(More) Testimonials from Clients and Others

Here are lovely comments I’ve received since 2021:

“I really appreciate your help, effort & support. Thank you!” J.K., 12/18/24

“Yay! Thanks for your patience and perseverance.” C.W., 12/16/24

“Thanks so much for the quick reply and your honesty.” K.W., 12/9/24 (online inquiry)

“Thanks again for your awesome service, It would have been a real issue getting through this sale without your knowledge and advice! Proudly Ready for your final billing!” J.S., 11/26/24

Craig, thank you for all of your work. It really made a world of difference to have professional assistance navigating this. If I need further assistance or if anything else comes up, I will definitely reach out.” S.M., 11/1/24

“Thank you Craig! for doing what you do… well!” C.C., 10/14/24

“Thank you for all your work getting our deed and paperwork together! You made it easy and we appreciated how you laid the steps out for us. Thank you!” M.B., 10/3/24

“Thank you Craig for the help and answering all our questions!” N.V., 9/6/24

“Thanks so much for all your help on this. What a great way to sell real estate. We will absolutely recommend you to anyone.” B.J., 8/31/24

“Thank you for all of your help. You have been fantastic.” M.W., 7/30/24

“I’m very glad that you were able to take me on as a client. Your work and counsel made a big positive difference for me.” W.A., 7/19/24

“Thanks for all of your quick help Craig! Really appreciate how prompt you've been in addressing our questions! I'll definitely reach out in case we have future questions, and recommend you to friends who ever need a real estate lawyer!” J.C., 7/18/24

“Thank you for all of your help, Craig. It was great working with you.” J.H., 7/11/24

“Thank you Craig!! We can both say we appreciated your services, your willingness to start working with us on a holiday weekend, and your proficiency! We are so excited.” J.A., 6/25/24

“Your assistance is greatly appreciated. You are "da Man" and I will recommend you to people I encounter who need such services you provide. Thank you again Craig! You’re awesome.” T.W., 5/31/24

“Thank you for your work! It's a huge relief to part ways with the seller. You have been great too work with and we will be returning clients in the future.” E.A., 5/31/24

“Woohoo! Thank you for making this process incredibly seamless and clear. Additionally, I cannot express to you how grateful I am for your help in addressing and resolving various concerns along the way. I will be referring your name to friends and family for their future real estate legal needs.” A.S., 5/7/24

“Amazing. Thank you Craig! Absolute pleasure to work with you.” T.R., 4/24/24

“Craig - you have been an amazing partner through all of this. Thank you for your diligence, humor (definitely appreciated), and willingness to push when we were hesitant. I still can't believe we got to where we are today and it feels really good!” R.S., 4/2/24

“We sincerely appreciate all of your help in this process and could not have been more pleased with your services. We will be sure to recommend you to all of our friends.” B.P., 3/18/21

“It looks like we are through the sale and everything went smoothly! Thanks so much for your help it really lowered the stress level on our side knowing you had our backs.” S.M., 3/7/24

“Thanks so much, Craig. Hugely appreciate all the help... especially as this thing really started to snowball!” C.A., 3/5/24

“A big THANK-YOU for your expert work & advice on this. It's been a pleasure working with you too! I can't say we hope that we'll use your services again 🙂 -- but we definitely will recommend you to anyone who might need some real estate legal help!” M.O., 2/29/24

“Thank you so much for your help! What a great service you're providing, I really appreciate it!” G.M., 2/26/24 (FSBO seller)

“This is super helpful to know and I appreciate the quick response!” T.M., 2/25/24

“Thanks for the guidance early on , which helped us anticipate issues and understand the various aspects of the transaction.” C.H., 2/20/24

“I thank you for your honesty, and assistance in this matter. I want you to download this text and frame it as a testament to your Professionalism!” T.G., 2/18/24

“Thank you Craig, for your quick and knowledgeable help! A load off my mind.” A.H., 2/16/24

“Well, you have done a great job. It was a small win, but a win is a win, We didn't totally waste our time. Again thanks for your help. Much appreciated! M.H., 2/5/24

“We are funded and closed! Thank you for all your help along the way. We deeply appreciate it.” G.E., 1/22/24

“Thank you Craig!! My wife and I really appreciate your bias for action and communication today to get us here. We are so happy to be working with you.” B.V. 11/28/23 (upon reaching contract)

“Thank you so much for your help! This went smoothly and we are very pleased with how things turned out.” A.K., 11/17/23

“Thank you Craig for all your help! Just really happy to put this behind us.” E.R., 11/9/23

“A decade ago, you helped my then-wife and I get back a $10k deposit that a seller tried to keep after we pulled out. I was really impressed with your toughness and the speed with which you got things resolved - you were a lifesaver.” J.P., 11/1/23 (inquiring about a new matter)

“Craig, you have gone above and beyond with the crazies and we so appreciate you! Thanks again for your guidance!” A.K., 10/26/23

“Your lawyerly intervention did get things moving and eventually fixed. Thanks again. The unit is now on the market and looks great.” G.C., 10/11/23

“Thank you Craig! That was the best $700 I ever spent in my life!!!” S.J., 9/14/23

“You've been very helpful. I'll refer you when anyone asks me to.” P.T., 8/22/23

“Thank you; it’s been a pleasure working with you and I will certainly recommend you!” B.M., 8/15/23

“Thank you for everything, and all your help, support, and guidance! We couldn't have done this without you.” S.H., 8/3/23

“Thanks Craig. We really appreciate the help and piece of mind you gave us. We’ll definitely be recommending you if we know anyone else buying or selling a house.” J.S. and R.S., 7/14/23

“Thank you for all your patience and help. I felt well advised and represented. I think you are a good person.” L.H.S., 7/7/23

“We closed the house today. P. and I wanted to take a moment and thank you for all the help along the way. You made this entire process so easy for us. We are very excited to move to our new home. 😊” L.C., 6/9/23

“Thanks again for taking care of this TICA and meeting the tight timeline we had!” J.K., 5/26/23

“ I really appreciate you guiding us through this. You will come highly recommended to our friends and I hope we have reason to work together again.” J.S., 5/24/23

“Craig, thanks for all your help on this transaction- we have officially closed! It was great working with you and your advice and assistance were a huge advantage for us.” J.B., 3/9/23

“I want to personally thank you for sticking with us and getting us through this whole ordeal. This process has been an emotional roller coaster for us, and I am grateful for your steady and well considered counsel. Thank you so much” G.L., 11/11/22

“Your advice and willingness to talk to us in realtime to help us stay informed about the process and make good decisions gave us so much peace of mind! We would strongly recommend working with you for anyone navigating the home purchasing process.” C. & J.Y., 10/20/22

“Thanks for your help with everything - it's been a great experience working with you!” A.J., 8/3/22

“Thanks so much for your help! You were very helpful in working through all of the wrinkles along the way. We definitely recommend your service to anyone else who is bold enough to try FSBO buying/selling.” C.V., 6/30/22

“Thank you, Thank you, THANK YOU. Keeping me on the right path is never easy and honestly your fee schedule should include a “crazy client” charge. I appreciate everything. Really. You’re the best. I’ve referred you to some (sane) coworkers of mine who plan to sell this year.” J.T., 6/30/22

“Thank you for all your help Craig, you definitely made this process easier.” L.G., 5/31/22

“Thank you SO MUCH! I really appreciate all your help and advice during this process- you were great to work with and I appreciate you advocating for me so hard!” L.B., 3/10/22

“Congrats on your great negotiation skills!! Can’t believe it all finally worked itself out!! I appreciate you so much and am going to leave a glowing review online- you were the first lawyer I’ve ever worked with and the experience was great! You set the bar high!!” L.B., 3/3/22

“Thank you for all your help and guidance through the process! As a first time house buyer, I have to say this was surprisingly easy. :-)” J.K., 3/1/22

“​​Thank you so much for all your support and attention, Craig! It truly is exciting to finally be a homeowner and I really have to thank you for the part you played in making all that happen. I will without hesitation reach out again in the future for any real estate assistance I may need. Thank you again!” K.G., 2/22/22

“Craig, We can’t thank you enough for your help with this issue! We are so happy with the resolution.” S.G. and P.G., 1/19/22

“Craig - thank you for getting me thru this! You are my first call should I get myself in a jamb again.” N.K., 10/31/21

“I just want to say thank you. Your care and kindness and not to mention patience during this whole process was unmatched. I appreciate you so much, thank you for your assistance in helping us become homeowners and the administrators of real generational wealth!” U.S., 10/29/21

"Imagine my horror when Craig Blackmon told me I would have to use a composting toilet in my retirement dreamhome if I purchased a piece of land I was ready to make an offer on! This is exactly why you need to consult a top-flight attorney BEFORE you make an offer. His due diligence saved this out-of-town buyer thousands of dollars! Thanks for saving me from a crappy mistake!" S.W.D. 10/15/21

“We're closing the sale at the end of the month, and having this agreement gives me a lot of peace of mind.” J.C, 9/16/21

“SO grateful I was able to find you and get you on my side -- you seem to get what I need/want and I really appreciate it!” N.K., 9/9/21

“I will sing your praises near and far. Thank you for seeing this through and making everything so easy and manageable. Invoice paid and a million good wishes to you and your family, Craig.” H.C., 8/31/21

“Thank you for all your support and counsel - immensely helpful!” C.C., 8/16/21

“Thank you so much for your guidance and support throughout this process! Closing on a house was certainly more difficult than we could have ever imagined, but we're relieved that it's over.” J.Y. and A.Y., 7/30/21

“Craig, Thank you for your guidance from start to finish.” A.Q., 7/30/21

“Good blog post on this subject! You are giving away a fountain of information. We both feel much more confident about this home purchase with your help. Also, my attorney daughter in New Orleans is happy about you as well.” M.F. and D.F., 6/23/21

“Thanks for all of your help with this, Craig! I didn't imagine that it could all be so easy.” M.S., 6/18/21

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“Wow! I am honored to have had the chance to lend a hand to all of these wonderful people. Thank you!!!“

-Craig

Changes to Title and the Quitclaim Deed

Ownership of real property (i.e. land) is a big deal. Changing ownership of a house or condo is a complicated process, made worse by all the legalese. Keep reading to get a better understanding of title and how a quitclaim deed (or QCD) is used to change it.

A Quitclaim Deed Conveys Title

“Title” is the fancy legal term for ownership. When you transfer ownership, you “convey title.” If you make someone a co-owner, you “add them to title.”

A “deed” is the legal document that conveys title to real property. There are different types of deeds. They range from the warranty deed (the most protection for a buyer) to the quitclaim deed (the least). In a market sale, title is conveyed by warranty deed. For gifts, family transfers, or simple changes, title is conveyed by quitclaim deed.

When to Use a QCD.

An owner may want to share ownership with a new co-owner, for many reasons.

• Add a Spouse. If you purchase a home, and then get married, you may want to make your new spouse an owner too (you’d better!). To do so, you sign a quitclaim deed conveying the property from you, to both you and your new spouse as a married couple. This adds your spouse to title and creates community property.

• Buy-out of Co-Owner. It is not uncommon for an unmarried couple, or even friends, to buy a house together (they own as tenants in common). Eventually, one co-owner may want to buy out the other (relationships do end, unfortunately).

• Gift. A gift of real estate, particularly between family members, is common.

• Transfer to Trust or LLC. Ownership may be transferred into a family trust (for estate planning or tax reasons) or an LLC (for liability protection).

• Co-Signor on Loan. Someone else (thanks Mom and Dad!) may be added to title for purposes of co-signing on a purchase loan, and taken off title when the loan is repaid in full.

In these and many other situations, a quitclaim deed is used to convey title and change the ownership of real estate.

Not a Quick Claim Deed.

There is no such thing as a quick claim deed. Nor is there a quit claim deed. The law defines it as one word: quitclaim. But these other terms (particularly quickclaim deed) are often used by non-lawyers. The process can be quick, but it isn’t a quickclaim deed. It is a quitclaim deed, or QCD.

In WA, a QCD Incurs an Excise Tax

An “excise tax” is a tax due upon sale (more legalese!). In Washington, an excise tax is due when title is conveyed. It is based on the sale price or the assessed value, whichever is greater. So to record a deed, you must complete a Real Estate Excise Tax Affidavit (or REETA).

There are many exemptions to the excise tax. But completing the REETA is far from easy. And wihtout a correct REETA, you cannot record the quitclaim deed.

I can help for a reasonable flat fee.

If you need a quitclaim deed, I can assist. I draft the deed and the REETA for a flat fee of a few hundred bucks, plus a couple hundred bucks in recording costs. Contact me to learn more.

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A quitclaim deed will convey title to this this beauty!

Never Waive the Inspection Contingency (and always get the most out of it)

Buying a home is a big deal. It’s a major financial commitment — up front, and for the long haul.

A home inspection is critical.

If you buy a house in poor condition without realizing it… well, it is the stuff of legend. To avoid a lousy outcome, a buyer simply must inspect the home before buying it. Never waive the inspection contingency.

Hot market? Get a pre-inspection before making offer.

Here in Seattle, we are just now emerging from an historic sellers’ market. For several years running, bidding wars were the order of the day. To compete, some buyers skipped the home inspection entirely. Some of those buyers ended up in real money pits — without the happy ending.

The better solution was — and still is — a pre-inspection. A pre-inspection is a shortened version of a standard inspection. It covers only the big systems and highlights, and ends with just an oral report. It usually costs about half as much.

A buyer gets a pre-inspection before making an offer. They get some basic protection, and can account for the condition of the home in the offer amount. Only then can they reasonably waive the inspection contingency (by skipping it entirely up front). Not perfect, but the minimum any buyer should ever accept. Anything less is plain foolish (unless you’re Tom Hanks and Shelley Long).

An inspection contingency provides the best protection.

In normal markets, buyers simply include an inspection contingency in their offer. If the parties reach agreement and enter into a contract, the buyer then has the right to inspect and approve of the home. The initial inspection must happen usually within the first 7-10 days, and the buyer can get more time if follow-up or specialized inspections are needed.

Under the inspection contingency, once the buyer has inspected the property, they can back out of the contract and get their earnest money back. It is a true “get out of jail free” card. Or the buyer can demand that the seller make certain repairs or corrections. And of course, the buyer can simply waive the inspection contingency and accept the property in its condition — knowing its condition.

Renegotiation after the inspection is key.

If the buyers demand repair or correction, then the seller has three options: reject the demand (and probably kill the deal); accept the demand (and likely close on schedule); or negotiate further.

Many buyers would rather do the work themselves. The seller, after all, has little incentive to do a great job. So instead of asking for repairs, some buyers ask for a reduction in price, or payment of their closing costs. This is a mistake.

Every single seller hates the inspection contingency. They are convinced that the buyer will use it to squeeze them out of even more money. When a buyer then asks for a price break? It isn’t well received.

A far better tactic is to ask for the repairs. If they are significant, include a bid showing the necessary scope of work and expected cost. Most sellers would rather give the buyers some money back, rather than dealing with the hassle of making the repairs. The buyers get what they wanted initially.

The key to good negotiations is knowing and respecting the perspective of the other side. Asking for repairs is most likely to get the best result.

There are few exceptions to the Home Inspection Rule.

Yes, every rule has its exceptions. And this very important rule is no different. It is conceivable that a buyer could reasonably skip getting a professional inspection. The best example is the buyer who is a contractor (and can inspect for herself) or a developer (so the house is getting scraped regardless). Other examples? Well… uh… let us know in the comments. We’ll see.

I can help.

That’s a lot to remember. And there is a lot at stake. Think about hiring me. Particularly if you’re interested in skipping an agent and saving a bunch of money….

How to Read (and understand) a Title Report

What’s a “title report”? Heck, what is “title”? And why should a home buyer care in the first place? Here are the answers.

Title Report Explained.

“Title” is legalese for ownership. If you are “on title” then you are an owner.

When buying a home, you want to make sure you know what you are buying. Real property (legalese for land) is a complicated thing to own. Other people usually have some legal right to or interest in the land too, besides the owner.

A review of title shows who these people are and what they have to do with the property. So before buying it, a smart buyer will review title as part of their due diligence.

Encumbrances on Title

The legal right of someone other than the owner in property is called an “encumbrance” on title. A “lien” is one type of encumbrance. A lien is the legal right to force the sale of the property to satisfy a debt of the owner (or a prior owner).

The loan you take out to buy a home, the mortgage, is a common type of lien. If you default on that loan, the lender can foreclose the lien, which means the house is auctioned and the proceeds used to pay the debt.

Thankfully, a typical contract for sale requires that the seller pay these liens at closing. So the buyer doesn’t have to worry about them.

Other encumbrances, though, can be of real concern.

Covenants, conditions, and restrictions… oh my!

Covenants, conditions, and restrictions (or CC&Rs) are common in newer areas. Starting in the 1930’s, they were imposed by builders of new neighborhoods. They were used in part to enforce racist restrictions on housing. Indeed, progressive cities today are reckoning with this aspect of our racist past and attempting to move beyond it. And since the 1960’s these restrictions have been unenforceable and illegal.

CC&Rs impose restrictions on how an owner can use the property. In modern neighborhoods, they often create a Homeowners’ Association. Concerned about the environment, and want to dry clothes on a line in the yard? Probably not allowed (this was practically a crime in the 1960’s and CC&Rs of the time routinely ban it). Thinking about updating the exterior and giving it a modern PNW feel? The Architectural Review Committee of the HOA will need to weigh in.

Of course, an owner benefits like all the others from a tidy, uniform, well-maintained community. But don’t be surprised by the restrictions (and the costs, an HOA has dues that must be paid or they become a lien).

Easements can create problems.

An easement is the right to use someone else’s property for a specific purpose. A common type is a utilities easement. This gives the utility provider the right to maintain lines over (or under) your property. They have the right to come onto your property as needed to work on the lines, but once done they must restore it. Utility easements are very common and generally not a concern.

An ingress and egress easement is another type. This would cover a shared driveway, and in some instances even a private road that serves a bunch of parcels. These can be a problem.

Shared driveways are notorious flash points between neighbors. Many people share a driveway with a neighbor for decades and never have a problem. Others are not so lucky — as any real estate lawyer can tell you. Just be aware up front.

Reading a Title Report

Part of the sale process includes making sure all liens on the property are paid at closing. Here in WA (and many other states) this is done using a title insurance company.

So once the parties have a contract, it is sent to the title insurer. They issue the title report that shows all of the encumbrances on title to the property. The insurance company then works with the closing agent to make sure that all liens are paid and taken off title before the buyer becomes the owner.

A buyer will get a copy of the title report when it is first issued. Usually a buyer, under a title contingency, has five days to review and approve the title report. If the buyer objects to any encumbrance, the seller must have it removed before closing. If the seller cannot do so, then the sale fails and the buyer gets her earnest money back.

The encumbrances that will survive closing and bind the buyer are called “Special Exceptions.” These are listed in the section entitled “Part II Schedule B Special Exceptions.” Review this section closely.

Do not rely on any summary. You must follow the hyperlink to the actual document that creates the legal rights and obligations. Review that document. Are you OK with this? If so, cool!!! If not, well that’s the whole point of due diligence, avoiding a mistake.

We can help.

That’s a lot to remember. And there is a lot at stake. Consider hiring a lawyer, the only professional actually qualified to read and interpret a title report on your behalf.

Form 17 Explained

Standard Disclaimer: Like all information on the internet, rely on the following information at your own risk.

By law, most sellers of real property must provide a completed Seller Disclosure Statement (aka Form 17) to any buyer. The Northwest Multiple Listing Service (NWMLS) publishes the most commonly-used real estate forms, and its version is called the NWMLS Form 17. But other forms work fine too, including the Seller Disclosure Statement created and used by Craig and other lawyers. Regardless of which version you use (they are all essentially identical) most people have a lot of questions. Here are, hopefully, some answers.

The law requires a Seller Disclosure Statement.

This legal obligation is created by statute. It is a detailed law that sets out the specific terms of a required disclosure to buyers of commercial, residential, and unimproved property. Because the law itself spells out exactly the terms of the disclosure, any form that tracks the statute will work just fine.

The statute itself doesn’t provide much guidance about exactly how a seller should complete this form. But it does provide a lot of other good information that should not be ignored. And other law (case law, which is law created by courts) puts the obligation in context and gives further guidance.

Seller Disclosure Statement

How should a seller complete the Form 17?

The law requires a seller to complete the Seller Disclosure Statement truthfully and to the best of their ability. However, answers are based only on a seller’s actual and current knowledge. A seller does not have to research any of these questions before answering them.

Failing to answer a question correctly can give rise to a claim against the seller after closing. Answering honestly reduces that risk. It is better to sell the house you have for a fair price and be done with it, rather than the house you wish you had for more, only to then be sued after the fact.

One common source of confusion is the difference between “no” and “don’t know.” Generally speaking, if you know something that indicates an answer is “no” then the answer is “no.” If you have no information one way or another, then the answer is “don’t know.” Easy enough, right?

It gets complicated where the absence of any information means the answer is probably “no.” For example, Question 2(A)(3) asks if there are any problems with the household water. If you have lived in the home, you probably should know of any problems if they exist. So if you don’t know of any problems, “no” would likely be the best answer. Remember, these questions are to the best of your knowledge.

Recognize the balance you want to strike between reducing your exposure, and putting off a potential buyer. Many sellers think “don’t know” is the safest answer. But if your disclosure is mostly “don’t know”s and you’ve lived there for years, some -- most? -- buyers may wonder what you are concealing. Remember, if you are honest in completing this form in the first place, your exposure is minimal.

Finally, buyers don’t expect a property in perfect condition. Noted defects, flaws, etc. won’t turn them off. However, if there is a defect noted, they will want to know more. So don’t be shy about explaining your answers (remember that those questions with an asterisk require an explanation if the answer is “yes”). Don’t go into any more detail than necessary, though, to (a) disclose the defect, and (b) put it in context.

What if a seller gives a wrong answer in the Seller Disclosure Statement?

An undisclosed defect can end up being an extremely expensive problem. It is reasonable for a buyer to wonder whether the seller just “dumped” the problem into the buyer’s lap by failing to disclose it on the Form 17 — and what can be done about it if so.

First and foremost, remember that the law requires sellers to answer to the best of their ability and existing knowledge. So a “wrong answer” isn’t an answer that turns out to be factually wrong. If the seller didn’t know, then the seller had no duty to disclose. Rather, a “wrong answer” is where a seller gave the wrong answer — and knew it.

When that happens, a buyer may have a claim for misrepresentation against the seller. The burden of proof is high, and it is a difficult claim to prove. But if the money at stake is significant (a failing foundation — a common source of such claims — can be a $100k problem) then it can make sense to incur legal fees in pursuing it.

Generally speaking, a problem that will cost more than $20k to fix merits at least consulting an attorney. Before incurring that cost, though, ask yourself: How do you know that the seller knew the answer was wrong? Can you bring that evidence into court? In other words, can you prove the claim?

If so, then it makes sense to at least give an attorney a call to discuss further.

Should the PSA list the Form 17 as included?

No. OK, technically it differs on whether you are the buyer, or the seller. If you’re the seller, then the answer is, “Absolutely not.” You’re the buyer? Then, “Uh, sure!”

It is very, very common for the Purchase and Sale Agreement (PSA) to list the Seller Disclosure Statement as being included in the contract as an addendum. This is a widely accepted standard practice among real estate brokers. However, this is actually inappropriate.

First and foremost, look at the terms of the Form 17 itself (which come directly from the statute): “THIS INFORMATION IS FOR DISCLOSURE ONLY AND IS NOT INTENDED TO BE A PART OF ANY WRITTEN AGREEMENT BETWEEN BUYER AND SELLER.” So right there, it makes no sense to list the Form 17 as an addendum to the PSA.

Moreover, it is not in the seller’s interest to do so. There is a reason why the law notes that this is for disclosure only and not part of the contract. That is because, when included in the contract, it significantly increases the seller’s legal exposure to an additional claim about the condition of the property after closing.

Misrepresentation bad, breach of contract worse

There are two legal ways for a seller to be liable to a buyer after closing: breach of contract, or misrepresentation (which can be either intentional or negligent misrepresentation, both are types of tort). In terms of the physical condition of the property, the law requires a seller to truthfully and accurately answer the questions of the Seller Disclosure Statement. If the seller doesn’t do that, then the seller will be subject to a claim of misrepresentation. And only such a claim, there is no basis to assert a breach of contract.

Unless, of course, the Form 17 has been listed by the parties as being one of the addenda to the contract. In that case, the buyer has a decent argument that the seller’s failure to answer the Form 17 correctly is also a breach of the PSA contract. This is a big deal. Such a claim dramatically increases the seller’s potential liability to the buyer. Not only are breach of contract claims easier to prove, they also give rise to a claim for attorney’s fees.

Ultimately, the terms of the statute and the form itself are likely to prevail: The Form 17 isn’t part of the contract. But any seller that willingly opens a very big door leading in the opposite direction… well, that’s a bad move. Buyers, needless to say, you might just want to roll with this one.

Due Diligence Checklist for Home Buyers

Craig provides this checklist free of charge and without any warranty or guarantee whatsoever. Use this checklist at your own discretion and risk.

Homebuyer Due Diligence Checklist

“Due diligence” is how a prudent buyer goes about making sure it is a good decision to buy a particular house, warts and all.  Since every house has warts, it is essential that you identify them prior to closing.  If you don’t, you may end up making a very expensive mistake.  Here is a checklist that you can use to make sure you complete your due diligence.

⎕  When will you complete your due diligence?  Before your offer, or after?

In a hyper-competitive market, where there are more buyers than houses, you may need to consider completing your due diligence prior to making an offer.  If you do so, your offer will be a whole lot stronger.  But you’ll also incur costs even before you know whether you will get the house.  In addition, due diligence prior to making an offer is not as in-depth or thorough as due diligence after you have the home under contract.  You need to balance the risk (of incurring unnecessary costs, and not discovering all of a house’s warts) versus the reward (of having your offer accepted) in order to answer this question.

⎕  Review the Seller Disclosure Statement (aka Form 17)

In Washington, most sellers must provide the buyer with a completed Seller Disclosure Statement.  The form is commonly known as the Form 17, the designation of the Northwest Multiple Listing Service.  

• The Form 17 requires the seller to disclose what the seller knows about various aspect of the property. Review it closely. That said…

• The Golden Rule of Due Diligence: You should confirm for yourself anything that is important to you. Do not rely on what the seller or the real estate agent may have said, even in writing, whether in the Form 17 or anywhere else. If it’s important, you must confirm it for yourself!

⎕  Inspect, and re-inspect…

The heart of due diligence.  Only the most reckless of buyers would even consider buying a house without inspecting it first.  Because owning a home can lead to some nasty surprises.  You don’t want to be surprised.

• Begin with a general inspection. Find a home inspector. Your agent may be a good referral source, or use an online review site to find a good one.

• The general inspection is likely to reveal other aspects of the home appropriate for further inspection by a specialist. Common examples include a stonemason to inspect a chimney, an electrician to inspect the electrical system, a roofer to inspect and assess the roof, etc. Follow up as necessary.

• Don’t forget the sewer or septic system, a common and expensive “must-fix” item after closing. Particularly for any home 40+ years old, a sewer scope is a good idea.

⎕  Review Title

When you buy a home, you will get a title insurance policy to insure your ownership.  The initial step in issuing such a policy is to generate a preliminary title commitment (also known as a title report).  The title report gives excellent insight into the condition of the home’s title.

• The word “title” essentially means “ownership.” Ownership of a house can be complicated with lots of other people having some degree of “ownership” in it. For example, there may be liens on the property, or an easement across it. These encumbrances will be revealed by the title report.

• Have an attorney review the title report and explain its contents and significance to you. An attorney is the only professional qualified to do so.

• Do not rely on a “courtesy review” or any other sort of review by the title insurance company. The insurance company’s review is limited to issues that are important to it and not necessarily those that may be important to you (such as an easement).

• Make sure your review includes the declaration (if you are buying a condo) or any conditions, covenants, and restrictions (CC&Rs), which are common in newer communities. These documents impose restrictions on how you can use the property. Make sure you are OK with these restrictions.

⎕  Review the HOA finances and management

Many homes are subject to a Homeowners Association (virtually all condos, and many newer communities).  Particularly where the HOA is responsible for the upkeep of some or all of the property, like a condo or a community center, it is essential to review the HOA’s financial documents to confirm that it is in good financial health and well managed.  Because at the end of the day, if the HOA doesn’t have the money it needs, you will be on the hook once you close.  And you will be stuck with the HOA’s decisions, even if you don’t agree with them.  Good management is essential.

⎕  Check out the neighbors

There is no cure for the proverbial “Bad Neighbor,” other than to move away.  So due diligence requires that you look around: Does the home next door look like a junkyard, or a dog kennel?  That’s a red flag.  Knock on some doors and introduce yourself.  Does the guy across the street seem like a cranky hermit with a nasty temper?  That’s another red flag.  If there is an HOA, review the meeting minutes (both the HOA, usually annual, as well as the Board, usually monthly).  If there is a difficult member of the community, you will likely learn as much from the minutes.  

⎕  Confirm the house works for you

Take some time to fully imagine yourself living in the home.  Does it work for you?  For example, does your car fit in the garage?  Will you be able to tolerate the only bathroom being on the ground floor?  Once you close and move in, it is too late to discover something about the house that doesn’t work for you.

⎕  Review the closing documents before signing

If you have a lawyer on board, you’ll likely be able to get a copy of your closing documents in advance. Otherwise, be prepared for 100+ pages for your review and approval at your signing appointment. Plus

Warranty Deed

A deed is the name of a legal document that transfers ownership of real property.  A Warranty Deed contains promises from the seller to the buyer about the rights of ownership and possession of the property.   Contrast with Quit Claim Deed. Here in WA, the warranty deed is defined by statute. Accordingly, it is called a Statutory Warranty Deed.

Title Insurance

A type of insurance that insures either the buyer’s right to own and possess the property, or the lender’s security interest in the property. Typically the seller will pay for the buyer’s title insurance policy, and the buyer will pay for the lender’s title insurance policy.

In Washington, title insurance plays an important role in the transaction. The insurance company is responsible for making sure title is "clear," meaning there are no liens on the property. 

Title Contingency

A contractual term that allows a buyer to inspect and approve the Preliminary Title Report before the contract becomes binding. The buyer doesn't have the right to simply rescind the contract, though. First, the seller is given an opportunity to fix the defect. If the seller can do so prior to closing, the contract remains binding. If the seller cannot do so, then the contract terminates and the buyer gets their earnest money back.

Want to learn more? Check out my great blog post on how to read and understand a title report.

Tenants in Common

When two or more people unmarried to each other co-own real estate, they own either as tenants in common, or joint tenants. When married, they own as community property.

When people own as tenants in common, they have some flexibility in ownership. Tenants in common can own in unequal percentages. This can be important where one person invests more than the other in the property. Also, when one tenant in common dies, their ownership interest goes according to their will (or the law of intestate succession). This works well when the co-owners are not also in a life relationship.

For an unmarried couple, ownership as joint tenants may make sense. Joint tenants own in equal shares. When one dies, the ownership automatically passes to the surviving owner.

For more, here is a good blog post on co-ownership of real property by single people (on FSBOLawyers.org).

Selling Office Commission (or SOC)

This is the old name for the seller-paid commission offered to the buyer’s real estate agent. These days, forward-thinking brokers (like the NWMLS) have re-named it (the NWMLS now calls it the “buyer brokerage firm compensation”).

The commission is technically paid to the real estate firm where the agent works, and that firm then splits the commission in some fashion with the agent. That split can be a percentage, or simply paid via a flat monthly fee (a "desk fee").

Most people assume that the split is even (so the typical 3% is split evenly between the firm and the agent). But that is rarely the case anymore. The "splits" vary from office to office and within offices, based on an agent's "production." The more commissions they earn, the better their splits will likely be.

Settlement Statement

The formal spreadsheet issued by the Closing Agent at Closing that shows the origination and disbursal of all funds.  If there is a lender, the Closing Agent will use the form required by federal law.

Formerly called the HUD-1 (the designation of the federal government), then known as the TRID (a really complicated acronym for the post-meltdown reform law), it no longer has an official name. It is often called the “Master Statement.”