Posts Tagged ‘Legal Advice’

Reading Title Commitments For Better Closings

Q: What is the most common mistake Realtors (and FSBO parties) make in reviewing a title insurance commitment?

A: They don’t review or read it at all!

Most Realtors are trained not to act as attorney’s or give any legal advice. The Title Commitment is a legal document and advising a client on it could constitute legal advice. In addition, many Realtors and FSBO parties simply don’t know what to look for and, therefore, don’t read the document.

Title Commitments Provide Critical Information

All Realtors should be reviewing the title commitment for certain, important information. A title commitment has three sections or schedules: Schedule A, Schedule B-I Requirements, and Schedule B-II Exceptions. At a minimum, Realtors should be reviewing the following:

Schedule A

The first part of the title commitment provides the names of the proposed insured. This should be your buyers. If it is not, call the title company right away – they might be missing an Amendment or their might be an error in your paperwork.

The Policy Amount should match your purchase price.

The name of the seller should be listed in paragraph 3 as the “fee simple” owner. If the name is different, there may be a title issue such as a deceased individual or spouse that still owns the property, a trust or LLC that has an interest in the property, or some other issue that requires attention.

The land referred to in the policy should match the land being sold. It will be a legal description, not a postal address. Review to make sure it looks right, especially if the property is a Condominium or includes multiple lots.

Schedule B-I Requirements

This portion of the title commitment provides a list of requirements that must be met in order to close. The requirements will call out any unusual issues that must be dealt with at closing. For instance, if the seller is deceased, the Requirements might require a valid Personal Representative to be appointed to sign on behalf of the estate.

In addition, most title companies will include any loan payoffs, taxes, or other liens that must be paid at closing. Some title companies, however, will show those liens in Schedule B-II.

Schedule B-II Exceptions

This section shows all of the title “issues” that are excepted from coverage – in other words, the title company will not insure for these issues. They are usually things like covenants, restrictions and easements. But, at some title companies, seller mortgages and liens will appear in this section. Therefore, it is important to review.

Reviewing is not Advising

Although Realtors should review the title commitment, they should not advise their clients about the legal meaning and effect of this document. That would constitute legal advice and is prohibited under Wisconsin Law. Nevertheless, if the Realtor spots a problem (the wrong seller or buyer or too many Mortgages), that should be brought to the client’s attention with the advice to seek legal counsel.

The title commitment is a critical document that provides all parties and their agents with notice of the current state of title. While Realtors should not make a “legal” review of this document, they should make a thorough review to avoid any closing problems.


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CYA Letters and Better Communication

Real Estate Agents would be well served to learn a lawyer’s trick of the trade – the CYA letter. Short for “Cover Your A$&,” these letters serve an important function both for limiting liability and improving communication. Rather than viewing these as obnoxious, overly legal annoyances, Realtors should view CYA letters as tools to better serve their clients.


Buyer:        I like the work the seller did in the basement. But I worry about whether it’s up to code. Can you find out?

Realtor:    I don’t know. You would need to ask an inspector and maybe an attorney. We can ask the Seller’s Realtor about permits and whether all the work meets code, but the ultimate determination is a legal question and I’m not an attorney.

This might be a good, safe answer that does not delve into legal advice. But, without more, there is still a risk of being sued or having a licensing or ethics complaint filed against you. A buyer who later has costly problems because of code violations may lash out at anyone and everyone, including the Realtor. The Buyer might misremember the conversation or even fabricate what was said. All of this can be avoided with a simple, follow up letter – a CYA letter.

CYA Letters are Good Customer Service

Anytime a Realtor is asked for legal advice, they should both decline and follow up with an email or letter. This creates a written record that the Realtor did their job and complied with the law (Wisconsin law prohibits Realtors from offering any legal advice – REEB 24.06). More importantly, it is great customer service and provides a clear communication to the client. A good, CYA letter might read as follows:

I want to follow up on our conversation about the basement. As I said, I don’t know whether there might be code violations. I did ask the Seller’s Realtor and we’ll see what she says. I’m not an attorney and can’t offer anything on this kind of question. An inspector or attorney could help you answer this question and I have some great referrals, if you need them. Thanks!

Following up in writing shows a level of professionalism and assures a clarity of communication. And it covers your tail.

By Attorney Peter Zarov. Mr. Zarov is a Wisconsin attorney who represents many Realtors and Brokers.

This post is not intended as legal advice. Realtors, Brokers and other individuals should consult an attorney regarding their specific issues and questions.

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I’m a Realtor and my buyers just got married after closing and want to know if they need to change anything on the title of the house. What should I tell them?

This is a dangerous question to answer without treading into the realm of legal advice. The simple answer is: your buyers don’t need to do anything — marriage doesn’t change the fact that they jointly own the property.  But, the deeper question likely being asked is, “How should I hold title now that I’m married.”  This is a legal question and should only be answered by an attorney.

When two or more people acquire title to real estate, their rights can be established by important language on the deed. For instance, unmarried individuals could designate their rights as Joint Tenants or Tenants in Common. Similarly, married individuals may want to own the property with survivorship rights so that the property will automatically transfer to the surviving spouse when one spouse passes away.

These designations have very significant legal meanings and can determine who has ownership rights upon a sale or at death. These choices are not simple, require an analysis of a number of factors, and most importantly, constitute legal advice.

Many lenders, Realtors, and title professionals tell all married buyers, “You should take the property as survivorship marital property – everyone does that.” This may be good advice for the majority of people. But, for the few married individuals who have good reason not to make this choice, this is not only bad advice, it could constitute legal malpractice.

Indeed, there are a multitude of reasons that married individuals might not want survivorship rights, including:

  • They have a premarital agreement,
  • They may be using funds for the purchase that they wish to keep separate,
  • One or the other of the spouses has children from another marriage
  • There is a will or estate plan in place
  • They have or will soon have inheritance
  • Many other factors

The analysis of these and other facts is a purely legal function that should not be undertaken by non-attorneys. The majority of married couples do opt for survivorship marital property, after consulting with an attorney. Nevertheless, this does not mean that non-attorneys should assume that this choice is right for everyone.

The Realtor, lender, or title company that is asked the question, “how should the buyer take title” should answer:

The buyer should consult an attorney to determine what is best for their given facts and circumstances. I am not an attorney and cannot provide that kind of advice.

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