Q–Due to a job transfer, last September we sold our old home and bought a new one in a town with which we were totally unfamiliar. My husband’s employer recommended a local Realtor, so we presumed she would do a good job finding us a suitable home to buy. She showed us at least 25 houses.
We finally bought one we liked. But in March we were totally surprised to find a construction crew cutting down the beautiful street trees. When we asked what was happening, the foreman said, “Didn’t you know? This street is being widened to four lanes.” Unknown to us, the city had long-planned to widen the street. I fear our house will lose value as a result of the heavy traffic. Our Realtor failed to warn us. Shouldn’t she have told us?
A–Yes. Realtors hold themselves out to be professionals. They have a fiduciary duty to their clients to disclose all material facts.
This situation shows why out-of-town home buyers must be extra cautious before purchasing a house. It is every realty agent’s dream that an out-of-town buyer will come along and overpay for a home because they don’t know local property values. You didn’t know what local residents knew about the street-widening project.
Your buyer’s agent should have known about the long-planned street widening and should have informed you about it. Failure to do so was clearly a breach of her fiduciary duty of full disclosure of material facts affecting the market value of the home you planned to buy.
If you can prove damages, such as lost property value, due to the agent’s failure to warn you about the construction, you may have grounds for a lawsuit against your Realtor. Please consult a local real estate attorney to discuss your alternatives.
Q–As a Realtor, I want to get your opinion of a home-buying method one of my clients stumbled upon. My buyers told me they have lousy credit due to unemployment problems. But now they both have good jobs. So I limited my search for houses to show them to free and clear homes where the seller might carry the mortgage back.
We found one the buyers loved. But their cash down payment was less than the seller wanted. So the husband said, “If the seller will carry back a 100 percent mortgage, we’ll prepay the first six-month’s payments at the closing so she will feel better.”
To my surprise, the seller accepted this offer. I had never heard of such a thing, have you?
A–Your buyers should be congratulated on their creative financing. Instead of making a down payment, your buyers turned their limited cash into paying the first six monthly payments on a 100 percent mortgage.
I have never seen such a transaction. But there is nothing wrong with it. Of course, it’s a bit risky for the seller. Not only did your buyers buy the house with their small down payment, but they have no mortgage payments for six months. Even more important, they made most of their down payment tax-deductible mortgage interest payments.
Q–We are buying our first home. The realty agent keeps referring to a trust deed or deed of trust. Is this the same as a mortgage?
A–Both are security devices. If you don’t make your monthly payments, the lender can foreclose and take away your house. With a mortgage, only the borrower and lender are involved. If you default on a mortgage, foreclosure is usually by court judicial sale. There is often a redemption period after the sale for the buyer to buy the property back.
With a trust deed, or deed of trust, there is an additional party, called the trustee. If the borrower defaults, the trustee files a notice of default, which provides for a reinstatement period. After that, the trustee holds a non-judicial foreclosure sale. Where allowed, lenders prefer deeds of trust because there is no redemption period after the trustee’s sale.
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Have a question about real estate? You can write to Robert Bruss in care of Tribune Real Estate Features Service, 435 N. Michigan Ave., Suite 1400, Chicago, Ill. 60611. Answers will be provided only through the column. Please note that laws vary from state to state and area to area. Consult an attorney for specific legal advice.
