October 4th, 2012 at 7:14 pm
As you know, twice each year CAR releases revised and new documents for our use. The next release will be on November 26 and will include a number of regularly used documents and some very nice changes. Below are some highlights:
1. On the Counter Offer form (Form CO), they have added paragraph 1C as follows: “If checked, Buyer’s deposit will be adjusted in the same proportion as in the original offer.” As you will recall, in the prior versions of this document, only the down payment and loan amount were adjusted in the boilerplate. This change includes the deposit, and would thereby keep it at 3% of the new purchase price if the original offer included a 3% deposit. As the listing agent, you should always check this box.
2. In the Commission Agreement (Form CA), CAR added a line in paragraph 1 setting forth a date by which the subject property must be sold in order for the commission to be earned. This is a good change as it adds clarity to your agreement, but you need to be sure to fill in the blank in every instance. Forgetting to add a date will only add ambiguity to your contract and leave the client with an argument to try and avoid payment.
3. The Receipt for Increased Deposit (Form RID) will now be known as the Increased Deposit/Liquidated Damages Addendum (Form IDA) and now reflects the possibility that an increased deposit may be wired directly to escrow. It also adds a check box next to the Liquidated Damages clause, allowing you to once again acknowledge that the new deposit money is part of the potential liquidated damages.
4. The Contingency for Sale or Purchase of Other Property (Form COP) clarifies the parties’ rights should the buyer’s present home fall out of escrow. Specifically, a sentence was added which provides that if the buyer’s sale escrow cancels after the buyer has removed his COP contingency, only the seller has the option to cancel the agreement. By removing that contingency, the buyer loses her cancellation rights even if the sale of her home doesn’t close.
5. CAR created a Trust Listing Agreement (Form TLA), which is a regular listing agreement except that the signature lines reflect that the property is held in trust. Of course, you should use this form when your seller is a trust.
6. Finally, CAR has separated the clauses from the Purchase Agreement Addendum (Form PAA) to create separate forms that can be used in the appropriate circumstances. For example, there is now a separate Back-Up Offer Addendum (Form BUO), Seller in Possession Addendum (Form SIP), Tenant in Possession Addendum (Form TIP), Court Confirmation Addendum (Form CCA), and others. These new forms are not substantively different from the corresponding clauses in the old PAA, but are easier to use because they are only one page long.
Of course, there are other new or revised forms being released next month. If you want to review them all, go to CAR’s website, car.org, the following link: http://www.car.org/legal/standard-forms/summary-forms-releases-chart/november2012formreleases/
As always, let us know if you have any questions.
September 26th, 2012 at 7:14 pm
We have had a number of complaints recently regarding agent conduct at Open Houses. Specifically, we have received calls from our sellers complaining that our agent has spent time at an open house talking on their cell phones or playing on their computer or IPad. In certain instances, the seller has heard from neighbors or prospective buyers that the agent was rude in responding to questions, or unavailable when they sought information about the property. In most of these situations, the alleged conduct of our agent has resulted in the seller requesting a cancellation of our listing agreement.
Of course, the lesson from these stories is obvious: Stay off your electronic equipment during an Open House. Ignoring for the moment the buyers you can find at an Open House, your seller expects you to be focused on visitors to their property during that time. They believe it is your job to sell those visitors on the property. They expect you to show people around and answer all questions. They expect to you to watch their personal property to ensure that nothing is stolen. In short, they expect that all your attention will be on selling their property and, if it is not, they will be unhappy with you. I know because I hear that unhappiness.
Further, however, an Open House is one of your best opportunities to find new clients. For 20 years, I have been consistently told by managers and agents that they get many clients from holding an Open House. After all, we know that people who come to your Open House are for the most part in the market. They want to buy a property. So, working with and impressing them may result in you getting a new client.
In short, being attentive and professional at your Open Houses is good for multiple reasons. First, it keeps your sellers happy and feeling well represented.
And next, it helps you meet new people and procure new buyers, thereby increasing your income. So make your calls before or after the Open House, and focus on the people who come to visit during it. It will only help your business in the long run.
As always, please contact us with any questions you may have
September 22nd, 2012 at 7:13 pm
As you know, given the economy of recent years, it has become more common for us to see transactions involving the Bankruptcy Court. Most commonly, our seller has filed bankruptcy in order to delay a foreclosure or stop some legal proceeding against him, and the property we have been asked to sell is now subject to Bankruptcy Court jurisdiction. While I do not want to go into too much detail about what this means, there a couple of warnings I would like to pass on. First, as with any property subject to a court proceeding, selling a property in bankruptcy is much more complicated than the normal deal. For example, after a bankruptcy is filed, the court appointed trustee can disavow any of the debtor’s (usually the seller) contracts. So, the trustee can terminate our listing agreement and hire a new broker. She can also disavow a purchase agreement that the seller has already signed. So, the most important thing for you to remember with a property in bankruptcy, is to be in contact with your client’s bankruptcy attorney or the bankruptcy trustee and follow their instructions. They will tell you who needs to approve any action you take, and what sort of court proceedings will be necessary. And remember, all bankruptcy issues are legal so you should not be advising your client concerning those questions. Always have the client consult with their attorney.
Next, I wanted to warn you about what happens when a debt is “discharged” in bankruptcy and specifically how such a discharge will affect the typical real estate transaction. In a few transactions we have had recently, our seller’s debt to a lender was discharged by the Court. Based on that discharge, our agent believed that the property could be sold without dealing with that “discharged” lender. Of course, when the title report was ordered, that lender’s lien was still shown. So the question arose whether the “discharge” eliminates the lien or not. After much research, we discovered that even with the discharge of a debt, a lien against the property still remains in place. As odd as that may sound, the discharge eliminates the debtor’s personal liability for the debt. In other words, the lender cannot sue the borrower for repayment. However, when the debt is also supported by a lien against real property, the lien continues after bankruptcy and must be paid off at sale of the property.
So, if your client tells you not to worry about their mortgage because the debt has been “discharged,” tell them you believe it still exists as a lien and send them to their lawyer for advice. More importantly, don’t be a bankruptcy expert. In almost all instances, a client in bankruptcy will have a lawyer who you can use for direction. That lawyer becomes a great resource for you and can make sure that you handle things right and make no mistakes in your transaction. And, of course, that is what we all want.
As always, give a call if you have any questions
September 21st, 2012 at 7:12 pm
While it is our goal in the legal department to never have our company and our agents involved in litigation, sometimes it happens. At the end of a trial, a jury will be provided with a series of instructions on how to apply the law. These instructions guide the jury in the deliberation process. While we all know that a real estate broker must disclose to his or her client all material information that the broker knows or could reasonably obtain regarding the property or relating to the property, recently, a separate jury instruction was adopted which is specifically directed at the duty of disclosure by a real estate broker. This instruction states that “the facts that the broker must learn, and the advice and counsel required of the broker, depend on the facts of the transaction, the knowledge and experience of the client, the questions asked by the client, the nature of the property, and the terms of the sale”. The instruction goes on to state that the “broker must place himself/herself in the position of the client and consider the type of information required for the client to make a well-informed decision”.
So does this expand the real estate agent’s duty to disclose beyond what traditionally has been “disclose what you know or reasonably should know”? The simple answer is probably yes because an agent must now consider each client individually and relay information which is fine tuned for that client. In reality, what we are suggesting is that you continue to disclose what you know or should reasonably know by being observant and by thinking would I want to know this fact if I were purchasing this house. Remember if you are questioning whether you should disclose or not, be conservative and disclose it. I can’t recall one case where we were sued for over disclosing.
As always, if you have any questions or comments, please contact the legal department.
September 14th, 2012 at 7:11 pm
As you know, every few months we like to share true stories about disputes or litigation we have been dealing with. In today’s case, we represented the seller in the sale of his property. The property had many beautiful and unique features, including a large stable that allowed for the boarding of up to 10 horses. At the time of our listing, the seller had leased the stables to a woman who was operating a riding school at the property. According to our seller, the school had been there since before he bought the property and had operated continuously for as long as he knew of the property. When the property was shown to potential buyers, we made no representation about the business. We, of course, identified the large stables, but said nothing about what use could be made of them. On the other hand, whenever we showed the property to anyone, including the ultimate buyer, the riding school was in operation and we let all those buyers watch the lessons and believe that the business could continue after their purchase. In truth, everyone involved, including our agent, the buyer and the seller, believed (assumed) that the riding school was legal and nothing to the contrary was said to anyone.
Of course, after close of escrow, a government official visited the property and told the buyer that the zoning prohibited the operation of the business. It turns out that a neighbor had complained about the business three years earlier, and two and a half years before our transaction, and it took that long for the county to get around to the complaint. We tried to get a variance to allow the business’s continued operation, but the county said no. So, we were left with a lawsuit for misrepresentation and non-disclosure. Given that the alleged fraud related to a business, this case was very expensive to settle.
So, what is the lesson of this story? The main thing is that old lesson we learned as children: Do not assume anything. While I would not have wanted our agent to confirm the zoning of the property, or make any representations about the business, when the facts on the ground make a representation of this nature, that an operating business was legal, and we don’t know if that is true, we need to explain our lack of knowledge to the buyer. We cannot allow the “implied” representation of the condition’s existenceto be accepted by a buyer. Tell the buyer you don’t know if the business is legal, or if the structure is legal, and recommend that they check if they would like. That simple statement, which is obviously true, avoids the problem and, most importantly, avoids the expensive lawsuit.
As always, contact us with any questions you may have
