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Contract conundrums… Important considerations for Ohio REALTORS

Guest column by Joe Barone, President, Talon Title Agency, Columbus 

Let’s look at a few issues that will inevitably cause all REALTORS consternation. The problems result from confusion as to contract terms and what they mean, along with other issues that impact the residential transaction.

In a Fix

“Fixtures” is a contract term that has been problematic since 1853, when the Supreme Court of Ohio was asked to decide what constitutes a fixture. I am sure the first image that came to mind regarding fixtures involved nuts, bolts, nails and screws. In 1853, the Supreme Court said that a fixture is something attached to real estate with the intention to make it a permanent part of the real estate. The key element here is intent — not nuts, bolts, nails or screws.

In fact, in 1935, the Supreme Court of Ohio said property might be a fixture “even though slightly attached…but will not necessarily be considered a fixture because of a high degree of attachment.” Intent is the deciding factor and that’s the problem, because intent is subject to interpretation. These two court cases do provide some clarity; but if clarity is what you seek, don’t assume something is a fixture — avoid the entire problem by specifically listing each and every item your Sellers want to remove from the property and your Buyers want to remain with the property. Being legally right is no comfort to your client when the Seller is threatened with a lawsuit for removing a “fixture” or the “fixture” is gone when the Buyer moves in.

A Property Divided

A Survivorship Deed is a joint ownership that results in the transfer of title to real estate to the survivor at a death of a joint owner. This deed negates the necessity of “probating” the real estate, thereby avoiding the time, costs and legal fees involved in the probate process. Unfortunately, however, some owners establish survivorship without understanding the legal impact.

When a parent, after attending the “how to avoid probate” seminar, adds children to the deed with survivorship, the legal effect is an immediate transfer of ownership interest to their children. If you create a survivorship deed with your three children, you are now an owner of an undivided 1/4th interest, and each child owns an undivided 1/4th interest with title transferring at death to each survivor. Many people misunderstand the survivorship and believe that the transfer of title takes effect at death, which is simply not the case.

As a REALTOR, you need to understand this because the parent who has lived in the house for 30 years, paid taxes and maintained the property with no contribution from the children cannot sell the house unless the three children agree. All four must sign the listing agreement, offers, counter offers, deeds and the closing documents. And this does not even address the additional signatures required of the three sons’ wives to release dower, or the potential problems obtaining those signatures.

Regrettably, many owners who went to a “how to avoid probate” seminar don’t understand another potentially tragic result of survivorship. For example, one son, an owner with survivorship, was sued by a credit card company that obtained a judgment, filed a certificate of judgment against the son’s 1/4th interest and foreclosed on the house. Mom, who paid 100 percent of all ownership costs for years, was paid for her 1/4th interest from the sale, even though she believed she owned the entire interest in the house, and was not in a position to buy a new house to replace the one she lost. Because of these risks, if your client asks you whether they should take title at closing with survivorship, refer him or her to an attorney.

Balance of Power

A Power of Attorney (POA) is a legal document that may allow someone else to legally act on behalf of a Seller or Buyer in a real estate transaction. Powers of Attorney are more prevalent in today’s real estate world. A POA legally enables a person to sign on behalf of another person. The POA allows the recipient of the Power, the Attorney in Fact, by signing for the Grantor of the Power, to legally bind the Grantor. When you are involved with a POA for your real estate transaction, it is imperative that you have the POA reviewed by the closing company or closing attorney to make sure it is legally sufficient. The legal document must specifically contain language that the Attorney in Fact can use the POA for the sale and/or purchase of real estate. If that specific language is not included, it cannot be used for your real estate transaction.

Most REALTORS are aware of this requirement. What they often don’t realize is that, by Ohio law, the original Power of Attorney must be available for two reasons. First, for a real estate transaction, the POA needs to be recorded (Ohio Revised Code §1337.04 and §5301.25) if it is used to sign a deed or mortgage. Also, since POA’s are revocable, if you don’t have the original, there is no assurance that it was not revoked. Generally, the person that granted the POA is no longer competent, so they are not capable of verifying that it was not revoked and the Attorney in Fact, because of his or her involvement, is not in a position to verify that it was not revoked.

For Ohio REALTORS, understanding these three contract conundrums is critical to providing accurate and adequate counsel to clients.


Joe Barone serves as president of Talon Title Agency, a leading title agency with offices throughout the Columbus market. Joe can be reached at jbarone@talontitle.net

Tags: legal