Ep. 20 – The Best of the Best

Matthew Maschler:
Welcome to the Real Estate Finder podcast, special 20th episode. Stacey, we’ve done 20 episodes already.
Staci Garcia:
Applause,
Matthew Maschler:
Applause. We have an applause button. Congratulations. Here we go.
Bob Schwartz:
Congratulations
Matthew Maschler:
To us. I am Matthew Maschler, realestate Broker in the state of Florida, based in Palm Beach County, and you can find me@realestatefinder.com.
Staci Garcia:
And I’m Stacey Garcia, also in boca realestate finder.com. And also no HOA boca.com.
Matthew Maschler:
Alright, and today for our 20th episode, we have a very, very special guest. When I was a kid, I wanted to be a lawyer and I did go to law school and I’m admitted to the Florida bar. And to be admitted to the Florida Bar, you need a sponsor, someone who’s already a member of the Florida Bar to sponsor you, someone who knows you and can recommend you. So there was no question, this was probably 1997 or no, 1998. And the person who sponsored me for the Florida Bar was my family’s longtime real estate attorney, Bob Schwartz. And so with us today in the office is Bob Schwartz. Welcome to the show. Welcome.
Bob Schwartz:
Thank you. Good morning everybody.
Matthew Maschler:
Alright, so I’m going to start with something big. It is our 20th episode. And so in round numbers like that, this year, 2022 is a very, very special year for Bob. He’s in March, he will be awarded his an anniversary certificate for the occasion of his 50th anniversary from his bar admission.
Bob Schwartz:
I started in 1972. Things were a lot different than they are now. Actually it’s April 24th. April, I graduated from the University of Florida Law School in December of 1971. But then you start clerking and then I took the bar in February of 72. Back then there weren’t as many people taking the bar, so they actually called me up and they said, congratulations, you passed. Get over the fourth district court of appeal and they’ll swear you in. So they swore me in and it’s 50 years later.
Matthew Maschler:
How many lawyers were in the Florida bar? Yeah, the Florida bar. How many lawyers were in the Florida bar when you were admitted?
Bob Schwartz:
I don’t really remember the number, but it was maybe 10,000.
Matthew Maschler:
There was a number, you told me the other day,
Bob Schwartz:
The number I told you was the members of the Palm Beach County Bar
Matthew Maschler:
Association. Oh, the Palm Beach County Bar Association.
Bob Schwartz:
In 1972 when I became a member of the Palm Beach County Bar Association, there were 600 members,
Matthew Maschler:
600 Did you know all of them?
Bob Schwartz:
There is. If you go to the Bar Association office in West Palm Beach, there is a picture of the members of the Palm Beach County Bar. And it wasn’t 72, it was maybe 73 or 74. Well at least the people who staffed the picture. My picture is there on the wall, but that would be before digital. Everything. When I started, we had no computers, we had no cell phones, we had no fax machines, we had no email. When I started practicing law, we did not yet have calculators. I had a slide roll,
Matthew Maschler:
A
Bob Schwartz:
Slide roll that was left over from college.
Matthew Maschler:
And what was your first job as a lawyer?
Bob Schwartz:
1972 was not really a great year to be finding a job as a lawyer in Palm Beach County or pretty much any place else in the United States at the time. I got a job working for a sole practitioner in West Palm Beach in the citizens building before they modernized it. And West Palm Beach was dramatically different. We mostly did litigation, that’s what he liked to do and he didn’t like real estate, but I like real estate. So I ended up with the real estate and growing up in the real estate business and gradually that’s what I bet I got to tell you there, probably pictures around, but West Palm Beach in 1972 didn’t look anything like it looked today and when you left the building, if it was dark, you had to be pretty cautious. This was also, of course, back in 72, the citizens building had windows that opened. And I didn’t realize at the time that that will be last time in my professional career that I would be in an office with Windows that opened because all the building codes changed, but then everybody used to open and of course the weather was different too. It didn’t get as hot and it didn’t get as cold.
Matthew Maschler:
So yeah, so I remember I’ve talked about it on the show. I remember that when I used to come down with my father and help him out on his real estate deals and that’s how I met Bob. And we’ve met some very, very interesting characters along the way and we’ve done some very interesting deals along the way. And Bob has represented my father when I told you once about the development that he built in polo club, the Knightsbridge sub development, and Bob helped with that. And then when I started in my career as a broker and took over the sales at Stone Creek Ranch, Bob helped with all of the sales at Stone Creek Ranch. And then there were times in some of the resells, when the buyers would choose a lawyer or a title company, I’d strongly recommend Bob and they would choose somebody else and that’s okay.
They were paying for it so they could choose whoever they want. I can’t tell you how many times after the closing they had to call Bob and hire him to fix something that their lawyers might’ve missed. And one in particular that I remember, I don’t remember which allot it was, but they failed to obtain water rights for the public water, public sewer. And somehow the lawyer, the title company missed it. And these people were trying to build a 12,000 square foot house on two and a half acres and they couldn’t run water to their house. And that’s the type of thing that it’s amazing. People might think a lawyer or a title company is a commodity that could be interchanged. And in my experience, there’s been over a hundred times Bob has caught something that I don’t think anyone else would’ve caught or somebody missed something that Bob had to fix.
Bob Schwartz:
I’ve always been very technically oriented. When the bar started the board certification program back in the mid eighties, I was among the first group of real estate lawyers to get B certified in 87. And besides, it’s kind of like what the doctors do at board certification, except you also have to have an application process and references and cross references and back and then you sit and take an exam. So in 87, I think the first time there were like 30 or 40 of us who passed the exam. There are a few pretty good lawyers I know who did not pass, but I won’t mention their names, at least one of them. And from 87 until now, they’ve given the certification exam every year and there are currently 414 board certified real estate lawyers in the state of
Matthew Maschler:
Florida in the state. So board certification is an option. Any lawyer out of law school can be a real estate lawyer, a criminal defense lawyer, divorce lawyer, PI lawyer. Very few I find go out and get that certification. And there are plenty of real estate lawyers that don’t have a board certification and it’s not required. But if you’re choosing a lawyer for the first time and you don’t know who to choose, choosing one that’s board certified is certainly a very, very helpful tool. It’s kind of insane to think that in the state of Florida there are only 418 board certified real estate attorneys. The
Bob Schwartz:
Process is kind of hard and particularly if you’ve been out a while and it’s been a long time since you’ve taken a bar exam, the prospect of taking a complicated exam is daunting. I currently serve on the Florida Bar real Estate certification committee. There are 11 of us and we write the certification exam and we grade the certification exam and we review the applications. And it’s surprising, but it hasn’t for many years when I first got board certified, nobody really knew and nobody cared. But they finally kind of get to it. And of course there’s board certification, a lot of other areas right now matrimonial and civil trial was the first, but it’s kind of like doctors. It depends on what you got, but if you had a problem with your foot as I currently do, you would not go to a gp, you’d go to somebody who’s board certified in podiatry.
It’s a different thing. But things have changed. And over the years the way in which real estate transactions are conducted has changed a great deal and unfortunately there is a tendency throughout all of us industries for private equity money to try and corner a particular industry and they really only have, well, they really only have one concern, which is profits, but they only have two areas of focus. One is monetizing things and the other is scale. And unfortunately neither really works well in real estate because the real estate laws, practices and procedure in the United States and particularly in Florida are basically based upon the English common law. It goes back a long way. Some of it is quite archaic, but it’s cast in place and it’s like the old right way, wrong way and army way. There is a correct way. And for example, Zillow is currently bailing out of their real estate procedures where they were buying and selling because I just did a closing where a client bought a property from Zillow and the Zillow closing agency, and by the way, they’re not title companies. Your local commercial title agency is not a title company. There is actually a law in Florida which prohibits a commercial title agency from calling itself a title company. That’s like your neighborhood insurance agent calling himself an insurance company. They’re not.
Matthew Maschler:
So then let’s explain it, what is the title company?
Bob Schwartz:
The title company is essentially the underwriter I write on older public national title insurance company. There are half a dozen title insurance companies in the whole country. So the
Matthew Maschler:
Title insurance company is the one that issues the title insurance.
Bob Schwartz:
They are the insurance like Northwest Mutual or the companies that actually will pay the claim if there’s any problems. The companies, when you get the paper policy, their name is on the top, the agent’s name is one of the names and they sign it, but it’s two very different functions, particularly today. It was different years ago.
Matthew Maschler:
So if you recently bought a house and you went into the title office, that might’ve been a title agency
Bob Schwartz:
In Palm Beach County traditionally and residential real estate, the seller picks who does the closing? The seller has two choices. The seller can pick a commercial title agency or can pick an attorney. A lot of attorneys will create a commercial title insurance agency. I don’t do that. I am what’s called an attorney agent so that if you hire me, you will hiring an attorney while if you hire cloudy title incorporated, you’re hiring just an agent and they don’t actually have to be lawyers, they just have to be licensed title agents.
Matthew Maschler:
So when I moved to Florida and I first started, I did real estate law and I was a real estate investor, dabbled in New York and New Jersey. And when I moved to Florida and I bought my first house and they said that the seller picks the title company, I was very confused. I was like, as the buyer, I want to protect myself from the seller. I need title insurance in case the seller doesn’t have good title. How could the seller, how would that protect me if the seller’s choosing the title, company title, who owns the house? Well, as the buyer, I have to make sure that I’m getting title to the house. I don’t trust the seller. Why should the seller pick the title company and pay for the title company? So how come? Why is it in Palm Beach County that the traditionally, and these are negotiated, it’s in the contract, it could be negotiated, but the default in Palm Beach County? Traditionally in Palm Beach County, the seller pays. Why is that?
Bob Schwartz:
Many years ago, Palm Beach County was the same as Dade Broward and Monroe Counties in terms of the seller would provide the buyer with an abstract. Before title insurance was big, we had abstracts of title. Problem with an abstract of title is you actually have to know how to read an abstract and nobody even learns that anymore. But anyway, so I did a lot of work in Monroe County, that’s the keys in the seventies, and you get an abstract and probably a lot of you people don’t know what an abstract is. Literally an abstract is a clip together book that has a photocopy of every instrument in the chain of title to a piece of property. The chain of title is just what it sounds like. It’s the first document out of the state and all the transactions to there and you’d look through it and you’d create a pencil chain to figure out who has title.
You don’t do that anymore these days. Everybody orders a title commitment. However, in the mid sixties in Palm Beach County, all the abstracts were stored in a warehouse by the airport and there was a fire and almost all the abstracts were destroyed. So Palm Beach County went to title policies because the fund at that time, attorney’s title insurance fund had already gotten together to the point where you could do title policies. Well, since the seller was always provided an abstract and the seller couldn’t do it, seller started product and that’s helped Palm Beach County switch and there were a few counties in the state to do
Matthew Maschler:
That, right. So the important part to hear then is the seller provided an abstract to the buyer. The abstract was the proof that the seller owned the property. It showed the chain of title. The seller bought it from this person who bought it from this person, bought it from this person. And how did the first person get it? I don’t know. They probably stole it from the, and in the state, from the state, from the state in Pennsylvania or
Bob Schwartz:
From the federal government on Jupiter Island, you have land grants.
Matthew Maschler:
I’ve seen aspects in Pennsylvania that ultimately 200 years ago, it goes all the way back to William Penn, right? So because of the fire, because the record room where all these abstracts were stored, there was a fire, the abstracts were destroyed. The seller could no longer provide an abstract to the buyer. What does a seller do if they can’t do something They have to pay just as if there was a broken glass. If you’re under contract and there’s a piece of glass that’s broken, the seller has to fix the glass. The seller could not provide the abstract because of the fire. So the seller had to pay for the title insurance and that’s why in Palm Beach County, there’s other counties also. But that’s why in Palm Beach County, the seller traditionally pays for, that’s
Bob Schwartz:
How
Matthew Maschler:
It started Palm. That’s how it started. And it
Bob Schwartz:
Remained, when I started from the beginning, you could write a title policy, but in the early seventies there were two separate types of title policies. There was an owner guarantee and an owner opinion that is with an abstract. Basically you had no insurance, you had an attorney’s opinion. The attorney give you a letter, which is his opinion, which says, I’ve reviewed the abstract and here’s the status of title. Title insurance became popular because should you have a problem, it’s way easier to get it fixed. Most title problems are small, a lien unpaid taxes, and what it really amounts to is the title insurance company hires an attorney who fixes the title problem. So as opposed to having essentially to pursue the attorney who gave you the opinion, you just notify the title company. In addition, the problem on the attorney opinion, if I’m examining an abstract of title, I can’t tell if any of those documents are forged.
Matthew Maschler:
So when you have a title problem, traditionally what it might mean is someone else has a claim to the property and you study this in law school, if let’s say a bad seller signs a deed to two different buyers at the same time and one records the deeded first, which one owns the property? So that’s really what you’re trying to protect. So there’s two different parts, right? There’s the title search to find that chain of title, and then there’s the title insurance. So that way if there’s a problem, if the title company, if the closing agent missed something, the title insurance would protect the buyer in case of a claim. And what you said, it’s
Bob Schwartz:
We’ve actually moved past that.
We no longer do chains of title and we no longer create title commitments. The way it’s done universally now is you supply the title company with your legal and hopefully a prior policy and they supply you by email with a title insurance commitment. Then it’s your obligation to satisfy all the obligations on the title insurance commitment. They should mention at this point that when I receive a title insurance commitment, it has two lists. The first list, which is called Schedule A, schedule B, section one is all the things that have to happen before I can issue a clean title policy. Some of them are obvious, a deed from the seller to the buyer, a mortgager satisfaction of mortgager homeowner. Anyway, those are the things that have to happen. Then there’s a second schedule with lists. The exceptions title insurance differs from regular insurance because your regular insurance, like on your car or your house is prospective, you’re insuring you today against something that might happen tomorrow.
Title insurance is the opposite title insurance is insuring you today for something that might have happened yesterday. Like Matt’s example where a seller does, which is actually fairly easy to do, although they always get caught, is to sell the same house to two or even more people. And periodically that happens because there’s a lag in examining title. So you get the title policy and if you find a title problem, usually in the form of a notice from somebody or another, an easement or what have you, you don’t have to hire a lawyer. All you do is send it to the title company and they have people who fix it.
Matthew Maschler:
Now the other interesting thing is let’s say there is someone out there with a claim. So if I go to sell my property, I have trouble selling it because there’s this dispute, there’s this claim out there. I have title insurance, I tell the title insurance, go ahead and fix it. Theoretically, they don’t have to fix it, they could just insure it. So then my transaction goes ahead, the buyer takes the property, they have insurance. If this person never makes a claim, but theoretically that problem, that deficiency entitled could follow the property from buyer to seller, from buyer to seller, buyer to seller for generations and the insurance company rather than fix it, they could just say that. They could just insure it and say, if there’s ever a claim, they’ll insure it. And that way they maybe save a little bit money by not having to actually fix it ever.
Bob Schwartz:
We used to do it that way, way long time ago in the seventies and eighties, we would do affirmative coverage. That is if there’s a recorded problem, whatever the nature of it might be, if it’s of record, you have to list it in the title insurance policy. And we used to do affirmative coverage. That is we’d insure over it. That’s prohibited by law for about 20 years now. Affirmative coverage is no longer permitted. Agents used to get the title insurance companies in trouble as a result of it. So today the insurance company will literally fix the problem. Basically whatever it takes most of the time on the small things, they’re just paying it off. But if not, they’re litigated. I was a couple of years ago, an expert witness for Old Republic where they were doing just that. They’ll bring quiet title actions. That’s what they do.
Matthew Maschler:
A quiet title action is to settle the title to make it clean and marketable so the person knows that they have good title,
Bob Schwartz:
Right? The important thing is in Florida, when you get a title insurance policy, it is a marketability policy. That means if you can’t sell it because of a title issue, which may or may not be an actual cloud, they guarantee you marketability. So they’ll fix whatever the problem is of the transaction go forward. As they say, years ago I used to see some things where they would just insure over it and go forward, but they’ve mostly gotten away from that because they found long-term it doesn’t work out.
Matthew Maschler:
So if I’m a buyer in Florida and the seller’s choosing the title company, the seller picks the title company pays for the title company and there is, there’s an issue, you maybe an open permit or something like that. Can the title company just make it an exception and then I come in and buy the property and I’m on the hook for whatever it was that they accepted?
Bob Schwartz:
Probably if you didn’t have a lawyer,
Matthew Maschler:
And that’s the risk of not having,
Bob Schwartz:
Yeah, I mean it is really surprising to me. In Palm Beach County, the seller isn’t going to pay for title. So the seller is that has a commercial title agency or an attorney for them, and a lot of the buyers just don’t bother getting a lawyer. But if you think about the nature of a real estate transaction, a house closing, let’s say when the deal closes, what the seller gets is money. Money’s money. Money doesn’t have any title problems. Seller walks away, they got money, the buyer is walking away with some kind of a title to the property, but they own the property. So that’s way more complicated than just money. And you should know, I mean, the simplest thing is, I was talking earlier about this Schedule B section two exceptions. That is a title insurance policy starts out by saying, we insure you against everything in the world.
And then it says, except for example, if you close today on a deal, let is say, except for real estate taxes for calendar year 20, 22 and subsequent years, if you live in any of the communities of Boca, it’d be subject to the declaration of covenants and restrictions and the duty to pay. And there’s a whole series of exceptions. There’s also what’s called standard exceptions, which have pre-printed in the policy parties in possession mechanic length. However, if you ask to have them removed or if somebody knows to ask to have them removed, you have to get ’em removed. My favorite example is the survey business. If you’re doing a deal and the buyer’s getting a mortgage, the buyer says to you, do I have to pay for a survey? It’s $800. And I say yes, because your lender is requiring the survey exception to be deleted.
This is a little slight of hand lenders like to play. If you ask your mortgage lender, do you require a survey? They will all tell you no, they don’t require a survey. However, they require the survey exception to be the leader from the title policy and I as the title insurer, I can’t lead it unless I have a survey. So it’s kind of circular. The survey exception, by the way, says we won’t insure you for any problems or errors that would be disclosed by an accurate survey of the premises. Suppose part of your patio is on your next door neighbor’s lot. That’s a survey problem. But if you get a survey, then they will insure you.
Matthew Maschler:
So if you’re buying a house and you get a survey and there’s a problem with the survey, do you have to fix it?
Bob Schwartz:
Well, it depends. Presumably if you get the survey during the title examination period, then you make the seller fix the problem. If the survey problem is bad enough, you have the right to cancel deal and get out and get your money back. For example, I was involved in a project up in Palm Beach County, Palm Beach Gardens many years ago. Everybody’s familiar with these quad units. There’s four units. It set at kind of an angle in the townhouses, buzzed the vast invented them with flying forms. Anyway, this particular project, the builder, then normally you’d have the surveyor set the stakes because this is a platted lot. So if you can picture it, you’ve basically got a square lot and it’s divided like you’d cut a sandwich. So you’d have the surveyor set the corners, but if you don’t have the surveyor set the corners and you let the builder do it, suppose the builder builds the whole thing four feet north, which happened.
That means for every one of the units, part of your unit is owned by your neighbor and you own part of your neighbor’s unit. That’s what happened. And actually in this particular one, I only found out about it because unlike one of the four units was getting a mortgage and we got a survey and it’s like, whoa. A lot of corrective deeds and stuff in residential real estate transactions. When you hire a lawyer and you get it, it’s all really a form of insurance because most of the time things go okay, the problem with real estate transactions is there really aren’t any small problems if they’re ignored.
Matthew Maschler:
Lemme go back to something you said. You said if the survey problem is big enough, maybe the buyer can cancel the contract. Where would the buyer get that right from the
Bob Schwartz:
Title? It’s in the standard Far Bar contract.
Matthew Maschler:
It’s in all those pages that I don’t read. All
Bob Schwartz:
Those pages you don’t read, right? Yes. The procedure in Florida, is that into the standard Far bar contract? Actually, when I joined the Palm Beach County bar in 1972, they had just signed on to the attorney realtor Joint Accord in the sixties. The realtors and the lawyers throughout the state really didn’t get along very well, and they had a big agreement and a truce like a de tent. And that’s when the far bar stands for FAR, Florida Association of Realtors, BAR, the Florida Bar. And it was like a choose uniform form of contract. And now there’s a statewide committee joint committee that makes those revisions. So you need to get a new contract every couple of years. Yeah,
Matthew Maschler:
They just did one. They just did a new contract in December. We talked about it on the show.
Bob Schwartz:
It’s currently evolving. And the difficulty is that real estate practices vary dramatically based upon where in the state you are. If you are up in the panhandle, they are not the least worried about open permits. If you’re down in Dade, Broward, Palm Beach County, it’s a disaster. Open permits for a variety of reasons. And in the West coast, in the Naples area, they got their own contract entirely because they’re their own group for whatever reason. But the contract provides that the buyer gets a title insurance commitment. Then the buyer has anywhere from five to 15 days to write a title objection letter to the seller. At least in Palm Beach County. It’s the opposite Broward County saying, okay, here’s what’s wrong with the title. You’ve got to fix it. Then the seller has a 30 day period of time to either fix it or say, I’m not going to.
If the seller is unwilling or unable to cure the problems, the buyer has a choice. The buyer can either take it as it is if it’s not significant or they can figure it out. Or the buyer can say, forget it, I’m going home. Give me back my deposit. I am actually currently involved in a deal like that on a $23 million residential sale down on the Bay Harbor Islands where you didn’t satisfy the B one because of open notice of commencements, which is too complicated a problem for this podcast, I think. But people don’t realize that, and I have clients do this too. People for some reason have this concept that a residential closing is less complicated than a commercial closing, and it just not. So in most respects, a residential closing is more complicated than a commercial closing because in a commercial closing, it’d be very unusual to have three separate homeowner property owner associations, and you have different loan provisions and different requirements, but it has just evolved.
I have been doing this long enough. If you’ve only been doing residential real estate for five or 10 or 15 years, which to me is last week, it doesn’t seem like this is how it’s always been. But if you were doing it in the seventies, it was dramatically different. And most things, in some ways it’s better and in some ways it’s not. But the system evolves. And of course the timing and the nature and individual things happen very often. Litigation creates strange situations like as you’re well aware, realtors for about 20 years have had this attitude that buyers and sellers shouldn’t ever meet. They shouldn’t get to meet each other. They shouldn’t talk, they shouldn’t anything. And that I was around when the problem started because there was some people on a deal in St. Andrew’s country Club where the buyer and seller met and figured out a way to cancel a deal and restructure it with entities and for the purpose of trying to cheat the realtor out of the realtor’s commission. And there was a lot of litigation, and eventually the realtors won because they were procuring cause. But the realtors decided that if they didn’t meet, they couldn’t do this. And most of the time, the realtors and the commercial title agencies goal is to get it through smooth to closing with no issues.
Matthew Maschler:
I remember when the parties would first meet at the first time at the closing, but in the last 10 or 15 years, the companies have separated the title agencies and offices or lawyers’ offices would separate the closings and have the buyer come in and the seller come in at different times that way they didn’t meet, they didn’t have the conversations, and it didn’t drain the office from the amount of time, energy, and effort it took for the buyers and sellers to meet and exchange words, whether they were happy or angry with each other.
Bob Schwartz:
And of course now, unless even if there’s a mortgage to be signed, sometimes nobody meets, nobody gets together. Everything is Zoom.
Matthew Maschler:
But even before Covid, I didn’t go to closings. I like to go to closings, especially with my clients, and sometimes you go, Hey, when’s the closing? And you find out that your client was already in and sign the papers.
Bob Schwartz:
I can tell you when the seventies we had closings, residential or commercial, not only did you have the buyer and the seller and of course the title agents, but the lenders would come. I can remember obviously before email when lender would show up at the closing with the loan, closing documents. Of course, they were a lot shorter. Another example I was talking about that form that they assigned, they call it a cooperation agreement that if something happens to these documents, you’ll come and it’s a doctor down in Miami closed on a major refinance of his expensive residence. And somehow between the closing and the courthouse, the documents were somehow lost or destroyed or whether the doctor said, well, I guess I don’t owe you the money really anyway after,
Matthew Maschler:
To me that’s stealing.
Bob Schwartz:
That’s stealing. Well, but you figured it was worth a shot. Sure. But obviously at the end of the day, the land is won. But everybody goes back to their paperwork and they put something in the contract and the documents so that, well, that’s not going to happen to me again. Well, the reason that your residential closing package today is 120 pages long is because the solution, everything is a piece of paper that somebody signs. So there’s a piece of paper for if somebody called you a different name, if you cooperate, if you live here, if there’s somebody else but your name, there’s sign off on everything.
Matthew Maschler:
I think the new as is contract is about 12 pages without addendums and
Bob Schwartz:
Whatnot. I have in my office a copy of the far bar contract from 1982. Legal size pages
Matthew Maschler:
Two legal size, so about three pages then?
Bob Schwartz:
Well, it’s pretty small type too
Matthew Maschler:
Small type. Do you still use legal size paper for anything? Pardon me? Do you still use legalized paper for anything?
Bob Schwartz:
I only used legal size, legal pads, yellow pads.
Matthew Maschler:
Yellow pads. But in the printer, I remember when I
Bob Schwartz:
First started, oh yeah, a lot of loan documents are still legal size.
Matthew Maschler:
A lot of loan documents are still legal size. Hu document
Bob Schwartz:
Statements just is, that was starting to fade away. The use of legal size recording costs got dramatically. I mean, it used to be that the actual recording costs that is the per page cost was nonsense compared to the documentary stamps and intangible tax. So what was the point? But it all went up and there’s a significant difference between recording a 15 page document or a 30 page document.
Matthew Maschler:
So because the recording fees go by the number of pages of the document, some people still use the legalized paper to get as much words on the page as possible.
Bob Schwartz:
I’d say it’s habit, but it’s very seldom that I’m in a deal with one of my peers. Well, very few of my peers are still practicing a public, having recently there’s a guy in Del Ray, but more often I’m doing a deal now involving a ground lease involving a national franchise company. And the senior lawyer on the other side had not yet been born when I started practicing law. And of course I
Matthew Maschler:
Spent, I wasn’t born. Yeah, I was going to say
Bob Schwartz:
Just barely.
Matthew Maschler:
We talked about that. I was born eight months later.
Bob Schwartz:
We talked about that. I was a member of the Florida bar about six months when you were born?
Matthew Maschler:
Yeah, I was born in November of 72,
Bob Schwartz:
And my actual admission date is April 24. And I remember, and boy, we were a small group over at the fourth district court of appeals, six or seven of us I think. Well, that’s why back then, as I say now, they don’t actually notify you at all when you take the bar exam. You got to go to a website and look for your name. When I did it, they called me up
Matthew Maschler:
When I was admitted in New York, New Jersey in 97. It was in the newspaper, but there was a way, I think there was a dial in, there was a way to dial in and enter your name on the phone. Right.
Bob Schwartz:
Well, but none of that stuff existed. And of course, there’s just so many more people now. There are as many members of the real Property probate and trust law section of the bar today as there were lawyers in all of Florida when I started.
Matthew Maschler:
You’re involved in that section of the
Bob Schwartz:
Bar. I remember the executive council, the real property section many years ago. I got involved. I did condominiums, new condominium developer. That’s all I did. And there is a Florida bar condominium and plan development committee, which I joined in 1975 and I became the chair in 1990, I guess 1990. And that makes you remember the executive council. It’s about 200 members of the executive council. And we meet around the state and they work a lot with the legislature. We have our own lobbyists, and they try and fix the laws that overzealous legislatures screw up. They’re about to pass because of the surf side disaster and the committee and pressure, they’re about to pass a law, which is going to be devastating for condominiums because essentially all those condominiums who have either waived reserve or reduced reserves are not going to be able to do so, and they’re going to find their maintenance budgets shooting through the roof. And of course, you guys, as realtors know, if the maintenance goes up $500 a month place is worth less and harder to sell. That’s
Staci Garcia:
True.
Matthew Maschler:
Right, right. Stacey, do you have any questions
Staci Garcia:
For Bob? I do have a question. So I want to backtrack for a second. You were saying that if a buyer decided, or if there was a problem with the property, and let’s say it went over the property line in a survey and the buyer decided they still want to buy it instead of backing out and the seller wasn’t going to calm it or fix it, and so the buyer buys it as is. What happens then? Do they have to fix the problem to
Bob Schwartz:
Get the mortgage? It depends upon the problem. I mean, if a piece of my swimming pool deck sits on my neighbor’s property, you need an easement. In theory, if the neighbor gets pissed off, the neighbor could make me remove it. So it depends upon how big the problem is and the nature of it. Most problems can be remedied somewhere or another.
Staci Garcia:
What if it’s a problem like a structure? Part of the structure is actually overhanging, let’s say over the property line?
Bob Schwartz:
Well, the supervisions of Florida law for a creative easement, if you have encroached on the property of another for 20 years and under certain, you can actually get a form of easement by use. Actually, in fact, I’m working on a deal like that right now to try and establish that. There are a lot of fixes that have evolved over the years in terms of real property title problems. The most real estate lawyers in Florida are members of attorney title Guarantee Fund Inc. And the fund title notes, which have evolved over the last 60 years or so. If you have this, this is what you do. And eventually through essentially trial and error, things that occur more than once a solution comes up because we want free alien ability of property. We want, everybody wants to be able to sell their property and deal with their property in that manner. So you have to have a way of solving these kind of problems.
Staci Garcia:
Right. So if a buyer decided they wanted to do it,
Matthew Maschler:
You could remedy it. Now you have a problem with the survey and the mortgage company may not lend to you based on
Staci Garcia:
It. Right?
Matthew Maschler:
So you’re stuck. If the mortgage company won’t lend to you, how are you going to buy it?
Bob Schwartz:
Well, you’d have to work at it. One of the things you might do is work out a deal with a neighbor, an easement.
Matthew Maschler:
So you ask the seller to cure the defect and the seller cures the defect. One of the ways the seller cures the defect is by getting the neighbor to sign off.
Staci Garcia:
Gotcha.
Bob Schwartz:
Yeah, it depends. Almost every problem, title, problem has a manner of solving. It doesn’t mean you can achieve it. I mean, they may or may say, pound sand, I guess I’ll sign off. I want a hundred thousand dollars. But most, and then there’s equitable results in court. And how long has it been sitting there? It all depends. That’s why we call it the practice of law.
Staci Garcia:
Have you ever encountered a situation that is absolutely new and has never happened before and you can’t find a remedy for it? Sure. And have you
Matthew Maschler:
Probably not recently though.
Staci Garcia:
Well, have you then had to create something that has become part of a contract in the future? Yeah,
Bob Schwartz:
You have to create something frequently. It’s all because each parcel of real property is unique, right? By definition, each solution is unique. It’s similar to something that you did before, mostly, but it’s some variation on it. And it’s a matter of if you spend 50 years dealing with these things, it’s very seldom that something comes up as a complete surprise. It’s like, oh yeah, I saw something like this before and here’s what I did once in a while. But life becomes much more complicated and new problems arise. A thing we have today is, in my opinion, partially because of remote notarization and online, and there’s a lot of plain forage deeds or good deeds that a seller has decided they were better off claiming was false. Years ago, I can remember when we were doing a real estate transaction, we would have a sit down contract signing.
Matthew Maschler:
Oh, interesting.
Bob Schwartz:
We worked out the deal. Don’t forget, in 1975 or 1976, the contract was a piece of paper. The only way you could send it to somebody was we used to use couriers a lot or FedEx or what have you. But basically it was mail and people got together and you’d sit down and work out the details and mark up the contract because you didn’t have word processing and retyping it. So you have this expression cut and paste Now, it’s not what it used to mean. Cut and paste really meant cut and paste. You’d cut up a contract and you put a piece of these words here, because otherwise somebody with a typewriter had to retype the whole thing. And there was a time problem. But yeah, we had a sit down contract signing and the pace. And that
Matthew Maschler:
Way you could have, let’s say four copies. And that way everybody got a copy of an original
Bob Schwartz:
And everybody would initial every piece. And also the pace of transactions have changed so dramatically. I mean, you see drafts flying back and forth with revised drafts and clean drafts and red lines, and there’s a lot of room for things to go wrong. Absolutely. And that’s before we start talking about hackers, the thing about experience is that you can look at it and say, wait a minute, that’s not right. The problem with the private money, people who monetize and scale is that the stock market rewards publicly traded companies for reducing their payroll. So if you have experienced talented, competent people, you got to pay ’em. If you, however, let them go and get some kids and train them a little bit, you can reduce your operating costs significantly and your stock goes up and your CEO’s pay goes up. The problem is that they only know how to do it if it comes out just so they know how to put a square peg into a square hole. Sometimes you have a round hole and you need to figure out how to get a square peg into it.
Matthew Maschler:
Well, you can. If it’s big enough can. If it’s big enough,
Bob Schwartz:
It can be done.
Staci Garcia:
I have a lot of questions that are just random. And you’re a real estate attorney, Jill always asks me, and we talked about this a long time ago, if someone passed away in a real estate, do you have in a property, do you have to disclose that to the buyer?
Bob Schwartz:
It depends. The general rule is that anything that affects the marketability or value of the property has to be disclosed. The old gable versus silver case. So if the owner of the widow whose husband died, if she lived there and she passed away from natural causes and the kids are selling it from the estate, I mean, you got to tell what’s from the estate, but it’s of no significance. On the other hand, and there’ve been a lot of cases on this, if there was a famous murder in the house that affects its marketability and that has to be disclosed.
Matthew Maschler:
When does it have to be disclosed?
Bob Schwartz:
Oh, right up front
Matthew Maschler:
Before the contract is
Bob Schwartz:
Signed, before they sign the contract.
Matthew Maschler:
And if it’s disclosed during the contract, maybe the buyer might have the right to cancel.
Bob Schwartz:
It could have a material effect on the value of the property. If it’s a famous crime,
Matthew Maschler:
And that’s the threshold seller, I believe the seller has to know and that it’s not readily available or apparent to the buyer and it has to a material value,
Bob Schwartz:
Those are the tests for fraud. That’s a more complicated situation. I
Matthew Maschler:
Was think for
Bob Schwartz:
Disclosures. This actually, this disclosure is actually on the realtors too, in terms of, and it’s because of the cases on it, famous killings, famous crimes in terms of fraud, standard for fraud, which sometimes people get is you have to have a material fact that negatively affects the value of the property. The walls of porous, when it rains, whatever it is the seller has to know or should have known. Sometimes actual knowledge can be difficult to prove. So you can prove it by implication. So the seller know, or should have known, and the buyer doesn’t know, wasn’t obvious, and the buyer relies upon the representation. This is where the realtors come in, really. So if you make a representation about the house, that’s false but not easy to tell, and it’s material. That’s the basis for an action In fraud,
Staci Garcia:
There’s just a lot of things because I always get asked questions and I think of random things that probably nobody else does, but I saw a property and rented it out and didn’t open all the windows. And then five years later, I complained that none of the windows opened. And the landlord said, well, this is the same situation that you leased it in. So nothing’s changed. So for the buyer or the
Matthew Maschler:
Tenant was there for five years, and maybe when they left the landlord, maybe they complained that the windows don’t open, or the landlord wanted to claim their deposit because the windows weren’t opening.
Staci Garcia:
No, either way. But you could just say the tenant complained because none of the windows opened. And the landlord said, when you rented it, this is how it was. None of the windows opened. But at the time, you didn’t open every window.
Bob Schwartz:
It’s a fact question. It’s in each instance. It’s a matter of how easy was it to tell? Was it obvious? Should you have known the call for inspection? How long a time has passed? You mix the whole set of facts together. And ultimately, the way I view it and the way most lawyers view it is if I put it in front of a judge, how would it go? That’s how I look at it. But obviously, whether you’re buying or renting, there are a number of things that you should always do and you should always ask. And of course, you got to remember, there’s two old sayings. The first saying is that the first rule doing business in Florida is if it isn’t in writing, it didn’t happen. And the second is, just because you’re paranoid doesn’t mean they’re not out to get you. So you have to check an awful lot of the things that I checked. And as attorney in every real estate transaction, mostly they were okay. That is if there are no open permits and I don’t check for open permits, it didn’t matter. If there are open permits and I didn’t check for open permits, then it did matter. That’s a whole other subject. Open permits is a very long story and problem.
Staci Garcia:
So I see a lot of MLS listings and it says that you’re buying this house as is, and you as a buyer should do your own due diligence because the seller is not responsible for anything that is going on with this property.
Bob Schwartz:
That’s not true for a house deal, a single family house deal. The law in Florida is that the seller has a duty to disclose anything wrong that the seller knows. And should the seller not disclose and obviously not readily appointment, and the buyer finds out prior to the closing, they can cancel and after the closing, depending upon the nature, but sometimes they can rescind, which is to unwind the transaction, get their money back, and get the property back to the seller. Commercial transactions are still caveat mTOR, let the buyer be aware. Typically in commercial transactions, your buyer is going to be in a better position to do actual due diligence, but you always need to do due diligence. And the standards and procedures for due diligence are pretty well worked out. I can remember before the famous Gable versus Silver case, which is the one that said, the seller’s responsible for not telling.
We didn’t have all these companies. Inspection companies suddenly sprung up and they became the standard. And then of course, part of the problem there was the inspection companies were doing an inspection for five, six, $800. So there could be problems they might not find. So at the end of the day, they were getting sued for not finding problems, and then they’ve evolved to limit it. So then you need additional inspections. So the thing is always involving the state of practice and procedure in real estate has evolved so much in these last 50 years. It’s hard to believe how much different it was, but it is today. It’s you got to check everything and you got to verify everything. And of course, I can remember back when I was with a firm, this was maybe around 1980 when we put in our first computer and we were going to become a paperless office.
Matthew Maschler:
That was the goal.
Bob Schwartz:
Everything was, and I can remember when we used to buy paper by the caseload, and eventually we started buying it by the truckload, that warehouse at the end of Raiders of the Lost Star.
That’s about the size warehouse. You need to keep all the papers. Now, these days I am finally scanning and saving a lot. So I am on an ongoing basis in terms of saving this stuff. I’m not saving as much paper, but I do find we burn through as much paper. When the deal is finally closed and we close the file, you got to throw away about half the pieces of paper because you don’t know. And now the same with email. There’s separate files where I keep the 800 emails I got in the deal because a few months from now it may jump up and you may need it.
Matthew Maschler:
May need it. So talking about disclosures, what about sometimes the buyer will ask the seller for a seller’s disclosure, or the seller will provide the seller’s disclosure. Is that required?
Bob Schwartz:
There’s no real statute on it. The realtors are required to make it happen. And it’s a very good practice. And part of the reason, of course, that it works out well for the realtors because it’s the right thing to do. It’s helping both of the parties, but also it limits your liability. Because if you are not as a realtor, you are not required to do any due diligence. So basically you ask the seller, you encourage the buyer to get an inspection, the premises, you have a connection with some sort of a good inspection company or a roofer or these days. Now of course, an air purity, depending in them, the list goes on because there’s so many more things that go wrong. I mean, 30 years ago, nobody ever heard of Chinese drywall.
Staci Garcia:
Were you extremely busy during the Chinese drywall?
Bob Schwartz:
Chinese dry? It didn’t affect me all that much, really. It was a problem badly handled by everybody. But there were a few builders who just walked away. I must say it’s pretty well known. But GL Homes had a bunch of houses in the oaks that they were sold and under construction and what have you. And they found out about the Chinese drywall, and they went in and they closed it down, and they tore out all the Chinese drywall and they put up good, and they made it right. And I think it dramatically improved their reputation, which is frankly, sometimes doing the right thing if people find out about it, can be good for business. Agree.
Matthew Maschler:
Yeah. Jail homes that did have a very good reputation from the response to Chinese
Bob Schwartz:
People, that made a big difference in terms of who you trust. Because when you are building a custom home, it is an incredible leap of faith. I mean, basically if you think about it, you’re contracting to buy something that’s not there.
Matthew Maschler:
When I used to sell resales in the oaks, it was always the first question, did this house ever have Chinese drywall remediated Chinese drywall? I don’t get it anymore.
Staci Garcia:
And some people don’t know what it is,
Bob Schwartz:
Even
Matthew Maschler:
Forget. And not just because of this crazy demand we’ve had for the last two years, it’s just it’s so many years past it that I just don’t get it. And I had listed a house and that the buyer had, in my opinion, overpaid for the house, but I didn’t represent him when he bought it. And I listed the house and I said to the guy, I said, this was remediated Chinese drywall. You knew that when you bought it. Right? And he said it was disclosed to him, but he didn’t understand what it meant. Was
Staci Garcia:
That the was foreign house?
Matthew Maschler:
No, he lived here. Oh, I remember
Staci Garcia:
One of those
Matthew Maschler:
Houses. Yeah, we went through a lot of ’em. But yeah, no, it was disclosed to him that the house had Chinese drywall, but he didn’t know what it meant. He didn’t know. He didn’t know that it could negatively affect the price of the house, possibly carry a stigma, but it doesn’t anymore. Which is interesting that remu Chinese drywall, because it’s been so many years and the houses are in good condition, that it’s just passed.
Bob Schwartz:
Well, of course not all of the drywall created in China was bad. Just a lot of it. A lot of it, for some reason, a lot of it ended up at the Oaks. A lot of houses were rebuilt there,
Matthew Maschler:
But all over Parkland and all over south Florida and in Jersey as well. It was pretty big. The oaks had a lot of it. There was plenty of developments up in Boynton that had it. There was, you say some reason, it was that year, right? It was a boom. Like this year there was a boom and there was a shortage of product. They went, let’s find it somewhere else. And China filled that shortage, but they filled it with that stuff. So anyway, so it was a problem, but I think it’s pretty much past that, so that’s good. And Bob’s not a litigator, so he didn’t have to deal with any of the litigation afterwards. The Chinese trial litigations afterwards, but that was a big deal, but we still have the disclosure sometimes. What about this one? This is something that came across my desk recently by, and seller signed a contract, the closing date set, ASAP.
Bob Schwartz:
If I were in the deal, I wouldn’t accept it,
Matthew Maschler:
Right? No, I It’s
Bob Schwartz:
Not a contract.
Matthew Maschler:
Well, the question is, is it a binding contract? No. You think that one of the parties can get out based on
Bob Schwartz:
Absolutely.
Matthew Maschler:
Yeah. But to get out, if the other party, they’d have to sue, right? That would be the remedy if they both, right?
Bob Schwartz:
Yeah. I mean obviously ultimately, in any dispute, there are only two possible outcomes. The parties agree or judge decides, but there are a number of requirements for a binding contract. You have to have certain essential terms. And if the contract doesn’t have the essential terms, unless they can be determined on the face of it, it’s not a binding contract. For example, one of the requirements of a contract is a price. But you could have a contract, and I’ve had this that says it’s X dollars per acre, and we’ll send a surveyor out however many acres it is, we multiply. That’s acceptable. You see, very often you’ll have a contract that says the due diligence inspection period is X days 15 or 30, whatever. The closing will occur 30 days after the end of the inspection period. Well, that’s not actually a date, but it can be determined with certainty from the contract. But ASAP is not a date. I find when I get contracts in very often, they’re just not complete. They’re not
Matthew Maschler:
Correct. If it was blank, if the buyer was trying to say that at the seller’s convenience, if it was blank, then the seller can choose it. Initial have the buyer initial, you’d have an executed contract. I think the listing agent made a mistake by letting their seller sign this contract with an A SAP P date. The problem I have is, is it so ambiguous that you don’t have a contract, right? No purchase price. You don’t have a contract. Is it so ambiguous that you don’t have a contract? Or would a judge say there’s no contract, can one of the parties back out because there’s no contract? Or was there enough of a meaning of a minds that the parties have to, in good faith, get the title company and the mortgage company and get this
Bob Schwartz:
Enclosed? I think ASAP somebody could get out of deal, but you got to remember, most of the time the buyer wants to buy and the seller wants to sell.
Matthew Maschler:
In this instance, the seller got a better offer.
Bob Schwartz:
That would be up to a court to decide. That’s a fact question, but basically, as I say, there are contractual requirements, just like the requirements for conveyance. For a long time, I did before you’re going to take the real estate certification exam, which is a pretty hard exam. About half the people fail, and we give a seminar, the Advanced Real Estate Certification Review courts for about, I dunno, about 25 years I did the section on conveyancing and joint ownership, and you got these different pieces, and if one of the pieces, one, the requirements is missing, there are all sorts of curative acts and title. There are usually ways to fix something. It depends upon how close you are, but ultimately it’s a judge who decides. So then you’ve got the Garrity of who are the lawyers trying it, how does it work out? Am I going to appeal ’em? Am I not going to appeal?
Matthew Maschler:
And is the cost of the higher offer is the price of the higher offer worth that litigation?
Bob Schwartz:
I actually was just involved in one of those. It ended up in a lawsuit. I was an expert witness. The buyer bought a specific performance action against the seller because yeah, the seller got a better offer and they settled after a while. And it’s also, there’s gamesmanship involved. Not everybody wants to or is capable of. If you’ve got a deal and the seller says, I’m not closing, I got better off, go pound. Sandy’s your deposit. So the buyer is going to go find himself a litigator and is these days probably going to write a $10,000 retainer check. Litigation is incredibly expensive. The buyer may just decide, you know what, I’ll go home, I’ll find something
Matthew Maschler:
Else. But these days, a month or two later, the property values might’ve increased by more than $10,000.
Bob Schwartz:
Actually, in my particular instance, the seller made a serious mistake because the buyer was a player by any standards who immediately hired a lawyer and filed a suit and got an expert witness and just cranked it up real hard and the seller folded.
Matthew Maschler:
Yeah. So Bob, when we spoke last week and you told me it was your 50th anniversary year, it just made me happy. And sometimes I feel selfish, right? Why am I being happy for someone else? But no, it’s okay to be happy for someone else. Right? I am truly and genuinely happy for you as we celebrate this anniversary, and that’s why I was like, we got to get you on the podcast. I’m really, really happy to have you here if you have any final thoughts that you would like to say. And then also, how does somebody get in touch with you?
Bob Schwartz:
Oh, well, I have a webpage. I got an email too, but
Matthew Maschler:
It’s, what’s the webpage?
Bob Schwartz:
Robert Schwartz pa.com.
Matthew Maschler:
Robert Schwartz pa.com.
Bob Schwartz:
Yeah. You have to be able to know how to spell Schwartz
Matthew Maschler:
And made the Schwartz be with it. I was going to say it. Oh, I’m sorry. You didn’t say anything. I had to go one line. I was trying to hold it down. And obviously you can call me or Stacy and we can put you in touch with Bob. I think we put you in touch with someone recently for our book a Point Listing.
Bob Schwartz:
Oh,
Matthew Maschler:
Yeah. Interesting. And knock on wood for our,
Bob Schwartz:
There’s a lot of realtors out there over the years who on a regular basis have some commercial title agency that they like to refer their deals to, because if they can help it, the problem with bringing in lawyers is they’re really focused on the things that can go wrong, which is the nature of our training. But when they get one, I’ve had calls on closing emergencies. One looks, this is a big problem, you better call Bob.
Matthew Maschler:
Yeah. I find when I make an offer to buy a property for myself, I’ll click Buyer pays and chooses, even though in Palm Beach County, and you’d hope that the seller’s happy with that because it relieves them of the burden of having to pay for the title insurance. But there are sometimes when the seller’s realtor wants to use their in-house or their favorite preferred vendor. But I make that as part of my offer as a, I used to try to adjust the price because of it, but sometimes the seller doesn’t see the value. But I want to control the deal when I’m buying for myself and I want Bob to represent me.
Bob Schwartz:
Whatever rights title controls the
Matthew Maschler:
Closing. Absolutely. Yeah. That’s smart. I did it one time and I just felt so, I was confused and for me to be confused. It’s not good. I can’t read the abstract. Order the title the way you can, so you can reach out to bob@robertschwartzpa.com or ask me or Stacy for his information. We’d be happy to introduce you. You’d be very, very lucky to have him working for you. Oh, I have another question. Have you ever had an experience where you got a new client because they were on the other side of one of your deals and they were so impressed with you that they wanted to hire you for your next deal?
Bob Schwartz:
Yeah, a few
Matthew Maschler:
Times. A few times. To me, that’s the ultimate compliment when that happens. I agree.
Bob Schwartz:
A part of it is my training experience and background is pretty much like one of the guys my age. When you get to be my age, it’s mostly guys. Today it’s half women met when I started law school at the University of Florida in 69. There were three women in the class of 80. But if you go to one of these big firms, you may meet with the partner in charge, but unless you have a really big deal, your deal is going to be done by this year’s associate. I don’t have any associates. It’s going to be done by me.
Matthew Maschler:
Okay. Absolutely. All right. Thank you so much for joining us. Thanks, Bob.
Bob Schwartz:
Thanks for inviting me. Thank
Matthew Maschler:
You for listening to episode 20 of The Real Estate Finder podcast. I’m Matthew Ashler.
Speaker 4:
The future looks bright and the storms pass by the sky’s blue. When it’s almost that time, light shows cameras flash when I pass living in the moment, forget about the pass. They saved the best for last. Matthew Mania. We about to make a splash. Life is a marathon full of sharp turns, got to keep pace while the hands on the clock turns high stakes. Five star. I run a show. You can tell the boss center play electricity, energy. I’m always on time. Even if I make dreams, come living my life. Real clear view.
Speaker 5:
It’s It’s time. It’s time. You know. Know what
Speaker 4:
Time. You know time. You know what time? It’s the what time? Whose time? It’s, you know what time It’s Matthew Mania. The Thomas. Yeah. Got him shook, scared. Can’t look. We not afraid of the big bad wall first comes to right.