March 7th, 2016 at 7:56 pm
Question: In last week’s legal tip, you said that when a listing agent demands to know why a buyer is cancelling, the buyer’s agent in many instances could say “because of everything.” I’m usually a listing agent, and that statement, quite frankly, can be insulting. Could the buyer’s agent simply say: “I have not been authorized to share that information?”
Answer: Yes. Last week’s legal tip? dated February 29, 2016? involved a buyer who cancels at the 11th hour, but had not removed any contingencies. If a listing agent demands to know the reason for cancelling, the buyer’s agent should not volunteer just one reason, such as “school district,” because that can infuriate the other side, and most buyers cancel for many reasons anyway. The suggestion last week was for the buyer’s agent to perhaps say, “because of everything,” so as not to pin the buyer down to one reason. Saying “I have not been authorized to share that information” is fine too. Another possibility is to say “the buyer is cancelling under the buyer’s contingencies, and the contract does not require the buyer to give a specific reason.” Unfortunately, these response could? also be upsetting to the other side.
If you are the listing agent in this situation, your seller is likely to get upset no matter what the buyer’s agent gives as an explanation for a last-minute cancellation. To counteract that possibility, be sure that, earlier in the transaction, at the time the buyer’s contingencies are about to lapse, you ask your seller in writing whether the seller would like to serve a Notice to Buyer to Perform to require the buyer to remove the buyer’s contingencies. Also let your seller know that, if he or she does not require the buyer to remove contingencies, the buyer can cancel at the 11th hour without giving us a specific reason.
-Thank you to Terry Canfield for suggesting this week’s legal tip.
February 29th, 2016 at 11:25 pm
Question: You are the buyers’ agent. Your buyers entered into a contract to purchase a property using the C.A.R. Residential Purchase Agreement (RPA). They never removed their contingencies. Now, right before escrow is scheduled to close, the buyers have decided to cancel. The listing agent is furious, and demands to know why the buyers are cancelling. Are the buyers obligated to give a reason for cancelling?
Answer: No. Your buyers are obligated to act in good faith and deal fairly with the sellers, but nothing in the RPA specifically requires them to give a reason for cancelling. In fact, without your clients’ permission, you should resist any urge you may personally have to explain your buyers’ reasons to the other side, because giving a specific reason may give rise to a heated dispute.
Let’s say, for example, your buyers decided to cancel because they don’t like the school district. If you told that to the listing agent, the sellers are likely to get very upset and claim they are entitled to the escrow deposit. After all, the buyers should have known about the school district from the time they wrote their offer. Of course, the sellers are unlikely to place any blame on themselves for failing to require the buyers to remove their contingencies.
Yet, if we were to all sit down and have a long discussion with your buyers about their cancellation, we are likely to discover that, regardless of the school district, they may have gone through with the purchase if the price was better, the mortgage payments were lower, the condition of the property was better, the neighborhood was better, and so on. Giving the sellers just one reason, such as “school district”, may cause an unnecessary misunderstanding between the buyers and sellers, when in fact, buyers generally have many other reasons for cancelling. So when the listing agent demands to know why your buyers are cancelling, in many instances you can honestly say, “Because of everything,” to diffuse the matter and help your buyers get their deposit back.
February 22nd, 2016 at 6:25 pm
Question: I submitted a very clean all-cash, full-price offer on behalf of my buyer for a property listed in the MLS. The listing agent is with another brokerage. Even though the sellers have no other offers, they rejected our offer. Doesn’t my buyer have the legal right to purchase the property?
Answer: No (except see fair housing issue below). Placing a property in the MLS is not an offer from the seller to sell the property. Instead, it is an offer from the listing broker to pay compensation to a cooperating broker for procuring a buyer who enters into a purchase contract in accordance with the MLS rules. One possible but oftentimes hard-to-prove exception is if the sellers rejected your buyer based on race, color, creed, sex, or other discriminatory reason in violation of the fair housing laws.
Follow-Up Question: So the listing agent can just get away with spinning our wheels in this manner?
Answer: No, not necessarily! You are now one of the very few agents who know that, for an MLS listing, the listing agent must immediately inform the MLS and all cooperating brokers when the seller has refused an offer satisfying the terms and conditions stated in the listing (see Rule 10.5 of the C.A.R. Model MLS Rules). So one possible strategy is for you to look up the equivalent of C.A.R.’s Model Rule 10.5 in your own local MLS rules, and show it to the listing agent. Also encourage the listing agent to have the sellers reconsider your buyer’s offer, otherwise you will expect the listing agent to immediately inform all cooperating brokers that the sellers rejected your buyer’s offer. If the listing agent refuses or otherwise fails to comply with your request, you may be able to file a complaint at your? local MLS for the listing agent’s MLS violation.
February 16th, 2016 at 11:38 pm
Question: I’m taking a listing for a trust. Title to the property is held in the name of “John Doer as trustee of the John Doer Family Trust dated June 2, 2003.” I noticed that C.A.R. doesn’t have a standard-form Trust Listing Agreement anymore. Do I just use the regular listing agreement and put the trust as the seller?
Answer: As to the first part of your question, the answer is “yes.” For a trust listing, use the regular C.A.R. Residential Listing Agreement (Form RLA), and check the box in paragraph 16 to attach the Trust Advisory (Form TAL). As to the second part of your question, the answer is yes, you can put the trust as the seller, but that’s probably not the best way. A better way may be to insert either “John Doer, trustee” or “John Doer” as the seller, and above his signature line, check the “Representative Capacity” box to attach the Representative Capacity Signature Disclosure (Form RCSD). Write the name of the trust on the RCSD, not the RLA. Checking the Representative Capacity box in the RLA means that all Mr. Doer’s signatures and initials on the listing agreement and related documents are to be deemed in his representative capacity as trustee of the trust. Another advantage for checking the box is it requires Mr. Doer to provide a trust certification or other evidence of his authority to act in his representative capacity within 3 days after entering into the listing agreement. We want to review this paperwork as soon as possible to make sure we don’t run into any issues involving the transfer of title.
February 1st, 2016 at 7:26 pm
Multiple Choice Question: Mr. Seller is in a pending sales transaction. The recent rainstorm has damaged his property. What is Mr. Seller’s obligation under the C.A.R. Residential Purchase Agreement (RPA)?
A.? To disclose.
B.? To repair.
C.? Both A and B.
D.? Neither A nor B.
Answer: Mr. Seller should both disclose and repair any damage to the property caused by the rainstorm. The correct answer is C. First, the disclosure requirement for new material facts that a seller becomes aware of during escrow is set forth in paragraph 10A(6) of the RPA. Second, a seller must also make repairs because, under paragraph 11, the property must be maintained in substantially the same condition as on the day of contract acceptance. In rare instances, a seller may argue that his or her performance is excused by an act of God, but California law defines that as an “irresistible superhuman cause,” so an ordinary rainstorm is unlikely to be enough, depending on the circumstances. For more information, see C.A.R.’s new rainwater legal article available at http://www.car.org/legal/real-property-title/rainwater/? (password-protected for C.A.R. members only).
