12 Ways to Foul Up a Real Estate Transaction

One would think that the transfer of ownership of real estate from one party to another should not be much more difficult than buying golf clubs at a garage sale. The seller puts a price tag on the goods to be sold, the buyer identifies the goods to be purchased, the parties dicker over price and, eventually, agree on a price. Money changes hands and both parties walk away happy.

Unfortunately, it is not that simple when dealing with real estate. Each jurisdiction has special rules, regulations, taxes, forms, and procedures that must be followed not only to effectuate a sale, but to protect the parties involved from litigation later. Further, most sales of real estate involve a mortgage, which requires an additional raft of paperwork in order to effect the sale.

There are a number of publications and periodicals dedicated to educating the reader how to successfully close a real estate transaction. Since it is not possible to summarize all those publications into a small article, it seemed that it would be of more utility to identify for the reader the more common mistakes made in real estate transactions. The following, admittedly incomplete, list discusses a few situations that one would think obvious, but still occur with startling frequency.

#1. The seller does not have authority to sell the property.

Most lawyers will recall learning in Contracts that one cannot sell what one does not own. A simple enough concept, but it is not uncommon that an owner transfers ownership of the family home into a trust, a limited liability company (that may or may not still exist), or pursuant to a community property agreement. Possibly the seller has authority to sell the home pursuant to an expired power of attorney. The parties are then unpleasantly surprised to learn that the seller who negotiated and entered into a real estate purchase and sale agreement in his personal capacity did not have the authority, or sole authority, to do so. It is usually a matter of an Internet search or a phone call to a title company to determine the legal owner of the property. It would be wise to make that call early on.

#2. The purchase and sale agreement contains an incomplete or inadequate legal description.

The property to be sold must be adequately described in the purchase and sale agreement. The mailing address is not an adequate description of the property. The purpose of a legal description is to describe a particular parcel of land in a unique and unambiguous manner that will survive forever. In the United States, this is done by reference to lots and blocks in a subdivision map, by metes and bounds, by aliquot (using the nomenclature of the U.S. Public Land Survey System, or by a combination of the above. Thus, it is necessary to include or attach the entire lengthy and convoluted legal description on the purchase and sale agreement for it to be enforceable.

#3. Zoning is Inconsistent with Intended Use

One might think this is strictly a “let the buyer beware” issue, but it is not uncommon that a party purchases property with the stated intent of building a duplex only to discover that the property has been zoned only for single family use. Or a party purchases an existing restaurant only to learn that the liquor license was “grandfathered” to the former owner and will not transfer. Sellers should know the zoned status of the property to be sold and disclose this information to prospective buyers. Buyers (and their attorneys) should perform a due diligence inquiry regardless of what the seller says long before closing.

#4. Failure to pay earnest money or follow earnest money provisions

Earnest money is money the buyer gives the seller to show good faith when making an offer to purchase the property. Sometimes, however, while there is a contractual provision that the earnest money must be paid by a certain date, it is not paid, not paid on time, or paid by a check that is dishonored. Buyers must understand that it is a breach of the real estate contract to fail to pay the earnest money. Sellers who do not insist on the strict performance of the buyer in this regard may be damaging their position if they turn down completing offers to purchase the property due to the mistaken belief that they already have a buyer.

#5. No meeting of the minds in the purchase and sale agreement

The failure to recognize whether or not there has been a true acceptance of the real estate contract is another issue that bogs down or fouls up a real estate transaction. If one party makes a written offer to enter into a purchase and sale agreement, and the other party makes changes to that offer there is no contract unless the first party expressly accepts and initializes those changes. What has occurred instead is that the second party rejected the offer and made a counteroffer. It is therefore important for a party reviewing a purchase and sale agreement to be sure that any handwritten changes that may appear in the purchase and sale agreement have been agreed to.

#6. Balance of the loan will be paid off with promissory note and deed of trust and then the note and deed of the trust are not attached

Unless the buyer intends to show up for the closing ceremony with a wheelbarrow of money, the purchase and sale agreement will be financed by a promissory note and secured with a deed of trust. The terms of these documents, including principal, payment terms and interests, should be made a part of the purchase and sale agreement. There is potentially no contract if all the terms of the agreement are not attached, and this is a classic method of voiding a sale. The basic form can be attached as an exhibit or an addendum and referenced using language such as, “payment for the property will be made pursuant to the terms of a promissory note and deed of trust the terms of which will be substantially similar to the forms attached hereto as exhibit A.”

#7. Everything must be in writing

Communicate everything in writing pending a closing. This should go without saying in any transaction. For example, if the seller agrees to make repairs prior to closing, put down the substance of the repairs to be made in an addendum to the purchase and sale agreement and have all parties sign it. Do not telephone the seller and indicate the repairs are OK (or that they are not OK), write it down. Include an integration clause in the lease, that the purchase and sale agreement is the entire agreement and any changes must be in writing and signed by both parties.

#8. Confirm that seller disclosure form is filled out correctly

It is a legal requirement in most jurisdictions that the seller of real estate certify that any existing defects in the property have been disclosed and any prior defects have been properly repaired. This includes cracks in the foundation, leaks in the ceiling, electrical defects and plumbing problems. In Washington State, for example, there is a statute that requires a particular checklist to be filled out and provided to the buyer. Frequently, sellers massage the facts, or indicate that they “don’t know” if there have ever been any defects. Generally, the test is whether a seller knew or should have known of defect in the ordinary course of events. If the seller’s answers on a disclosure appear to be vague or unresponsive, it is a good idea to wonder why.

#9. Allowing seller to stay in possession after closing without an airtight possession agreement

The inclusion of a “possession due on sale” clause is highly advisable. Sometimes the seller is willing to sell the house but not willing to move out in a timely manner. If the buyer is willing to allow the seller to remain in possession for a short period of time after the sale closes, it is necessary to execute an occupancy agreement that clearly spells out the dates of occupancy, the consequences of failed to abide by the dates, and any remuneration or consideration for the buyer allowing the seller to remain in occupancy after closing. Further, the buyer should seriously consider liability and insurance issues relating to the seller’s occupancy. If the seller is injured moving out due to a faulty step, can the seller sue the buyer? If the house burns down during the seller’s post-closing occupancy, whose insurance will cover the loss?

#10. Failure to clearly indicate what the seller takes with her

Much time and money has been spent in litigation over whether the seller was entitled to take her chandelier, washer, dryer, range, oven, or refrigerator with her when she moved. The parties should execute a written addendum to the purchase and sale agreement clearly indicating what fixtures stay and go.

#11. Buyers fail to get an environmental audit if property is commercial or if the property has ever had an underground oil tank

Few things upset a buyer more than learning the home he just bought is contaminated. If the home has an oil furnace—or has ever had an oil furnace—there is almost certainly a tank somewhere leaking oil. The sellers should provide an environmental audit indicating the property is clean, that the tank is in good working order, not leaking, has been removed, or has been filled.

#12. The parties neglect to include a merger clause in the purchase and sale agreement

Post-closing obligations may not survive closing unless there is language in the purchase and sale agreement indicating they will. If the sellers agree to be responsible for removing the pile of trash after they vacate the premises, there had best be language that establishes their continuing obligation to do so.

Evan L. Loeffler is a real estate attorney in Seattle, Washington. He is “of counsel” to the firm of Harrison, Benis & Spence, LLP and can be reached at: eloeffler@loefflerlegal.com. Mr. Loeffler thanks his law partner, Michael Spence, for his invaluable assistance in preparing this article

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Clear Lake History

Clear Lake, the 43,000-acre center of Lake County, is the largest natural lake in California; it may very well be the oldest lake in North America as scientific evidence has proven the lake to be at least 150,000 years old. The area took shape from volcanic action; Clear Lake's current form was created by a landslide thousands of years age which blocked the broad valley's drainage west into the Russian River. The water rose until it found a new outlet, Cache Creek, which drains eastward into the Sacramento River.
Four thousand years before the rise of the Egyptian civilization, the Pomo Indians were hunting, fishing, and collecting plant foods on the shores of Clear Lake. The lake yielded an abundance of fish, as well as tule reeds from which they made clothing, boats, dwellings, and household items. Today, Pomo baskets are widely admired throughout the West.
In the 1850's the first European families found their way to Lake County; the first of these settlers lived near what is now Kelseyville. Farming and ranching grew rapidly and toll roads began climbing over the mountains in the 1860's, bringing settlers in increasing numbers. The Pomo were gradually forced from their traditional homes to rancherias.
Natural mineral springs became immensely popular, drawing hundreds of thousands of visitors from around the globe to "take the waters." Huge resort complexes were built, and enjoying wide fame were Bartlett Springs, Soda Bay Springs, Seigler Springs, Anderson and Adams Springs. Many of these grand resorts were destroyed by fire, and most were not rebuilt.
Lacking roads along the perimeter of Clear Lake, steamers plied the waters connecting visitors to resorts across the lake. Steam boats, and then gas powered boats, became a favored means of transportation and recreation.
Automobiles gradually superseded boats, and it was several decades later that boats regained popularity. Today residents and visitors enjoy canoes, sailboats, fishing boats, speedboats, pontoon boats, and even oarless boat races on the many lakes of Lake County.
Agriculture has continued its role as a mainstay. Lake County's Bartlett pears, walnuts, and wines enjoy wide recognition. Wild rice and kiwifruit are products less significant.
In the twenty-first century, Lake County begins a renaissance reminiscent of her former glory as "playground" to the Bay Area.
The following historical timeline was compiled by Dick Dunn shortly before his death. In his own words, it was an "Incomplete Chronological History of Lake County". It is presented as a community resource and will be amended as additional data is perused. (7/98) "About 2 million years ago; Initial formation of Clear Lake.
100-600 thousand years ago; Mt. Konocti formed slowly in several eruptive episodes.
10,000 years ago; California becomes home to immigrating groups of early Americans.
By at least 6,000 BC, early Native Americans inhabit Clear Lake region
1821 -first arrival of Spanish soldiers, led by Luis Arguello, who were taking Indians back to missions (Arguello was first provisional governor of California in 1822 under Mexico).
-Mexico wins independence from Spain.
1830s-40s -area Indians captured by the Vallejo's to work in Sonoma and elsewhere.
1839 -Capt. Salvadore Vallejo begins cattle operations in area (longhorns)
1842 -Indian Island Massacre, when S. Vallejo led expedition from Sonoma to take Indians back to work the fields
1844 -Elisha Stevens leads party from Missouri to California (including James Madison Harbin).
1845 -Rancho Guenoc granted to George Roch by Pio Pico, the last Mexican governor (21,200 acres).
-George Roch begins cattle operations, also Robert Ridley.
1846 -Jacob P. Lease begins cattle operations.
1848 -California taken from Mexico to become part of U.S.
1849 -Ben and Andrew Kelsey, Mr. Shirland and Charles Stone arrive to take over cattle operations of Salvadore Vallejo (Ben left with Indians to explore Sacramento River valley).
-Indians attack Kelsey and Stone's adobe.
1850 -George Roch builds log cabin near present Stone House; abandoned it in 1851.
-Capt. Nathaniel Lyon leads attack in the Bloody Island Massacre.
1850-52 -all of Lake County in Mendocino County.
-Ben Moore helps Salvatore Vallejo find stray cattle, and later also assists Kelsey and Stone, later turned to cattle rustling and finally disappeared to South America.
1852 -Harbin Springs discovered by Archibald Ritchie and James Harbin.
-Mendocino and Napa counties divide Lake County through center of lake.
-Capt. A.A. Ritchie and Paul S. Forbes granted Rancho Guenoc.
1853 -Capt. R. Steele and Robert Sterling build the Stone House (completed in in 1854). Mrs. Sterling was first white wonan to live in the territory .
-John Cobb moves from Kentucky to Cobb Valley.
1854 -settlement of Scotts Valley begins in earnest.
-Mt. Konocti named Uncle Sam Mountain.
-John Grigsby and family homestead near Lower Lake (small house now part of Anderson ranch house).
1855 -Napa County takes control of all of Clear Lake.
1856. -borax discovered in county.
1856-58 -Upper Lake's first business, a blacksmith shop, is operated by Mr. Elliott.
1857 -first 'motel' built by Thomas Way outside Upper Lake as a stage stop with family living first floor and travelers upstairs.
-John Cobb builds saw and grist mill on Kelsey Creek (it burned in 1866-67).
1859 -first home in Lower Lake built by E. Mitchell.
1860 -Herrick and Getz start store on site of Stone House (first at south end of lake).
1861 -first Lakeport courthouse built (of wood).
-Lake County formed on May 20.
-John Cobb moves into Stone House to oversee the Guenoc and Callayomi (Middletown) grants.
-Pioneer Cemetery begins operation in Kelseyville.
-first saloon in Lower Lake opened by C.H. Adams
1863 -brewery built by Robert Smith (Ruddle place), 1 mile west of Lakeport, also had kiln with J.C.W. Ingram for bricks to rebuild courthouse.
1864-68 -Borax Lake site of first borax mine in t'ne U.S., owned by California Borax Company, took out 590 tons of borax.
-Chinese from Gold Rush begin to work in borax mines.
1864 -Cache Creek Dam built to operate mills.
-Lucerne's first settler, Samuel Morrison, builds his first home there.
1865 -first store opened in Upper Lake by Mr. Bukofsky.
-Byrum opens first hotel in Lower Lake.
1866 -townsite of Upper Lake decided upon.
1867 -Lakeport courthouse burns (suspiciously).
-Guenoc post office established in Stone House.
1867-68 -sulphur mined at Sulphur Bank Mine.
1867-73 -borax operations move to Little Borax Lake, ending with discovery of borax in California and Nevada deserts.
1868 -Harbin Hot Springs begins as small resort.
-Cache Creek Dam Incident when locals tore down dam and destroyed mills after waters flooded most of Lower Lake and Anderson Ranch.
1870s -Mounds Cottages and Hotel owned by Richard Floyd with first pier on the lake where he docked the 'Hallie.

Middletown gets its first saloon
-Bartlett Springs acquired by Green Bartlett and Mr. L. Thorpe who built a few crude cabins as the beginning of a new resort.
-Mountain Institute, a boarding school, is established in Lower Lake and building later the Catholic Church.
1871 -main part of Highand Springs hotel built with 5 cottages, room for 60 guests.
-lakeshore (now Nice) divided into 160-acre lots (on land first settled by first white settler, Andrew Jackson Carson).
1871-72 -Middletown laid out on stage route midway between Calistoga and Lower Lake.
1872 -legendary 'Monster of Blue Lakes' or 'Devil Fish' is again spotted and causes Indians from all around to gather at temescal at Quercus Ranch to await an expected calamity (the Misha Dance).
-first mercantile store in Middletown opened by David Lubrancryk (Lobree) a Prussian army officer, at Young and Calistoga.
-Soda Bay Resort built by Capt. John Behr as a refined resort (his estate was 'Kolaiah Bay') operated by Capt. Small with bar, bait shop, cottages, rowboats and camping (operated about 70 years).
1873 -the 'Hallie,' the first steamer on Clear Lake is launched by Capt. Richard Floyd at Lower Lake Landing (Garner's Resort).
-Saratoga Springs resort opened by J.J. liebert with several cabins, and by 1891 it can accommodate 350 guests.
-Witter Springs resort opened by Dr. Dexter Witter and W.P. Radcliff with hotel and 13 guest cottages.
-Bartlett Springs expands to a 2-story hotel and about 40 cabins.
1874 -Bank of Lake founded by Judge S.C. Hastings and others.
-second steamer, 'Emma Garrett,' a stern paddle-wheeler, makes runs between Lakeport, East Bank, Clearlake Oaks and Lower Lake (owned by Bank of Lake).
-Richard Floyd's 'City of Lakeport,' the largest steamer on the lake, begins daily trips between Lakeport and Lower Lake.
-Anderson Springs resort opened by Anderson family.
-Richard Floyd begins building Kono Tayee as personal retreat.
-Sulphur Bank Mine reopens as quicksilver mine.
1875 -Sarshel Bynam (involved in Cache Creek Incident) builds his house at 7th and Min in Lakeport.
-Thomas H. Buckingham of San Francisco purchases property at base of Mt. Konocti for a small estate.
1876 -James Lick (Lick Observatory) dies at age 80.
-Lower Lake grammar school is built but interior burns before it opens.
-Great Western Mine opens outside Middletown (until 1890s).
-smallest jail in the U.S. built in Lower Lake by the Copsey Brothers.
1877 -Lower Lake grammar school rebuilt.
-Bartlett Springs slowly bought out by McMahon family.
1879 -Blue Lakes Hotel built by E.A. Graham (who also built Blue Lakes toll road).
1880 -village and post office of Guenoc moves to Middletown.
-over 450 Chinese (after Gold Rush) work the area's quicksilver mines.
1881 -Harbin Springs a small village, more than 25 buildings and working farm.
1882 -Black Bart robs the stage from Lakeport to Cloverdale in November.
1883 -William 'Digger' Jones hanged at Lakeport jail (only white man ever legally hanged in Lake County).
-Black Bart again robs the Lakeport/Claverdale stage outside Cloverdale.
1884 -John Still Anderson buys Anderson Ranch from Grigsbys .
1885 -Hoberg's Resort founded by Gustav Hoberg family.
1887 -post office in town of Ely established.
1888 -town of Highlands (Clearlake) laid out with 11 lots.
-Kelseyville incorporated to close saloon and prevent sale of liquor, then incorporation relinquished.
-Lakeport becomes incorporated,
-English actress Lily Langtry purchases estate built by David Hudson and surrounding vineyards, maintaining it until 1906.
1890 -Ely post office moves to Kelseyville.
-Richard Floyd dies in Philadelphia hospital
1891 -Highland Springs hotel becomes luxury hotel for several hundred guests, becomes main stopover on Pieta Toll Road
-Cora Lyons Floyd (Richard's wife) dies in hotel in San Rafael.
-Laurel Dell resort established on Blue Lakes.
1892 -'Gentleman Jim' Corbett trains at Bartlett Springs for win over John L. Sullivan.
-John L. Sullivan trains at Harbin Springs for fight which he lost.
-Bartlett Springs becomes incorporated, toll road added from Nice/ Lucerne by Chinese laborers.
-Lakeport gets its first telephone.
1893 -Dr. James Blake, 'California's first great scientist,' dies and is buried in Middletown.
-Braun house lake frontage in Lakeport subdivided into 'villa sites' with connecting north-south road.
-Bob Rodman's villa 'Ka-Bel' is built.
1894 -Harbin Springs burns and is rebuilt.
(?) -the residence of C.H.F. Braun (Swiss Consulate of Marin and San Francisco counties) is completed (3645 Lakeshore Boulevard. in Lakeport).
-Bartlett Springs listed as first-class resort with 5 hotels, 350 cabins, and other buildings serving 5,000 guests at once (Queen Marie of Rumania was a guest).
1894-96 -Charles Young tears down and rebuilds Stone House as ranch house.
1896 -Blue Lakes Toll Road sold to County by E.A. Graham.
1897(?) -Highand Springs Resort and Spa built by J. Craig.
1898 -Benvenue Pavilion, built by Hotel Benvenue owners Mr, and Mrs. Frank Scales, with dance hall, boat and bath houses.
1899 -St. John's Episcopal Church completed in Lakeport (Willis Polk of San Francisco was the architect).
-Blue Lakes Hotel destroyed by fire and rebuilt.
1903 -quicksilver production at Sulphur Banks begins to slow down because of too much being produced.
-Harry 'Hallie' Floyd (daughter of Richard and Cora) marries San Francisco cable car gripman Milos Gopcevic, and she dies 4 months later.
-Mary Downen establishes first homestead on Mt. Konocti.
1904 -the wood-burning steamer 'City of Lakeport' begins runs between Lakeport and Bartlett Landing (contracted by Mr. Brundage).
1906-07 -first auto-stage runs begun by Mr. Libby with two 5-passenger Pierce Arrows.
1906 -Witter Springs expands to 113 rooms with verandas which could seat 5,000 (smaller hotel was later torn down).
-San Francisco earthquake and fire (causes many mineral springs in area to slow down, stop or move underground).
-Clear Lake Lodge (Nice) almost completed by J. Dalzell Brown, Pres. of California Savings and Loan, before being sent to prison for embezzlement.
1908 -steamer 'City of Lakeport' sinks and is later raised for salvage.
1909 -Soda Bay Resort bought by Bay Area investors for development.
1910 -Benvenue Pavilion destroyed by storm.
-part of Saratoga Springs resort destroyed by fire.
1911 -Lakeport gets its first electricity.
1912-13 -Blue Lakes Hotel burns again and is again rebuilt.
1914 -Witter Springs resort torn down.
1915 -new Carnegie Library opens in Lakeport.
1915-16 -Benvenue Hotel closes and is torn down to later became the site of St. Mary's Church.
1915-17 -Clear Lake Lodge (Nice) used as YMCA summer camp.
1917 -Ethan Anderson (Pomo) wins right to vote for California Indians not on large reservations (Lake County Courthouse).
1918 -Middletown burns.
1921(22) -Judge Hastings' 'Carsonia' estate (Nice) is bought by Keelings and Rodmans and divided into Clear Lake Villas, first real subdivision in county.
1923 -Clear Lake HigNands opens as new subdivision by M. Penn Phillips of Los Angeles.
-all of Lucerne, except for 21 acres, sold to Clear Lake Beach Company and a public road is laid.
1924 -much of downtown Upper Lake burns.
1924-25 -Clearlake Highlands begins to be developed.
1925-27 -Pittsburg Pirates train at Harbin Springs.
1927-29 -electricity and better roads brings resorts to shores and death to isolated resorts.
1928 -Middletown gets electricity.
-Soda Bay Resort sold to construction company and soon destroyed by fire, portion of land became Royal Oaks Mobile Home Court.
1929 -Harbin Springs gets electricity.
1930 -community of Nice formed with its own post office.
1934 -Bartlett Springs burns, never to reopen as a resort.
1936 -Lake County Museum founded.
1942 -Laurel Dell resort closed by fire.
1943 -Adams Springs resort burns first time.
1944 -Frank Hartmann buys Stone House from Charles Young.
1945 -Highland Springs resort burns and never reopens.
-Mirabel Quicksilver Mine closes, lack of new discoveries and drop in value of mercury.
1948 -Clear Lake State Park created.
1950s -estate of John Behr (Kolaiah Bay at Soda Bay Resort) sold to San Francisco union and turned into Konocti Harbor Resort and Spa.
1954 -Adams Springs resort burns second time.
1955 -Stone House burns, losing most of upper floor, then rebuilt in present form.
1960 -Highland Springs resort taken over by Lake County, torn down for dam and reservoir.
1960s-Indian Island becomes summer home for the M.S. Dodd family.
1963 -Kono Tayee sold to Hayward land developer for $500,000.
1965 -Kono Tayee torn down for a housing development.
1978 -Lake County Museum moves into renovated old courthouse in Lakeport.
1980 -Clearlake incorporated by combining Clear Lake Highlands, Cache Creek, Burns Valley, and part of Clear Lake Park.
1985(86) -Vittel mineral water company of France opens bottling plant in Nice to bottle Bartlett Springs water, and to begin restoration of the resort.
-Homestake Mining Company's McLaughlin Mine opens near Lower Lake to mine gold.
1987 -Pine Acres Resort Hotel (Blue Lakes Hotel) damaged by fire during rebuilding.
1993-94 -Friends of the Museum established to support the Lake County Museum. "

Welcome to Lake County!

Just two hours by car from the San Francisco Bay Area, the Sacramento Valley, and the Pacific Coast, Lake County is known for its spectacular beauty, headliner concerts, unsurpassed recreation, and fine wines. Nestled between three of the most famous wine areas in the United States - Mendocino, Sonoma, and Napa counties - Lake County is fast becoming a destination winetasting region and has been number three in the country for winegrape sales over the past two years.

Lake County keeps a full calendar of events and plentiful activities throughout the year, with distinct seasons to support them all. With its untarnished landscapes, friendly communities, affordability, and Clear Lake - the largest natural freshwater lake in California and possibly the oldest in North America - Lake County is not only a great vacation destination, but also the choice of thousands as a relocation destination.