Expert: Todd C. Menard - 5/4/2009

Question
I entered a contract with a seller who is not the legal owner on record. I found this out the day before my closing. I have been told this guy just needs 90 days for the paperwork to be processed, meanwhile i have been offered to rent the property for more than my priciple on my loan for the house. I was ready to move and thought everything was in place. now I don't know what to do. This move would have been from IL. to MO. and my new job is waiting for me to get there and start work. I have already finished my two week notice in IL. and iam not working now. I need to get to MO. A.S.A.P and i feel like this is a bad situation getting worse and all the expenses are begining to pile up. I should also mention that the real estate agent is also my future boss's wife.

Question: What rights do I Have as a buyer in this situation? and is legal action even worth the continuation of loss and even possibly the loss of my new job?
should I stay in IL., go beg for my old job back and sue?

Answer
Hello Chris - This situation can on two personas. First, it could be no problem, second, it could be a major crisis. The first, it could be this was an investor who acquired the property on a lease/purchase or agreement-for-sale which would require the first transaction to close and the deed to record before being able to transfer the title to you. This is reasonable although this should have been disclosed in the beginning and failure to have done so may have violated Seller disclosure laws or possibly other laws in your state. Was your future boss' wife the representative for the seller, for you or both? If for the seller in any capacity then she may also have contributed to the lack of disclosure. If not, then she should have least known who the owners were at the time she wrote your offer. It would be considered reasonable and prudent for the real estate salesperson representing you to have pulled a property & tax record to be certain that all "owners of record" have signed the contract as an offer/contract that is not signed by ALL the owners may in some states not be an enforceable or valid document (that is for the lawyers). The second, possibly the person who signed your contract as the "Seller" as previously stated should have disclosed they did not have right to convey the title/deed to the property without conditions or a contingency of first closing on the property themselves. There can be many reasons for this some which may be considered fraudulent, predatory, or to evade notice of their interest. The question it raises is why? The Seller (person with the interest in the property) should volunteer the reason for the delay, and since the seller is the cause of your dilemma, your agent should be pressing the issue and helping you negotiate your position that the Seller should pay for the difference between the sellers payment to the owner of record, and your payment of your new loan.... at least this. Any additional costs to you associated with the delay should also be negotiated on your behalf. I would question your representation should your representative not take this position. The National Association of REALTORS and its members pledge to abide by the NAR Code of Ethics. The first 9 Articles deal with an agents duty to Clients and Customers. You may desire to peruse through this on REALTOR.com. Finally, you do not want to move into a home that you are not certain the "seller" has the right to buy then sell. If the first transaction never happens the owner-of-record could possibly evict you... at this point you don't know. So you need answers immediately. I cannot answer your questions as you have asked specifically because those are questions only you can answer and only should answer with the assistance of a real estate attorney in the state where the property is located as laws vary from state to state. You have a right as a party to the contract to inquire about the possibilities I presented above directly to the title/escrow company or attorney handling the transaction. If the initial contractual relationship between the owner of record and your seller is considered by a real estate attorney to be legal, and the 'seller' appears to be capable of closing, then continuing with the transaction may be a reasonable option. If not, you should be able to either notice the seller with a 'notice to cure' within a certain time frame and if the seller fails to rectify the cure then there may very well be a default or breach, or in some states failing to close on the established close-of-escrow date listed in the terms of the contract is a material breach... in either situation you probably have the right to cancel the contract and be entitled to a refund of your earnest money. The NAR Code of Ethics requires a REALTOR to instruct a client to seek legal advice from a real estate attorney before allowing their client to enter into a pre-possession agreement. Therefore, I recommend to you that you should seek legal advice if for nothing more than your rights under a 'pre-possession' agreement. You want to be careful what you sign in this situation as your intent is to own not rent. What happens with maintenance and mechanical, plumbing, electrical, HVAC, pool motors, etc that require service or replacement during the time period you are waiting for closing? What does your real estate purchase contract say about who is to repair and what about after possession? Please seek legal advice or at least pre-paid legal services. Remember, I am not an attorney, so this is not to be considered legal advice but rather real estate information that any professional REALTOR should be able to provide. Please reply if you have further questions. I hope this helped - Todd