, the owner keeps the money.

If you are considering entering a rent-to-own situation, an integrated rent-to-own contract is much preferred over piecing together separate rental and sale contracts.  This is because an integrated contract clearly spells out the rights and obligations of the parties and provides a smoother transition from the rental phase to the purchase phase.

Please feel free to call our office at (314) 862-2237 to discuss your situation.

When purchasing a home, many clients misunderstand or ignore a very critical deadline in their contract – The Loan Contingency Deadline.  If the purchase is conditioned upon the Buyer getting financing, the Loan Contingency Deadline is the date by which the buyer needs to have a firm commitment from their lender that they will receive financing.

When the buyer applies for a loan, the seller wants clarity on whether or not the buyer will actually be able to get a loan and how long this process will take.  The seller sets a deadline by which the buyer needs to have a loan commitment in place, after which the buyer is on the hook to purchase the property, whether or not they can actually obtain the loan.    Many Realtor^® forms we see in our office refer to this deadline as the “Loan Contingency Deadline.”

What confuses many buyers is that getting a document from a lender titled “Pre-Approval,” “Preliminary Commitment,” “Loan Commitment,” or other similar phrase does not mean that the buyer has a firm commitment from the lender.  The lender has not yet unconditionally agreed to fund the loan, and may ultimately decline to if the buyer fails to meet certain conditions.

Buyers can then find themselves in a difficult position if the loan contingency deadline has passed, and their lender has not agreed to fund the loan.

If you have a question about the loan contingency deadline in your contract, or are unsure about what you have received from your lender, please call our office at (314) 862-2237.