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What You Can Do About Real Estate Fraud: An Interview with Samira Kermani of Kermani Law Firm

By Samira Kermani

Please tell us a little bit about your company and the services you offer.

The Kermani Law Firm is a boutique law firm servicing Southern California. The firm was founded by Samira Kermani who is an attorney, mediator, licensed California real estate broker and founder of Karlton Stone.com. The firm handles all matters involving civil litigation, purchase and sale of real estate and litigation of the same, drafting and negotiating commercial and residential leases, litigation of contract disputes. Ms. Kermani also serves as litigation consultant and mediator in disputes involving real property. She has been designated an expert witness in the area of brokers' duties and standard of care.

Ms. Kermani, is a member of the California Association of Realtors' Legal Affairs Forum. Ms. Kermani serves as an arbitrator in disputes involving broker commissions. She serves on the Grievance Committee at the Beverly Hills Greater Los Angeles Association of Realtors, hearing disputes from agents and consumers.

Ms. Kermani has taught real estate litigation as a guest lecturer at Pepperdine Law School. She speaks and teaches frequently on topics related to risk management, consumer protection, ethics and real estate law. She has owned and operated as franchisee of a national real estate franchise and practiced with Coldwell Banker Beverly Hills North office.

What are some of the biggest regrets you've seen new home buyers in Southern California have when it comes to misrepresentation or fraud issues?

Too many to list! One of most frequent problems I see in my law practice involves dual agents when one agent represents both the buyer and the seller. Parties with opposing interests would not hire one single attorney to represent both sides. Neither should buyers and sellers have one broker representing both sides. The conflict is inherent and inevitable, one broker cannot serve two masters.

Another problem is buyers who fail to conduct due diligence which includes properly choosing a competent physical inspector, relying on word of mouth instead of checking out the professional who will prepare the most important report on their investment. Other problems include failing to check permits, failure to inquire with neighbors about the property or the area to avoid surprises that affect the price and value of the property; failure to obtain correct repair bids prior to lifting contingencies; failure to read documents before they sign; failure to understand the title report's underlying documents (the interpretation of which is an attorney's job), relying on their agent to warn of all pitfalls concerning the transaction and the property.

Can you briefly explain what the most common cases of fraud or nondisclosure you've seen are?

In my experience, both as a real estate attorney and as a practicing real estate broker, the most common cause of fraud by sellers or listing agents is insecurity. They worry that if they disclose all material facts, the property may sell at a lower price.

Agents work on commission. They get paid only if a sale closes. Attorneys get paid by the hour or by a flat fee basis regardless of whether escrow closes or not. In many states, it is a legal requirement to have an attorney sign off on the deal.

In my law practice, I counsel my seller and agent clients to err on the side of over disclosure. The best practices tip is this: If you are asking me "Should I disclose it?" then you should. The worst that can happen is you disclosed a trivial fact that the buyer doesn't care about. The best is you potentially avoid a lawsuit. Once the buyer is informed of a particular fact in writing and accepts that, you're hard pressed to argue fraud or misrepresentation. The profit made from a higher sale price is not worth the cost of defending a lawsuit and potentially having a judgment entered against you, which may include punitive damages for fraud.

How is an "as-is" sale different when it comes to fraud or misrepresentation?

Every resale of real property in California is as-is. That means the property is being offered in its present condition with no warranties or representations by the seller or real estate agent. In other words, the seller won't pay for any repairs. However, new construction by builders enjoys certain limited warranties. The problem arises when sellers mistakenly think that if they label their sale "as-is," it exempts them from disclosing material facts that affect the value of their property. There is no such exemption.

What advice would you give people in California to help avoid fraud issues before buying a home?

I'm not sure you can completely avoid fraud. If a seller actively conceals a defect or material fact that no inspection or records search may reveal, you may fall prey. In such a case where no visual inspection or public record search would have disclosed the fraud, the best thing you can do is have a real estate attorney document your purchase file so that if after you close escrow, you discover that fraud was committed, you may have a better shot at proving up the case for fraud which, in California, the courts have made very difficult to prevail. California law sets the bar much higher for proving fraud as opposed to other claims. For example, when I represent a buyer in a purchase, even if they have an agent, when a seller or their agent makes certain representations, I create a custom disclosure that all parties sign-off on. That way you have a record of the off-record promises. And if the seller refuses to sign off, that could be a red flag.

My best advice to buyers is "Leave no stone unturned." Before you ever place an offer, interview several physical inspectors and vendors in each category of the systems for the house, for example, plumber, electrician, roofer, etc. Gather your team of qualified experts. Then, based upon your initial home inspection report, have the experts perform the secondary inspections that are recommended by the general inspector. Obtain repair bids. Check public records, look up permits. It is money well spent. Better to find out now what defects may exist and how much it may cost to repair them, then after you close escrow.

And if the seller or agent do not allow access, do not feel pressured. Have your broker advocate on your behalf so you are granted access.

Another important tip is: Give yourself the opportunity to conduct proper due diligence by not writing short contingency periods into your offer.

What's the best way for people to contact your company?

We can be reached at 310-475-3400 or via email to Consult@KermaniLaw.com. Our website and blog are at .

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