Expert: John Hendricks - 8/29/2008

Question
QUESTION: My husband and I would like to sell our current home in Southern CA, to our son without him having to make a down payment. He is the victim of a very bad real estate deal in which he was deceived by the seller and the seller's real estate agent. The house he purchased was a first time buyer,  low income home in which he was supposed to be qualified through the city to have permission to even purchase it. Nether the seller or the seller's real estate agent divulged this information.  Furthermore the bank, who funded the loan, the title company,  nor the escrow company caught this either. The city got wind of this and now they want to evict him because he was over qualified financially and should never have been able to buy the house in the first place  Needless to say, he is in a big legal battle which has taken all his financial resources and he is at the point that he is ready to just walk away, but he will not be able to buy another home in any conventional way due to this.  Is there anyway we can sell him our house without us holding the mortage as we need the money out of this house to purchase another.

ANSWER: Dear Ann;

Could you tell me if the agent representing the seller represented your son, or did your son have his own agent in this transaction? This would help me answer your question to a greater degree.

Thanks
John Hendricks

---------- FOLLOW-UP ----------

QUESTION: Unfortunately, the seller represented my son as well. Just today, his lawyer told him he believes he has a good case against the title company, because they either missed or did not document that these special conditions on the house.  The house also has a 30 year covenate that keeps him from being able to sell the house a full market value..another condition he was not told at the time of purchase.

Answer
Dear Ann;

Thank you for your follow-up response. I am currently in Mexico with limited access to my email, so I am sorry for the delay in responding.

When your son bought the home, the seller is responsible for completing a transfer disclosure statement for your sons review and approval. If the seller knowingly and willfully did not disclose information that had a direct impact and desirability on the property in question, your son may have a case against the Seller.

Based on what you said, the attorney was correct in saying that the title company may be legally responsible for the lack of inaccurate information provided at the close of escrow. The title company provides a title insurance policy that covers recorded documents that have not been reported at the close of escrow and have a direct effect on your sons property. At the close of escrow, the title company usually will have the buyer acknowledge an up to the minute final preliminary title report just before he signs. If the items in question were not on that report, the title company may be legally responsible for those omissions. Having a good attorney representing your son will make all the difference getting your case settled quickly.

Just this evening I answered another question regarding the lack of disclosure, but it involved not only the seller but a Realtor as well. In your case it is the Seller only. The title company is a separate issue. This is from the California Association of Realtors in regards to disclosure responsibility and potential liability for the lack of disclosure.

Q 26.  Will a seller or real estate licensee be liable if the TDS or MHTDS contains inaccuracies or omissions?

A  No, so long as the following are true:

The errors or omissions were not personally known to the seller or the licensee; and The errors or omissions were based on information provided by public agencies, licensed engineers, land surveyors, geologists, structural pest control operators, contractors, or other experts, dealing with matters within the scope of the license or expertise of that expert; and ordinary care was used when obtaining and transmitting the information. (Cal. Civ. Code § 1102.12.)

Q 27.  What is the liability of a real estate licensee or seller who fails to comply with the TDS/MHTDS law, either by making intentionally inaccurate statements or omissions, or by failing to deliver the TDS properly?

A  The TDS/MHTDS law provides that anyone "who willfully or negligently violates or fails to perform any duty prescribed by . . . [this law] . . . shall be liable in the amount of actual damages suffered by a transferee [buyer]"  (Cal. Civ. Code § 1102.13).

Q 28.  Under the TDS/MHTDS law, can a closed transaction be invalidated for failure to comply with this law?

A   No. The law specifically states that a completed transaction will not be invalidated by non-compliance. However, failure to comply can result in liability.  (Cal. Civ. Code § 1102.13.)  


Regarding your question buying your home without you carrying the mortgage? Unfortunately, with his financial problems with his current house and being the responsible party for the loan, it probably would be hard for him to qualify under the circumstances. I would recommend him resolving his current issue with his house prior to purchasing your home or another. When he is in the position to purchase again, unless it from you, always use a Realtor...

I would highly recommend you listen to your attorney, as he/she has all the facts to relate to where mine are limited. I hope this was of help to you and good luck.

Warmest Regards;
John Hendricks