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Thursday, January 14, 2016

Home Seller Risks and Responsibility

 

Home Seller Risks and responsibility

In a sale process, two primary parties are involved: Seller and Buyer. Both these parties have certain rights and responsibilities in order to complete the transaction successfully. The agreement to sell and sale deed is executed on the doctrine of 'Good Faith'. Let's take a look at the key responsibilities and risks of buyers and sellers:

 

Home Sellers Responsibilities

  • Duty of disclosure: The seller is bound to disclose to the buyer any material defect (in the property or in the seller's title thereto), of which the seller is aware and the buyer is not; and which the buyer could not, with ordinary care, discover. There is no duty to disclose such defects of which buyer has actual or constructive notice, but a mistake with respect to a fact material to the property will make the agreement void. Material defect must be such that if the buyer knew it, his decision to purchase the property would have been fundamentally affected. Such defects may also hamper the enjoyment of the property.
  • Responsibility towards buyer's queries: If the buyer raises reasonable questions with respect to the property with or without inspection of the property documents, the seller is bound to answer the same to the best of his knowledge and belief.
  • Agreement to sell: The seller needs to enter into an 'Agreement to Sell' with the buyer when selling a property. The purpose of the 'Agreement to Sell' is to provide a record of the terms agreed upon by both the contracting parties (buyer and seller) for the sale/purchase of a property and to create the right for the buyer to obtain a sale deed for the property purchased. The 'Agreement to Sell' is NOT a document through which the transfer of the title will be carried out. It is a document that precedes a sale deed and thus, does not require to be registered.
  • Looking after property before conveyance: Even after the 'Agreement to Sell' has been entered into with the buyer, the seller is still responsible to take care of the property and cannot be negligent towards the property until the sale deed is executed.
  • Execution of conveyance / sale deed: The sale deed has to be executed by both the seller and the buyer in the presence of separate witness for both parties. Sale deed of immovable property is required to be registered within the time stipulated under the law in the designated office of the Registrar. The registration of sale deed provides clear right to subsequent sale. Therefore upon receiving the total payment from the buyer, the seller must execute proper conveyance of the property and facilitate registration at the stipulated time and place.
  • Possession of the property: Once the formalities from the side of the buyer are completed, it is the duty of the seller to give the buyer possession of the property, notwithstanding a condition in the sale deed that if no possession is given, the buyer may get it himself. Possession has to be given when the property passes to the buyer, which would generally be at the time of the execution of the sale deed; though it may vary depending on terms of the sale deed.
    Normally it is understood that the seller can retain possession till the buyer pays the money. However it has been held that the transferor is not entitled to retain possession even where the purchase money has not been paid fully. If a seller takes a plea that the remaining money has not been paid, the purchaser must show that he is willing to pay the rest of the consideration. The court can ask for proof of this intention on part of the purchaser. 
    If the property is in the possession of the seller, he should vacate it and hand over the vacant possession to the buyer. If the property is in occupation of any other person, then, as far as possible, the seller must get it vacated and give vacant possession to the buyer - more so in case of agriculture land or even where the land is in occupation of a trespasser, unless the buyer has purchased the property with existing encumbrance.
  • Payment of public charges: The seller is bound to pay all public charges (i.e., financial or other liabilities such as tax liabilities to the statutory authorities, government revenue and municipal taxes) and rent accrued and due in respect of the property up to the date of the sale or up to the date of possession, if the parties so agree. The seller is also under obligation to discharge all existing encumbrances on the property or to pay the interest on all such encumbrances due up to the date o sale, except where the property is sold subject to the encumbrances.
  • Delivery of property free from encumbrances: Conveyance of a clear and a good title and delivery of property free from encumbrances is the duty of the seller.

Besides responsibilities, there are various risks associated with a property deal � both for the buyer and the seller. It is advisable to analyze the risks involved before you buy or sell property.

 

Home Sellers Risks

  • Inappropriate valuation of the property: It is quite possible for the seller to wrongly assess the value of his/her property. This value is mainly arrived at by using various sources such as comments from friends, overall property market trends and information from the marketplace. The seller generally wishes to receive the maximum amount through the sale of his/her property, which could become obstacle in achieving a possible sale. The seller should bear in mind that an average buyer is only interested in paying what he/she considers to be reasonable price. Thus, the seller should demand property price according to the market trends.
  • Selling through too many real estate agents: It is advisable to select few agents as the buyers tend to think negatively about a property that is being handled by multiple agents. The seller should consider the agents based on their specialization and market reputation. Further, notify the same property price to all agents to avoid possible manipulation by prospective buyers.
  • Tough access to property: There is also risk of losing potential buyer due to the difficulties posed in the access to the property. A seller should arrange for access to the property to be made as easy as possible.
  • Dubious buyers: There is risk involved in selling the property to a buyer with dubious credentials. It is, therefore, necessary to verify the background and standing of the buyer before getting into a transaction.
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