Real Estate

This firm represents a small condominium association in which unit owners have experienced difficulties in selling or refinancing their units because a substantial number of the units are occupied by tenants. The high number of tenant occupants create more demanding requirements from a mortgage underwriting perspective, which means that it is harder for someone to get a mortgage to buy a unit or to refinance. And these more demanding underwriting requirements are applicable not only to tenant-occupied units but even to owner-occupied units. We have just seen this problem recently in connection with representing a buyer of a small (four units) condominium unit, where, once again, we saw that there were difficulties in our client getting a mortgage because three of the four units are occupied by tenants. Bottom line: if you are buying into a small condominium (let's say, without being exact, less than 20 units), you should find out if so many of the units are occupied by tenants that there will be a problem for you to get a mortgage or – in the future – that your prospective buyer will have the same problem.

One of our clients, who has had difficulties selling his house, asked us if he could hold a raffle to make the sale. The basic idea is that any interested buyer would purchase a chance to buy the house (at a relatively nominal price), and as long as there were enough participants to raise the amount of money required by the seller, the house would be sold to one of the participants for the price of the raffle ticket. But this concept is complicated, because this idea runs afoul of the New Jersey prohibition against running games of chance. So to avoid the possible result of illegal gambling, the raffle would have to be coupled with some additional factor making the choice of the winner not merely a matter of chance. One factor along these lines could be for each participant to write an essay on "This house should be given to me because _____" and to fill in the reasons. But this very idea was ruled illegal in an unpublished and non-precedential case in the 1980s, and has never been ruled to be legal. There might be ways to make this idea more likely to be upheld (such as by having an independent panel of judges choose the winning essay), but any homeowner interested in this concept must understand that it has been held illegal once, has never been approved, and raises many complicated issues.

Buying or selling a home – March 16, 2015

A recent court decision highlights some of the potential dangers that can be involved in selling or buying a home. In this case (our firm was not involved) an elderly widow gave a power of attorney to her adult daughter to handle the widow's affairs. Relying on the power of attorney, the daughter signed a contract to sell her mother's house. The price was $1,350,000. As with any contract, the buyer expected good and marketable title. But this condition could not be satisfied when the mother challenged the sale, revoked her power of attorney, and said that the daughter had no right to sell the house. The problem was that the mother did not want to move. The sale fell through. Eventually the home was sold to another buyer but at a price of $1 million, leaving a loss of $350,000 compared to the first price.

The rest of the story need not interest us. What is important are the following lessons:

First, it is most likely that the buyer had no way of knowing when the contract was signed there were going to be title issues. The buyer's lawyer took the right actions to protect the buyer.

Second, if you are thinking of giving a power of attorney to someone, even to a trusted adult child, you have to be very, very careful. Conversely, a lawyer should always have a direct and probing discussion with anyone wanting to give a power of attorney in order to make sure that all issues of trust and conflict are addressed. In this case maybe the power of attorney should have been limited to handling a checkbook and paying bills, and should have not included any powers with regard to selling the mother's home. But that comment is made in hindsight. There is a good chance that when the power of attorney was drafted and signed, the daughter's good-faith intention was to be in a position to take over responsibility for all of her mother's financial affairs including the power to sell the house.

Third, each of the thousands and thousands of single-family home sales that take place every year presents its own challenges. Having competent legal representation is a necessity and not an afterthought. Berman Rosenbach takes these situations very seriously and has the experience and dedication to represent you as either a buyer or seller.