August 24th, 2012 at 7:09 pm
As you know, in our improved market where with low inventory, it is not unusual to see multiple offers on a well priced property. In that context, we are seeing many situations where our listing agent and seller are being forced to decide whether to rescind a previously issued counter offer. For example, last week we had a deal where, on the first day the property was in the MLS, we received an offer that our seller wanted to counter. Once that counter was sent to the buyer, however, a second offer came in. The question then became how to handle this situation in a way to both protect the seller legally and keep buyer no. 1 interested in the property. After all, once we issued the original counter offer to buyer no. 1, they now had control of the transaction. They could create a contract merely by accepting and delivering the counter back to the seller. So, we wanted to change that situation, and give the seller control of the process, while keeping the buyer interested.
In these cases, unfortunately, the first thing you have to do is protect your seller legally. As a result, you need to create a writing, by e-mail or otherwise, informing the buyer that the counter offer is being rescinded. Once you send that rescission, the buyer no longer has the ability to create a contract because he has no viable offer in his possession. Remember that any offer can be rescinded until it is accepted and delivered back. It does not matter how long the buyer has had it or how long the document says it will remain open. Any offer can be rescinded until acceptance. So, rescind IN WRITING. If you don’t, and instead call the buyer’s agent, they will have their client sign and return the counter. And then, of course, you will have the fight of which occurred first, your phone call or the acceptance. So, avoid the problem and rescind in writing. (Your e-mail should say something like this: “Counter Offer No. 1 regarding [property address], made by seller to buyer on [date], is hereby rescinded. Multiple counter offers will be issued by seller to buyer shortly.” )
After your e-mail is sent, however, you should return to salesperson mode. Call the selling agent, tell them that the rescission is in the e-mail, but that multiple counter offers are also on their way because a new offer was received. This phone call will soften the blow of the rescission and explain why it was done. It will assure buyer no. 1 that you are still interested in them and want them to continue their efforts to buy the property. The phone call is just a nice personal touch at a time when you are forced to do something some may see as a little too “legal.”
So do both. Rescind in writing first and then call to explain. That way you protect your seller and allow them to take advantage of the multiple offer situation while assuring all buyers that they are still strongly being considered for the property. And, as importantly, you ensure that the property is not being sold twice. And that is always a good thing.
As always, give us a call if you have any questions.
August 17th, 2012 at 7:09 pm
As you know, with our market improving, we have seen an increase in multiple offers. In the course of these transactions, we have had a number of instances where multiple buyers believe they have an enforceable contract for the same home. For example, this week we have been dealing with a dispute involving the following facts, occurring in the following order: (1) Buyer No. 1 made an offer for the property; (2) Seller countered to Buyer No. 1; (3) Buyer No. 1 signed counter no. 1 and returned it to his agent; (4) The selling agent did NOT return the signed counter to our listing agent; (5) Buyer No. 2 made an offer for the property; (6) The seller, through our listing agent, rescinded the original counter to Buyer No. 1 and reissued a multiple counter offer; and (7) Buyer No. 1 returned the signed version of counter offer no. 1. Buyer No. 1 now claims that he has a contract for the property and the seller wants to sell to Buyer No. 2. Of course, this dispute is answered by a very simple question: Was counter no. 1 rescinded before Buyer No. 1’s signed acceptance was returned to the listing agent. After all, acceptance requires Buyer No. 1’s signature and delivery back to the seller, and the seller was entitled to rescind until that acceptance was received. Since all these documents were sent by e-mail, I asked to see them so the timing of each step would be clear.
In response to my request, I received scanned copies of the e-mails which had been printed out and placed in the transaction file. I was not forwarded electronic versions of the e-mails themselves. When I asked why that was the case, I was told that our agent had a policy of printing out business e-mails, putting the hard copy in the file and then deleting the electronic version. Now, don’t get me wrong, I love the fact that hard copies of the e-mails and attachments were in our file. That is what you should be doing to maintain a complete file in these days of electronic communication. Additionally, however, I believe you should keep all e-mails sent and received in the course of your business. As you can see from the example above, e-mails are often central to explaining what happened in a transaction or to our defense of a claim against us. While putting a hard copy in the file is often good enough to provide the protection needed, maintaining the electronic copy is also smart for various reasons. First, a hard copy file, or more commonly, a single piece of paper, can be lost or destroyed. Therefore, having the electronic version is a good backup. Furthermore, finding an e-mail is often much easier than finding a hard copy. If we have an issue with a particular property, all you have to do is search your e-mail for that address and you will most likely find what you need. To get the hard copy, we first have to retrieve the file from storage and then manually search through it. Again, while maintaining a complete file is needed, the e-mail backup can only help make our search easier.
So, don’t delete any business e-mails. Instead, after you print them out and put them in the file, move them to your archive folders. Those folders can be organized however you want (by deal, by year, etc.) and do not affect the use of your main inbox. And, of course, they can easily be searched. That is exactly what I do and I can’t tell you how often I have been able to find an important e-mail from years ago. So please, don’t delete anything. Archive instead.
As always, let us know if you have any questions
August 13th, 2012 at 7:08 pm
I was at our Los Feliz Office last week for a Legal Lunch and Learn and we were discussing one of my favorite subjects: Managing your client’s expectations. As you know, we feel very strongly that if you properly counsel your client about their transaction, you will avoid most problems since they will not have false expectations about the deal. In the course of our conversation, our agents shared some of the things they talk to clients about and I thought two of them were brilliant, and worth sharing.
First, when representing a buyer, one of our agents always tells the client not to use or open any new credit after an escrow is opened. That new credit may negatively affect the buyer’s chance to get a loan and therefore make your deal harder to close. This advice was emphasized to me when later in the week I got a call from a buyer’s agent who had this very problem. After opening an escrow with our agent, the buyer then went out and bought a new car. Of course, that purchase was financed and, when the mortgage lender found out about the car loan, problems arose. The only way the buyer could qualify for his new mortgage was to pay off the car loan immediately and close out that new credit account. As a result, he had to borrow $12,000 from family, pay off the car and then close his real estate deal. So please talk to your buyers about this. They don’t know about these problems without your help.
Next, when representing a seller, another agent shared that they always tell the seller that no matter what the contract says, close of escrow is a “floating” or “flexible” date and often does not occur when scheduled. By having this conversation, our agent prevents a real problem of disappointed expectations, where the seller thinks the closing date is a guarantee, plans around it and then is stuck when there is a delay. Again, I recently saw this in concrete terms, where a seller demanded money from us for a late closing. This seller kept telling us that “the contract says what the contract says,” and therefore the buyer was in breach. He wouldn’t listen to anything we had to say. So to avoid the problem, and close the deal, we had to compromise on his demands. As a result, please tell your sellers that, while you will do everything possible to close on time, it sometimes doesn’t happen. Tell them that loans are hard to get and take a long time. Tell them that repairs may take longer than expected, or that the buyer could get cold feet and even breach the contract. Make sure they understand that is why the buyer has contingencies, because nothing is definite. By counseling the seller in this way, you will prepare them for all eventualities and will not have to deal with the disappointment if something happens.
In short, by counseling on these two issues, you can take easy steps to avoid problems with your deal and client. And, of course, we know that is your main goal.
As always, let us know if you have any questions.
August 3rd, 2012 at 7:07 pm
As you know, we unfortunately live in a world with bad people. As a result, in the past we have had a number of thefts at open houses. Additionally, we have heard of brokers being assaulted when showing a house by themselves. Both things have happened in our markets in the past few months, so I wanted to emphasize the steps you can take to protect yourself and your client’s property.
First, when holding an Open House, please consider taking someone with you. Especially for larger properties, it is impossible for one person to see everyone who enters your property and watch them as they go through the home. At a minimum, you should try to have one person near each exit to make sure no one is taking anything large. Additionally, you should try to accompany visitors as much as possible, walking through the house with them, or keep someone in the bedrooms and master bath where valuables (jewelry) and medications are most often kept.
Furthermore, even when showing the property to an individual buyer, you should try to take someone with you. People are less likely to enter the property illegally if there are multiple people present. Next, lock the door behind you when showing the property and, more importantly, when closing up after the potential buyers have left. While I understand that there is no way to protect against every eventuality, by locking the door when you are in the home alone, you make it harder for a burglar to get in and assault you and may cause them to go look for another target. Any amount of safety and protection is better than doing nothing. Of course, your safety is our first priority, so we want to make sure you think about it and take whatever reasonable steps are available to you.
So, try not to go to a home alone, either for a showing or to hold an Open House. And lock doors whenever possible, especially if you are in a property by yourself. Those things will minimize the chance that you ever encounter an intruder. Thanks
July 25th, 2012 at 7:06 pm
As you know, in today’s market, leases have become a much larger part of our business. It seems that every office I visit is doing more leases than ever and, as a result, has a lot more questions about how to handle those transactions. While most of these questions relate to things like the security deposit and commission, one thing we need to think about is the disclosures that we make to potential tenants. After all, despite the fact that the Civil Code does not require a Transfer Disclosure Statement (“TDS”) in a lease transaction, it seems logical that a prospective tenant would want to know about the physical condition of the property they may move into. With that in mind, what should you do as the agent, and how should you handle this issue.
First, you should always remember that more that 90% of our lawsuits relate to non-disclosure issues and the condition of the subject property. With that truth in mind, it is easy to see that the better our disclosure is, the less likely it is that we or our client gets sued. It is for that reason that we are required to disclose all material facts and we tell you to disclose everything you know. It is also the reason we recommend that you tell your client that making full disclosure is actually like buying insurance against a lawsuit. If you disclose everything, you will probably not get sued. And that is as true in a lease as it is in a sale.
As a result, even though the law does not require it, we should strongly recommend to our landlords that they fill out a TDS and give it to the tenant. If they refuse, which they are within their rights to do, you should still treat the transaction as a sale, do your visual inspection of the property and disclose everything you know to the tenant. In my mind, your disclosures should be exactly what they would have been had the transaction been a sale. That way, you will at least make sure the tenant knows what you know about the property and protect everyone from claims regarding those issues.
Furthermore, without the normal disclosure forms, there are other items or facts that your tenant should know but doesn’t. For example, and as you know, there is a relatively new law requiring carbon monoxide detectors in all homes in California. Since the seller is asked about that issue in the TDS, this disclosure is covered in most sale transactions. In a lease without a TDS, however, it is not. As a result, you need to check on that issue or, at least, give the tenant a Carbon Monoxide Detector Notice (Form CMD) in every deal.
In short, even though the law does not require a TDS in leases, there is information about the property that the tenant needs to know. So do not rely on the Civil Code and ignore disclosure. Doing so is only asking for trouble. Rather, get yourself and your client insurance: Treat the deal like a sale, do your inspection and make full disclosure. That way, everyone will be happy and, when the tenant buys a house, they may hire you because of the good job you did in their lease.
As always, let us know if you have any questions.
