Common Mistakes Made in Real Estate Transactions

key with keychain that looks like a house unlocking the front door of the house - Common real estate mistakes concept

Mistakes in a residential real estate transaction can not only delay a closing but can also cause financial consequences. When Sellers and Buyers make mistakes, they often involve the following:

Not Providing a Prospective Buyer with a Properly Completed Sellers Disclosure Statement

The Michigan Seller Disclosure Act requires a seller of residential property to provide a written Seller’s Disclosure Statement to a prospective buyer before a sales contract is signed. Failure to provide a buyer with a disclosure statement will enable a buyer to terminate an otherwise binding sales contract.

After closing, if the buyer discovers that the Seller’s Disclosure Statement was not properly completed and it contains material errors, omissions, or inaccuracies about the condition of the property, the buyer may have a civil cause of action against the seller for fraud and misrepresentation.

Not Verifying That You Have the Authority to Sell or Purchase the Property

The full legal names of all parties must appear on the sales contract and should relate to their authority to sign the contract. If the seller or buyer is a trust, an estate, a limited liability company (LLC) or is acting as a person’s power of attorney, the person signing the sales contract must have the authorization and documentation to sign the contract in order for it to be binding. A problem typically arises when a title company issues a requirement for an original certificate of trust, certified letters of authority for an estate, an operating agreement for an LLC or an original power of attorney and those documents are not readily available. A problem also arises when a seller signs a sales contract assuming he or she is the sole owner of the property when in fact there are other persons that share an ownership interest in the property.

Not Deciding How You Will Take the Title to the Property Prior to Closing

Although typically, a husband and wife will take title to the properties as husband and wife “by the entireties”, this may not always be the most desirable case. It may be more beneficial for them to take the property in the name of their trust or to take the property in an enhanced life estate deed (Lady Bird Deed) for estate planning purposes. There could also be tax issues for one spouse or the other to hold title to the property.

For unmarried couples there are important considerations as to whether the property should be held “as tenants in common” where each person holds an undivided interest in the property and are able to convey their interest separately, or hold the property as “joint tenants” where each person has a right of survivorship so that a deceased person’s interest is automatically transferred to the survivor at time of death.

Not Specifying Items of Personal Property That Are Included or Excluded From the Sale

Typically, a sales contract will have a provision indicating what appliances and personal property are included or excluded. However, most buyers and sellers have differing opinions about which things are considered fixtures that are permanently attached to the home and what is considered personal property to be taken when the home is sold. For example, a buyer could very well assume that drapes or a mirror hung in the bathroom is included in the sale and a seller could assume that they are not attached to the wall so are excluded from the sale. Other examples where differing opinions could arise is with a TV having a wall mount, rented water softeners and outside play structures.

Not Following Up With Additional Inspections of the Property After an Initial General Inspection

Most sales contracts include a contingency for a standard home inspection covering issues relating to the general construction of the home along with the mechanical, electrical and plumbing systems. However, there may be other issues to address in a residential property, particularly if it is an older home. Depending on the circumstances, additional inspections may be needed for radon, mold, asbestos and the condition of the sewer line. Many homes constructed in the 1950s through the early 70s had Orangeburg pipes for sewer lines which have deteriorated over time. If a home is suspected of having Orangeburg pipes, the sewer line should be inspected. Likewise, if there is evidence of water damage additional tests may be required for mold and air quality.

Not Issuing an Owner’s Policy of Title Insurance Without Standard Exceptions

“Standard exceptions” that are typically excluded from coverage in an owner’s policy of title insurance include: claims of easements not shown by the public records; encroachments and boundary line disputes; and construction liens that are recorded on the property after closing. To be protected against items that could affect ownership of the property, a buyer should make sure that they are issued a title insurance policy that is issued “without standard exceptions,” which will provide more comprehensive insurance coverage for the property.

Not Obtaining a Survey to Verify the Boundaries of a Property

Although a survey is not required with a home purchase, it is a good idea for a buyer to obtain one, especially if there are no clearly defined boundary lines for the property or if there are fences, driveways or structures on or near boundary lines. A survey will also show if others have the right to use your property for access, parking, and utilities. A survey may also be the only way to tell if a third party has a claim to part of the property because of improvements, such as a garage, fence, or swimming pool, that are on the property. For plated properties, a relatively inexpensive mortgage survey will usually show where the boundaries are in relation to the structures on the property and if there are any encroachments or building setback restrictions.

Purchasing a Property in a Homeowners Association and Not Reviewing the Restrictions

Condominium and homeowners' associations have rules and restrictions to comply with that impact a person’s ownership of the property. A prospective buyer needs to review and fully understand the governing documents of the association to ensure that they can agree to and abide by the rules and restrictions. Many associations have restrictions for pets, parking, maintenance, repairs, fences and other matters that are related to home ownership. For example, a prospective buyer of a condominium or a property in a homeowners association should not assume that they will be able to move into their home with their pets or be able to build a fence or out building on the property.

Not Contacting an Experienced Ann Arbor Real Estate Attorney

Bill Ager at Ager Law Office, assists both buyers and sellers with a variety of transactions. For a reasonable flat fee, he assists clients through the whole process from start to finish, including preparation and review of the documents and forms required by law. He also assists clients with For Sale by Owner transactions and transactions with real estate agents.

From his Ann Arbor office, Bill serves clients throughout Washtenaw County. For a free consultation call (734) 649-0784, send an email to, or contact us online!

Categories: Real Estate