March 28th, 2016 at 10:16 pm
Question: My buyer has been in escrow for 3 weeks. We just got an amended TDS from the other side stating that the built-in dishwasher does not work anymore, even though it was working fine when the buyer entered into the purchase agreement. The listing agent said the seller is not required to repair the dishwasher because the seller provides no warranty for items included in the sale under paragraph 8B(6) of the RPA. The listing agent also said that if my buyer is unhappy about this, he can cancel. Is the seller required to repair the dishwasher?
Answer: Yes. First, the listing agent misquoted paragraph 8B(6) which actually states that the items included in the sale “are transferred without Seller warranty” and a transfer has not yet occurred in our situation. Second, paragraph 11 of the RPA is? more? on point. It? states that the property “is to be maintained in substantially the same condition as on the date of Acceptance.” Given that the dishwasher was working on the date of acceptance, the seller is required to repair it to return it to substantially the same condition as on the date of acceptance. Alternatively, the buyer may prefer trying to negotiate a credit from the seller in lieu of repair.
March 21st, 2016 at 6:26 pm
Question: My clients are a husband and wife purchasing a home together. The wife has very bad credit. The lender told them that, to qualify for a loan, they must put the property and loan in the husband’s name only, and the wife must sign a quitclaim deed. If the couple buys the property the way the lender has advised, but sometime down the road they get divorced, can the husband claim that the wife has no interest in the property because she signed the quitclaim deed, regardless of community property laws?
Answer: Yes. A quitclaim deed transfers any and all ownership interest someone may have to another person. If the wife signs a quitclaim deed, the husband can eventually use it as evidence to show that she released and relinquished all ownership interest she had in the property. Perhaps he can even bolster his claim if, for example, the down payment for the home was a gift from his parents, which is presumed to be his separate property under community property law. Of course, the wife would attempt to refute his claim by arguing that their intent was to use the quitclaim deed for the sole purpose of qualifying for a loan, not giving up her community property rights. However, she would have been much better off if they had a signed agreement between themselves memorializing that intent. In any event, this is just one of many complex issues that may arise concerning holding title, and a good reminder for agents not to advise clients on how to take title to property.
March 14th, 2016 at 10:11 pm
Question: Can an agency agreement between an agent and a client be created without anything in writing?
Answer: Yes. Certain agreements must generally be in writing and signed by the parties before a court will enforce the agreement. This law is called the Statute of Frauds. An agency agreement authorizing you to represent a client is not one of the enumerated agreements within the Statute of Frauds. However, a commission agreement entitling you to compensation? as an agent? is within the Statute of Frauds. Of course, part of the confusion stems from the fact that a C.A.R. standard-form listing agreement so happens to be both an agency agreement and a commission agreement. In any event, if you and a client both verbally agree that you will be that client’s agent, an agency agreement has been formed, absent anything in writing. Legally, what that means is that you are now exposed to potential liability if you fail to satisfy your fiduciary duty to do whatever is in your client’s best interest. Yet, you are not entitled to any compensation. Be sure to avoid this situation by getting all your listing agreements in writing!
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.
