Home Buying in Tennessee>Question Details

Otrebmu, Home Buyer in Florida

Why Indemnify or hold harmless Cartus relocation company and any prior owner for the presence or non-disclosure of "substances"?

Asked by Otrebmu, Florida Thu Jun 24, 2010

In a contract for sale and purchase of real estate form used by the Cartus relocation company, I noticed this language: "Buyer(s) agree to indemnify and hold Seller and prior owners harmless from any claims raised after the closing transaction relation relating to the presence or non-disclosure of Substances in the property (said indemnity to include attorney's fees)." "Substances" are defined as "naturally occurring radon, molds, spores, pollens and/or botanical substances or other allergens (e.g., dust, pet dander, insect waste material, etc." Maybe I am mistaken, but this seems a bit extreme. I think I understand why a buyer might have to accept a relocation property as is, but this clause seems to go even further and asks the buyer, who is even less knowledgeable about the property, to provide what amounts to an insurance policy for Cartus and any prior owner. Since I know next to nothing about real estate, I am curious what the experts think and what other buyers would do.

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I totally agree with you. This risk is far too big to accept. I will gladly agree to a nonsuit, but I won't buy a house and agree to indemnify the seller, or even worse, the prior owners, if a third party sues the seller or prior owner for something I had no idea the seller or prior owner did. I think most people don't understand this clause and believe they are just agreeing not to sue Cartus. But it goes way beyond that. For example, if the prior owner pumped toxic waste into the ground, and a neighbor sues the prior owner and wins, then you have to pony up those damages out of your pocket (or insurance, if you are so insured). And you don't even get a say in the lawsuit! If the prior owner settles for $100 million, you owe $100 million. What do they care if they settle, as long as you are the one on the hook, not them? No way baby. Not me.
1 vote Thank Flag Link Thu Mar 10, 2011
I appreciate your time and effort , Kevin, but your latest response sounds a bit like real estate happy talk. Time to deal? Time to get real. True love won't last if that dream home turns into the house from hell.

Accordingly, I don't find the "dissuade legal action and further minimize their risk/costs after the transfer of title" argument convincing. The clause determines who picks up the tab, not whether someone will raise a claim.

As for my being ready, well, I've laid my cash offer on the table--and very close to what Cartus asked. If that isn't real enough, I have no problem walking away--especially in this market. But this Cartus deal may have yet another twist to it yet. You may see a separate posting down the road apiece.

As for my postings on this issue, all I can say is that it has been great fun. I guess I just like analyzing an issue. The feedback as well as the discipline of having to write things out has been invaluable. In a way it has prepared me for the next negotiation. So, thank you, Trulia.
1 vote Thank Flag Link Mon Jul 12, 2010
Dear Kevin and Stephanie,

Thank you for your answers.

To sum things up, it seems that when dealing with Cartus, a buyer should measure the Cartus contract against the local realtors' association contract. The difference between the provisions of each is an important buyer beware zone. Thar there be deal breakers.

For me it was asking the buyer to indemnify and hold harmless Cartus and all prior owners for any costs incurred (including attorneys' fees) if a claim were raised at any point in time after closing. I suspect that many sign without realizing or being fully informed of the risk they are taking on.

It seems to be a classic case of overreaching. Buying something "as is" is one thing; requiring an average buyer to "indemnify and hold harmless" a corporation and all prior owners is another. It turns that buyer into an insurance provider--for all time and for free. This is not a deal.
1 vote Thank Flag Link Thu Jul 1, 2010
Good point. Wasn’t looking to jump towards ‘real estate happy talk’ (great phrase, by the way), but can see where it came off that way. I was looking to show that the risk is real - as we have discussed here and by e-mail - but that there is a potential payoff for those that are willing to take on that risk; especially if the price can be made satisfactory. In your specific case, it’s more than fair to eliminate a Cartus home that you have concerns about. For others it may be that they love a particular home offered by a relocation company, or their family has made the choice, and they want to know how they can still protect themselves in that process. Does that make sense?

No question that you were ready, and more to the point ‘willing.’ I’d also love to hear more about the twist and details via e-mail again. Always looking to add to the experience my clients have working for them by learning more and more about what is happening in the market right now. Thank you for taking advantage of what Trulia has to offer. Love it when the community can show so much value to the contributors.
0 votes Thank Flag Link Tue Jul 13, 2010
Otrebmu,

What does your REALTOR say? Are you represented or not?

Here's my take..... if you were my client and presented with this contract from Cartus or any other "seller" I would bring you to an attorney so they could craft a legal response. You are absolutely correct in being concerned about "Hold Harmless" and "Forever". What if no one knew and 3 years down the road it comes to light there is methane seeping under YOUR property causing the neighborhood to be evacuated for an extended time period - who pays, do you?

Yes, the seller provides a Natural Hazard Disclsoure, but does that company include local data - some don't.

Unless you MUST have THIS house, take your cash offer and move on - it's a buyer's market.

Best of luck and please let us know how this turns out.

Thom Colby
Broker / Owner & Certified HAFA Specialist
Thom Colby Properties
Newport Beach, CA
Moving Lives Forward (TM)
We NEVER DOUBLE-END a Transaction in our Brokerage as it is not beneficial to the Seller or the Buyer, but only to the Agent.
888-391-5245 Direct Cell
0 votes Thank Flag Link Mon Jul 12, 2010
It certainly should be enough, but the amount of protection gained after a homebuyer agrees to indemnify the relocation company is ideal for a large corporation looking to dissuade legal action and further minimize their risk/costs after the transfer of title. If that is the bad part, what are you getting for that risk? How can this work in your favor?

Again, if you can find the risk satisfactory, you can take advantage of the situation and see your risk rewarded by encouraging a ‘national reaction’ from the big relocation companies (as opposed to the local knowledge of you and your realtor); allowing for you to purchase a home well below market value.

After all, once you have found a home you love, isn’t that the protection you are looking for in today’s market?

Kevin Pellatiro
Hoping to help you take advantage of the market – when you are ready.
(615)714-7918 | kpellatiro@realtracs.com
0 votes Thank Flag Link Mon Jul 12, 2010
Hi Laura,

Thank you for your response. You raised the interesting issue of inspection. I have some additional observations about that.

Cartus itself performs no inspections. The disclosure statement it provides is a blank form with "Seller is a non-occupant owner and has no knowledge of this property" stamped on every page.

With respect to radon, the disclosure documents include a radon inspection/remediation plan. If the inspection is performed after closing, the inspection is free. If the inspection is performed before closing, the inspection is done at buyer’s expense. The remediation service is free in the case of the former. I believe that the remediation service is also free in the case of the latter, but I am not sure. Both appear to involve a radon testing device that is mailed to the buyer.

With respect to “Substances” other than radon, the Cartus contract advises that the buyer monitor the federal and state environmental protection agencies and cites the URL of the EPA.

The Cartus contract allows 10 days for the Buyer to do an inspection and send the results to Cartus, otherwise, Buyer’s right to inspect and request repair is waived. Although radon is mentioned as one of the subjects of such an inspection, I am not sure how the radon inspection/remediation offer fits with the passages in the Cartus contract that deal with inspection.

All this seems harmless enough in and of itself. Remember, however, that even though the Cartus contract specifically states that all Cartus’ obligations cease with conveyance of title, the buyer’s obligation to indemnify and hold harmless (including attorney’s fees) Cartus and all prior owners should a claim be raised does not. It continues, as far as I can tell, forever.

This seems to put things in a different light. Certainly, accepting the Cartus radon inspection/remediation offer is now a must--even thought the buyer is responsible for the proper use of the mail-in collection device. Beyond that, however, just how far should the Buyer go in paying--whether before or after the inspection period--for a full environmental scan, monitoring the environmental protection websites and taking any remedial actions that they might suggest, regardless of how expensive or impractical those actions might be? I can’t help worrying that the buyer will only know the answer to that question after the fact, i.e., after a claim is raised.

Again, it seems odd that the buyer—a non-occupant non-owner who is even less knowledgeable than Cartus about the condition of the property—should be asked to assume such risk. Shouldn’t it be enough that Cartus conveys the property “as is” and as a “non-occupant owner and has no knowledge of this property"?
0 votes Thank Flag Link Sun Jul 11, 2010
Dear Otrebmu,

Any relocation company is going to have a contract heavily slanted in their favor. To the point of being ridiculous. The relo. company has never lived in the home nor do they have any in-depth knowledge other than inspections they have done (usually home inspection and radon inspection). Therefore they don't want to be held liable for something they could not have known about the home.

You as the buyer have the right to test for anything that may concern you such as radon and mold. They just want you to satisfy yourself (at your expense and prior to settlement) on anything that might be of concern to you.

The kicker, you have to sign their contract if you want that house. There is no benefit to you, it's all about them darn it! Hope you get your dream home and there are no problems.
0 votes Thank Flag Link Thu Jul 1, 2010
It's like Kevin said initially - whoever has that file on their desk would probably rather deal with another lower, and "clean" offer than bother with mark-up language that goes against company policy. As payroll employees of a RELO company they don't have as much skin in the game as a normal seller so price isn't the hot button; easy terms are.

I'm sure there are supervisors and such who you might be able to reach out to, but in RELO transactions typically there is one point person who acts as the go-between with the listing agent and the decision maker. Buyer's agents and buyers themselves should never have contact with the Relocation firm during the normal course of business. Because they have representation via a listing agent, they might actually require that all correspondence go through that person.

And yes, TAR is the Tennessee Association of Realtors. We have a basic, 9 page fill-in-the-blank Purchase & Sale Agreement that we use for most transactions. Builders and banks are typically the exception to the rule as builders usually have their own, protective contract. But more and more banks are going with our TAR contract. They'll typically have specific Disclosures, Addenda, and Disclaimers that are required to be attached. This is the normal protocol for RELO companies too (except with Cartus it seems).
0 votes Thank Flag Link Sun Jun 27, 2010
Ms. Crawford, thank you for your answer.

"As is" seems OK. "Indemnify and hold harmless" (for all time?) is the the deal breaker.

I find your comment about Cartus being one of the few relocation companies not to use the TAR (TN Association of Realtors?) agreement revealing. It gives me greater insight into the problem.

When I did submit a modified version of their contract, it seemed to be rejected out of hand. It made me wonder whether the person at Cartus had any authority to evaluate the situation and see that they had a very good cash offer that would take the property off their hands almost immediately.

Or does that person even exist? I was reminded of car salesman who have to clear an offer with their managers, i.e., walk around the corner and get a drink at the water cooler. It seems that the message is just not getting through to the person in Danbury (?) who needs to hear it.
0 votes Thank Flag Link Fri Jun 25, 2010
Great point, this is more of an issue to protect the homebuyer against overreaching contractual agreements; that too often go unread , while still being executed. Looking into a possible alternative for you now… and at any time you may choose to take this discussion private by email to kpellatiro at realtracs dot com.
0 votes Thank Flag Link Fri Jun 25, 2010
I've represented buyers in Cartus transactions in the past. Cartus is one of the few remaining relocation companies that requires the buyer to use their national, pre-printed Cartus Purchase & Sale Agreement (instead of the local TAR agreement that is commonly used in this area). This is just their company policy; I wouldn't think too much of it. All RELO-owned properties (no matter who they are listed with) are typically sold AS-IS. Some repairs might be negotiable if discovered during the course of professional inspection.

With any transaction, the seller (listing agent, RELO company, etc) is required by law to disclose any "known defects" affecting a property. You always have recourse if you can prove that they had "actual knowledge" of the problem but didn't disclose. Of course that is pretty hard to prove...

Cartus is one of the oldest and largest RELO companies in America. They're a little old-fashioned which can be a pain, but they are in the business of selling as many properties as possible and they have a good track record. The course of a normal sale in this area on regular Tennessee Association of Realtor contracts would more than likely have similar language included on the "Disclaimer Notice" and/or on the "Mold/Mildew Disclosure".
0 votes Thank Flag Link Thu Jun 24, 2010
Mr. Pellatiro, thank you for your answer. [There doesn't seem to be any way to reply to you except to post an "answer." I also know next to nothing about how these Q&A boards work!]

I agree that a good inspection would reduce the risk. As for relying on the disclosures made by Cartus, there is little chance of that. Each page is stamped with the phrase, "Seller is a non-occupant owner and has no knowledge regarding this property."

However, i don't see how that would reduce the additional liability imposed by such a contract should a problem arise within the scope of the of Cartus definition of "substances." The question seemed to come down to one of insurance. Should Cartus bear the cost of insuring itself or should I insure them by agreeing to the indemnity clause? And if I agree to the clause, am I sufficiently insured myself--or can I be insured--against the additional liability imposed by that clause (I note the passages that refer to claims that are merely "raised" and to "attorney's fees")?

It seemed to down to a question of what is reasonable and what is overreaching with respect to an average buyer like me (corporate sales may be another matter). I thought that I had found a pretty good answer when I compared the Cartus contract with the standard state realtors' association contract (all provisions). It made me feel that there was much for the buyer to beware.

I may try your idea of being the persistent only buyer, but, on the other hand, I will probably take my cash offer and walk. The whole thing reminds me too much of that 60's TV show "Lost in Space" (or was it "Lost in Real Estate"): "Danger, Will Robinson, Danger."

Thanks again for your answer.
0 votes Thank Flag Link Thu Jun 24, 2010
Good point to be raised, but many times relocation companies are willing to negotiate with the *next* potential home buyer rather than deal with changes or revisions to their protective clauses from a current home buyer's offer.

These statements are heavily in favor of the relocation company (to be fair: not just Cartus) because they want the sale to be the last interaction they have on the property. From their side of the equsion, they are risking huge amounts of money to buy and sell these homes. That being said, you are right to review the document and make attempts to replace clauses that you do not feel comfortable signing - please consult an experienced, local real estate attorney - especially if you are the only offer/interested party involved on the house (this may give you more leverage).

In practice, my feeling is to inspect the home to the best of your ability. Be extra cautious, and try not to rely on disclosure. Spending twice the normal amount of time and money on evaluation of the home might still be wiser than reviewing the relocation inspections that are provided. Does that make sense?

Kevin Pellatiro
Hoping to help you take advantage of the market – when you are ready.
(615)714-7918 | kpellatiro@realtracs.com
0 votes Thank Flag Link Thu Jun 24, 2010
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