More Legal Snags Jeopardize Real Estate Deals
With a real estate market filled with complex deals, legal disputes from real estate transactions are on the rise. Legal snags from short sales, foreclosures, and disclosures are prompting more real estate deals to end up in court.

Legal disputes stemming from short sales, in particular, are increasing, from how banks handle defaults to disclosures and contract performance sections of the sale.

Some sellers are taking legal action against their real estate agents, accusing agents of pushing through short sales and failing to inform them of their possible loan deficiency and tax obligations, such as how the amount forgiven by lenders may be subject to income taxes.

To help avoid legal disputes in short sales, some real estate professionals are using an attorney for reviews.

"The attorney does the complete negotiation with the lender on the deficiency," says Bill Gassett at RE/MAX Executive Realty in Hopkinton, Mass. "There are a lot of [real estate agents] doing this negotiating. I don't think that's a good idea."

Other legal pitfalls on the rise in real estate transactions include foreclosure disputes that accuse banks of taking shortcuts on foreclosing on homes, as well as legal problems from inadequate home sale disclosures. In most states, sellers are required to disclose defects on a property.

And in other disputes, sometimes real estate agents are suing home owners who don’t close on a good offer in short sale deals, or even buyers who walk away from a deal because it’s taken too long to close.

Source: “Legal Pitfalls Plague Housing, More Than Before,” Investor’s Business Daily (March 10, 2011)