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A Lender Asks You to Remove the Earnest Money from the Contract – What Do You Do? (11/20/16)
A lender asks you to remove the Earnest Money from a contract… what should you do? Lenders must source the earnest money & if it is cash or too difficult to source, the lender will ask you to write an Amendment removing the earnest money from the contract. What should you do? What are the risks for the Seller? Watch the video to find out!
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Contract Tip: All About Material Relationships (11/13/16)
The Georgia Brokerage Relationships in Real Estate Transactions Act (BRRETA) – effective in 1994 – requires that a Broker disclose any material relationships in contracts. A Material Relationship shall mean “any actually known personal, familial, or business relationship between the Broker or the Broker’s Affiliated Licensees and a Client which would impair the ability of the Broker or Affiliated Licensees to exercise fair and independent judgment relative to another client.” Watch the video for more information & how this relates to Agency as well!
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Contract Tip: Use Consistent Terms Throughout Your Contract (11/6/16)
It is vital to pay attention to the actual terms you use in a real estate contract and consistently use those same terms throughout your entire contract including all Special Stipulations and Amendments. For example, no where in either the GAR or the RE Forms contracts is the term “Business Day” used or defined; so it is inappropriate and potentially problematic when you as an agent use that term in a special Stipulation or or Amendment. Watch the video for more information!
Click here for Video on Due Diligence Period vs.Inspection Period
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Contract Tip: When is the 8 Day Unilateral Extension Really 11 Days??? (10/30/16)
The Georgia Association of Realtors (GAR) Real Estate Contract allows for either party to unilaterally extend the closing for 8 days. When is this 8 day unilateral extension really 11 days??? Watch the video to find out! By the way… the RE Forms contract does NOT include any provision for a unilateral extension of contract.
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Contract Tip – GAR Loan Exhibit: Can a Seller Terminate if No Loan Commitment Letter from Buyer? (10/23/16)
After the Buyer’s Financing Contingency has passed, in the Georgia Association of Realtor (GAR) contracts, the Seller has the right to request “Evidence of Buyer’s Ability to Close.” If the Buyer does not provide this evidence, can the Seller terminate the contract? Watch the video to find out!
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Contract Tip – The Effective Use of E-Sign (10/16/16)
E-sign is very convenient and potentially horrible for agent customer service with your clients. Watch the video for specifically WHY this is harmful for your clients and how to effectively use E-sign!
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Contract Tip: Due Diligence: What if Seller Doesn’t Respond to Buyer’s Amendment in Time? (10/9/16)
What if a Buyer has proposed an Amendment to the Seller to address some concerns with the property… you are running towards the end of your Due Diligence / Buyer’s Right to Terminate time frame and you have not yet heard back from the Seller… what do you do???? Watch the Video to find out!!!
For more information on what you need to now about the Due Diligence Period, Watch this video too: Due Diligence / Buyer’s Right to Terminate: What You Need to Know as an Agent
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Contract Tip: Sale or Lease Contingency Exhibit (10/2/16)
When you write an offer and the Buyer must or want to sell or lease their existing home in order to purchase a new home, you must use the Sale or Lease Contingency Exhibit. Make sure that you understand the “kickout” provision and EVERYTHING it entails when exercised by the parties. Watch the video!
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Contract Tip: Agent as Principal & E&O Insurance (9/25/16)
When you are the principal in a real estate transaction (Buyer, Seller, Landlord, Tenant; including being a member of a Corporation / LLC which is the Seller, Buyer, Landlord, Tenant) if you represent yourself then you do not have E&O insurance coverage. To be protected by E&O, it must be an arm’s length transaction. Additionally, as principal, you must disclose that you are principal and that you are a licensed agent. Watch the video for more on being the principal in your real estate transaction.
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Contract Tip: TWO Forms Required When Sending a Referral (9/18/16)
As a real estate agent, when you refer someone to another Broker / Agent for a Purchase or a Listing, there are TWO forms you need to get signed: The Broker-to-Broker Referral Form AND the Consent to Referral Form. This is required by Georgia License Law. Watch the video for more!
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Contract Tip: The Escrow Agreement Form (GAR & RE Forms) (9/11/16)
If your clients are in a situation where they negotiate to escrow funds until a certain contract provision has been performed (i.e. repairs) consider negotiating the terms of the escrow on the Escrow Agreement Form.
- GAR F85 – Escrow Agreement
- RE Form 215 – Escrow of Funds Agreement
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Contract Tip: Fill In the Blanks & Check the Boxes! (8/28/16)
Important reminder about not leaving any blanks in your contracts AND remembering to check the appropriate box to include those provisions in your contract.
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Contract Tip: All You Ever Wanted to Know About Pocket Listings vs. “Coming Soon” Listings (8/21/16)
Have you heard the term “Pocket Listing” and always wondered what it was? A pocket listing is different from signing a listing agreement to put in the MLS services as a later point in time & putting a “Coming Soon” sign in the yard. Is a pocket listing legal? Watch the video for information!
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Contract Tip: Due Diligence / Buyer’s Right to Terminate Period – What You Need to Know as an Agent (8/14/16)
The Georgia Association of Realtors (GAR) and he RE Forms Contracts in Georgia include a Due Diligence / Buyer’s Right to Terminate Period. Without other documentation, when these options are selected, the Purchase & Sale Agreement is subject to a Due Diligence/Buyer’s Right to Terminate Option Contract; NOT subject to Inspection. Watch the video for this explanation and more!
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Contract Tip: Quick Contract – Do I Have to List the Property? (8/7/16)
In today’s market, it is not unreasonable to get a contract on a property within hours of signing the paperwork. So when you get a quick contract, do you have to list it in FMLS & GAMLS? Do you have to pay FMLS? Watch the video to find out!
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Contract Tip – What Disclosures are Required in a Real Estate Contract? (7/31/16)
What are the many disclosures that are required or highly recommended in a real estate contract? Watch the video to find out!
Click on this link for specific information via video on Seller’s Property Disclosure: What You Need to Know as an Agent
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Contract Tip: Seller’s Property Disclosure Form – What You Need to Know as an Agent (7/17/16)
Seller’s Real Estate Property Disclosure Form – What do you need to know as a real estate agent? Is a Seller required to fill out this form? What are the differences between the GAR Seller’s Property Disclosure Form and the RE Forms Seller’s Property Disclosure Form? What do you as an agent need to disclose about the property? Watch the video to find out!
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Contract Tip: Type of Warranty Deed Conveyed in a Contract & How to Handle Title Issues (7/10/16)
What type of Warranty Deed is conveyed between the Buyer & Seller in a real estate contract in Georgia? Is there a difference if you are using the Georgia Association of Realtors (GAR) Contracts vs. RE Forms Contract Forms? What is the contractual definition of “good and marketable” title? What are the responsibilities of the Buyer and Seller regarding examining the Title to be conveyed and addressing any issues with the title? Watch the video to learn the answers to these questions!
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Contract Tip: Sending Notice by Email – What You Need to Know as an Agent (7/3/16)
What do you need to know about sending Notice by email in a real estate contract… watch the video to find out!
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Contract Tip: Brokerage Contract Forms Required for Selling a FSBO (6/26/16)
As a real estate agent in Georgia, what forms do you need if you have a Buyer who buys a FSBO? Are there any that are required or any suggested? Is there anything required to stay in compliance with Georgia License Law? Watch the video to find out!
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Contract Tip: Utilities & Due Diligence: How to Avoid Contract Issues (6/19/16)
What happens if the utilities are not turned on in a property when you go Binding? Who is responsible for the utilities? (Answer: It depends if you are binding on the GAR contract Forms or RE Contract Forms!)
Use a Special Stipulation that the Buyer’s Due Diligence / Buyer’s Right to Terminate Period does not begin until the Seller has turned on the utilities and notified the Buyer AND if that does not occur within ____ days, Buyer reserved right to declare contract null and void under no penalty. See GAR SS 331.
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Contract Tip: Issues with the Closing Attorney Verbiage in the Contracts (6/12/16)
Both the GAR real estate contract and the RE Form real estate contract in Georgia reference the transaction Closing Attorney. If the Buyer is getting a mortgage, the attorney represents the Lender. But what if the Buyer is NOT getting a loan or the Attorney is not acceptable to the Lender?
The RE Form states “Unless amended by the parties…. said closing shall be at the office of ______. If closing attorney is unavailable or unacceptable to Buyer’s lender, then ____ (Buyer or Seller) ___ shall have right to SELECT a different Closing Attorney.”
The GAR Contract states that “Buyer shall have the right to select the closing attorney….. where Buyer does NOT obtain mortgage, the closing attorney shall represent the Buyer.” This does NOT mean “represent” the personal interests of the Buyer in the way the public may think it does! So what DOES that term, “represent” mean? Watch the video to find out!
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Contract Tip: Appraisal Issues – What You Can Do as an Agent (6/5/16)
What can you as a real estate agent do about appraisal values coming in lower than contract Sale Price? Watch the video to find out why it’s happening & what you can do about it!
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TRID: Lender 3 Day Closing Disclosure – What You Need to Know as an Agent (5/22/16)
Think you know all about the 3 day Closing Disclosure (CD) that the lender is required to send to the Buyer? Think again! Watch the video for some facts that may surprise you!
For more information, watch This Video: CFPB/TRID What You Need to Know as an Agent – published 10/3/15.
CFPB = Consumer Financial Protection Bureau
TRID = TILA / RESPA Integrated Disclosure
TILA = Truth in Lending Act
RESPA = Real Estate Settlement Procedures Act
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Contract Tip: Counter Offers Between GAR & RE Forms AND Amendments for Low Appraisals (5/15/16)
How do you handle negotiating a counter offer between the Georgia Association of Realtors (GAR) contract forms and the RE Forms? Watch the video!
Also…. a tip on the Amendment to Change Sale Price with a Low Appraisal.
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Contract Tip: Counter Offers: How They Work & What to Sign (5/8/16)
In real estate when a Seller receives an offer and negotiates the terms with the Buyer, these negotiations occur on Counter Offer forms; make sure you know how these forms work and what the Seller should sign and how to handle the Financing Exhibits.
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Contract Tip: Writing Special Stipulations – DON’T Do It! (5/1/16)
In Real Estate Contracts writing your own Special Stipulations rarely has the result upon the parties you intend! DON’T write your own! Use the pre-written Special Stipulations available to you in the GAR contract and RE Forms contract forms or contact an attorney to write them for you.
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Contract Tip: Seller’s Right to Terminate with Closing Delay – RE Forms (4/24/16)
Did you know that the Seller has the Unilateral Right to TERMINATE a contract if the Buyer’s Lender delays closing??? Watch the video to learn the specifics of this issue!
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Contract Tip: How to Correctly Number Amendments (4/17/16)
Real Estate Contract Tip – How to correctly number Amendments. What about the Amendments that aren’t signed by both Buyer & Seller? Watch the video to find out!
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Contract Tip: How to Get the Buyer’s CD When the Closing Attorney Won’t Share It (4/10/16)
The new TRID laws are enforced by the Consumer Financial Protection Bureau (CFPB) and regardless of what verbiage is in a real estate contract that they DON’T sign, many closing attorneys and lenders will not share this document with you. So how do you get it? Watch the video to find out!
Watch the video to discover how paying for Homeowner’s Association (HOA) Letters can be a costly issue that may delay your Real Estate Closing. Make sure you know which party is paying for which letter and when you need to get them.
Thank you to Amee Davis of Davis & Associates for this Special Stipulation to attempt to alleviate this issue at closing:
“Sellers will pay the fee for the first HOA letter. All other fees associated with HOA letters & updates are to be paid for by the Buyer.”
- All parties agree that the repair work contemplated and agreed upon herein shall be completed not less than five business days prior to the closing dated of _________. All work shall be completed by vendors Licensed, in the State of Georgia, through the proper state licensing board, to complete the work required herein. Seller shall provide to buyer at least five days prior to closing, evidence of vendors license to do repair work, invoices and paid receipts for all work completed. Should seller not complete the work required herein at least five days in advance of closing, buyer shall have the right to either (1) immediately hire vendors of buyer’s choice and have work completed at seller’s expense to be paid at time of closing from seller’s proceeds or (2) terminate the contract agreement with full refund of all earnest money deposits.
A Seller has several possible options as to how to respond to an offer or multiple offers. Watch the video for these options & see the documents below for more information:
https://www.youtube.com/watch?v=lnYamXJKC_I&feature=youtu.beShould you attach a survey to a contract? Are the considerations the same if you are binding under the GAR forms or the RE forms? Watch the video to find out!
Contract Tip: Seller Costs Associated with a Buyer’s VA & FHA Mortgage Loan (1/17/16)
Make sure Sellers understand the additional costs they may incur when the Buyer is getting an FHA or VA insured mortgage loan. This video goes over these loan contingencies in both the GAR contracts & the RE Forms contracts. Some of these items include the following. Watch the video for more information.
VA Loan
• VA mandated repairs
• Miscellaneous fees (i.e. termite letter) & any fees not allowed by VA to be paid by Buyer
• Improvements less than one year old may require Home Warranty Certificate
• Public Water & Sewer Connection if available
FHA Loan
• Tax Service Fee
• FHA Mandated repairs
• Lender imposed well or septic inspection
• Improvements less than one year old may require Home Warranty Certificate
• Public Water & Sewer Connection if available
https://www.youtube.com/watch?v=Pk6GYyN8J2I&feature=youtu.beIn 2016 GAR added a new Consumer Brochure: B08 – What New Landlords Need to Know about Leasing Property. This informative Brochure is helpful for both the public and any real estate agent working with tenants or landlords in Georgia.A few key issues to consider:
• Possession belongs to the tenant
• Military Personnel may terminate early with no penalty
• Move-In Inspection must be complete PRIOR to Landlord accepting a Security Deposit
https://www.youtube.com/watch?v=g8A45SZkqbQ&feature=youtu.beThe 2016 GAR contracts will be available to agents in January of 2016. This video offers a sneak peek into what the changes and additions are to the GAR contract forms next year! Click here for a Training Copy of the 2016 GAR F20 – Purchase & Sale Agreement.2016 GAR Contract Dissection & 2016 RE Forms Contract Dissection & 2016 Contracts Review CE Classes will be scheduled beginning in January! ….. http://www.eAGENTweb.com click “Calendar”MX1 Agents – You are required to take at least one contracts class annually (GAR, RE Forms, or Contracts Review)
The 2016 GAR contracts will be available to agents in January of 2016. This video offers a sneak peeks into what the changes and additions are to the GAR contract forms next year! Click here for a Training Copy of the 2016 GAR F133 – Unilateral Notice to Extend Closing Date
2016 GAR Contract Dissection & 2016 RE Forms Contract Dissection & 2016 Contracts Review CE Classes will be scheduled beginning in January! ….. http://www.eAGENTweb.com click “Calendar”
Contract Tip: Make Sure Clients Understand Their Responsibilities & Consequences of Their Actions Regarding Earnest Money 12/6/15
If a contract fails to close, the Buyer & Seller must agree in writing which party gets the Earnest Money (regardless if it terminates based on a contingency or by default.) When they don’t agree in writing, then there is a dispute regarding the disbursement of the EM and the Holder may interpret the contract and decide to disburse to a party or interplead into the courts. Make sure your clients understand their responsibilities and the consequences of their actions particularly as they relate to the earnest money.
2016 GAR Contract Dissection & 2016 RE Forms Contract Dissection & 2016 Contracts Review CE Classes will be scheduled beginning in January! ….. www.eAGENTweb.com click “Calendar”
Contract Tip: Inspect Title Early with an Investor or Estate Seller – 11/15/15
There can be some major title issues especially with these types of Sellers – don’t wait until the last minute to find these out!
2016 GAR Contract Dissection & 2016 RE Forms Contract Dissection CE Classes will be scheduled beginning in January! ….. www.eAGENTweb.com click “Calendar”
Contract Tip: Amendment During Due Diligence Period – MAJOR Differences Between the GAR & RE Forms – 11/8/15
GAR F107 – Amendment to Address Concerns with the PropertyThere are MAJOR Differences between the Amendments that you use to Address Concerns with the Property During Buyer’s Due Diligence Period. The verbiage in the GAR package & the RE Forms package are vastly different- watch the video to know what they are!
- RE262 – Amendment During Buyer’s Right to Terminate
- GAR SS 302 – Amendment to Address Concerns as Notice to Terminate
Contract Tip: Terminating a Contract Prior to Buyer’s Remittance of Earnest Money – 11/1/15
GAR F83 – Unilateral Notice to Terminate; Agreement to Disburse Earnest MoneyThe Buyer & Seller must still execute a Termination AND Release Agreement for these contracts. If Earnest Money is addressed in the creation of a contract, Earnest Money must be addressed in the termination of a contract. Watch this video for more specific information on what to do if the Seller won’t sign the “release.”
- RE-263 – Notice to Withdraw or Terminate AND
- RE-212 – Agreement to Disburse Trust Funds
Contract Tip – Seller’s Disclosure Form as Part of the Contract (10/11/15)
Please Take the Maximum One Contracts Classes for additional thorough discussions on contractual issues such as this one!
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EDS: MX1 Seller & Co-op Buyer
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EDS: MX1 Buyer & MX1 Seller
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Click Here for EDS Guide (Updated 9/11/15)
Please Take the Maximum One Contracts Classes for additional thorough discussions on contractual issues such as this one!
UPDATE: The Agent did not go to jail – the Eviction was amended to add the new owner as the Plaintiff. The detective assigned to the case met with the Landlords & agent. The agent has been released from Maximum One & a GREC investigation is pending regarding the disposition of his license.
Many Buyers in today’s market must sell or lease their current house in order to buy a new home. Make sure to include the proper contingency exhibit in that contract and make sure the Buyer understands the kickout clause in that form.
- GAR F90 – Sale or Lease of Buyer’s Property Contingency Exhibit
- RE Forms 251 – Sale or Lease Contingency Exhibit
The Seller may continue to market the property for sale & if they get another offer to accept, they give the first Buyer with whom they are under contract the “first right of refusal.” When The Buyer is presented with the “kickout” the Buyer may either terminate the contract & get their Earnest Money back or proceed with the contract by removing the Sale/Lease Contingency. When they agree to do this, the Buyer also agrees to REMOVE ALL OTHER CONTINGENCIES!
Contract Tip – HOA Issues (7/5/15)
HOA issues impact both Buyers & Sellers. Prior to end of Due Diligence & prior to closing the transactions, make sure the clients are thoroughly satisfied with:
- Covenants, Conditions & Restrictions of HOA
- Know which party is paying for various HOA fees (amenities, transfer letters, extensions, etc.) & know these issues don’t necessarily survive closing
- rview the HUD-1 prior to closing for HOA fee prorations & costs & fees.
Please Take the Maximum One Contracts Classes for additional thorough discussions on contractual issues such as this one!
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CFPB Fails to Comply with Congressional Review – Proposes Delay of TRID until 10/1/15 (6/21/15)
Thank you to the Maximum One Affiliated Attorneys & Lenders for sharing this Breaking news with us!!!! This is GREAT news for agents! Thank you to Bart Patterson of Summit Funding Advisors for 1st braking this news last Tuesday! Summit Funding Advisors – Bart Patterson (404-835-6502) NMLS 223048 BPatterson@SummitFundingAdvsors.com Please contact the Lender & Attorney affiliated with your Branch for more specific information!
From American Land & Title:
In a statement today, the Consumer Financial Protection Bureau (CFPB) announced a proposal to delay implementation of the TILA-RESPA Integrated Disclosures (TRID) rule until Oct. 1.
The CFPB failed to timely notify Congress under the Congressional Review Act, which requires agencies to submit the rule to Congress and the Government Accountability Office 60 days before the effective date. The agency’s submission should include (1) a copy of the rule; (2) a concise general statement relating to the rule, including whether it is a major rule; and (3) the proposed effective date of the rule.
According to CFPB Director Richard Cordray, the bureau “made this decision to correct an administrative error that we just discovered in meeting the requirements under federal law, which would have delayed the effective date of the rule by two weeks. We further believe that the additional time included in the proposed effective date would better accommodate the interests of the many consumers and providers whose families will be busy with the transition to the new school year at that time.”
ALTA CEO Michelle Korsmo issued the following statement about the CFPB’s proposal: “You’ve got to give them credit for pushing the effective date to October,” Korsmo said. “The Bureau could have changed the effective dates for a shorter period of time. Clearly, the Bureau listened to the concerns that industry has for consumers. Consumers would be helped even more if the CFPB also announced a specific hold-harmless period for industry to understand how the forms will work in real life transactions. Under TRID, some mortgage lenders and settlement service providers may initiate additional risk-management tactics that could slow the closing process for homebuyers.”
“Additionally, ALTA and its members insist that the CFPB remove the ‘optional’ label of title insurance on the new TRID forms. Telling a consumer that owner’s title insurance is ‘optional’ will mean that homebuyers may be dissuaded from purchasing the same protection that lenders receive from a title insurance policy. The CFPB’s disregard of the protection afforded by an owner’s title insurance policy is a disservice to the consumers they represent.”
“Finally, Director Cordray and the CFPB staff should use this additional time to fix the inaccurate disclosure of title insurance premiums for consumers. State law and regulation in the majority of the United States dictates that consumers must pay title insurance rates that are different than how the CFPB requires industry to inaccurately disclose these fees to the consumer. Every homebuyer should be well-informed about the accurate costs of homeownership-including what they pay for each service during the real estate closing process.”
The CFPB will open the proposal for comment. The bureau said a final decision is expected shortly thereafter.
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Potential Problems with a Closing Attorney Holding the Earnest Money 6/14/15
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Designated Agency & the Forms that Create Legal Relationships with the Public 6/7/15
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GAR Revisions May 2015 – Revision to Unilateral Extension of Closing Date – 5/31/15
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Atlas Chalet Shingles – What You Need to Know as a Real Estate Agent (Video) – 4/26/15Unilateral Extension of Due Diligence??? – Due Diligence / Buyer’s Right to Terminate vs. Buyer’s Right to Request Repairs (Video) – 5/17/15
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How to Extend a Binding Contract (Both GAR & RE Forms) – Video – 5/10/15
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If a Buyer terminates a contract and writes an offer on another property, how to you address the earnest money on the offer? The answer….. it depends on if the “Release” has been signed by BOTH parties! Please watch the video for an explanation!
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Rentals: Security Deposits & Move-In Forms (4/12/15)
Do you work rentals? Do you wok them legally? Do you stay current with the ever-changing Landlord / Tenant Laws? Review the Georgia Landlord – Tenant Laws Ga. Code Ann. §44-7.
If you are working with a tenant or a landlord for placement in a rental property, make sure you know Georgia laws regarding the exchange of money between tenant and landlord. It is required that the landlord and tenant complete & sign a move-in inspection form OR that the landlord disclose in writing to the tenant a list of any pre-existing conditions with the property PRIOR to the Landlord collecting a Security Deposit (Ga. Code Ann. §44-7-33.)
Without this disclosure up front, how are the parties to determine the disbursement of the Security Deposit upon the tenant’s vacating the property? How will you determine what damage was pre-existing and the responsibility of the landlord vs. what damage the tenant caused and is the tenant’s financial responsibility to be taken out of Security Deposit. Without any agreement on what was pre-existing, the landlord cannot deduct any funds from security deposit for any damage to property.
Basically, the order of events in a rental situation is:
- Move-In form completed & signed by landlord & prospective tenant
- Security deposit delivered from tenant to landlord
- Lease signed by tenant & landlord
- for nonpayment of rent or of fees for late payment
- for abandonment of the premises
- for nonpayment of utility charges
- for repair work or cleaning contracted for by the tenant with third parties
- for unpaid pet fees
- or for actual damages caused by the tenant’s breach, provided the landlord attempts to mitigate the actual damages.
When you are getting a fee for a rental (either for Lease Listing, Tenant Procurement or if you are paid as a Referral agent) in order to protect you as well as your client, we need a copy of the Security Deposit AND the completed & signed Move-In inspection form or disclosures from the landlord with the tenant’s signed agreement.
The laws governing rentals are complex and change frequently. A website with extremely helpful information on leasing property iswww.Landlordology.com Specifically review this article on Georgia Landlord-Tenant Laws in Plain English
Please Take the Maximum One Contracts Classes for additional thorough discussions on contractual issues such as this one!
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“Termination of a Contract that Fails to Close” (4/5/15)
If a contract fails to close on the last agreed-upon closing date, is it terminated or expired? That question sparked a lot of discussion among our brokers and closing attorneys.
Remember that TERMINATION of a contract and DISBURSEMENT OF EARNEST MONEY are two completely separate legal issues with separate documentation relating to each issue!
Legally, in the event the closing did not occur by the date called for in the contract, the non-defaulting party could pursue any available remedy at law, which includes an action for specific performance – a court order for specific performance would basically revive the contract even if one of the parties was not agreeable to extending. Due to this possible occurrence, there is the legal opinion that the contract does not automatically terminate upon expiration.
If the transaction fails to close on or before the last agreed-upon closing date (or allowed-for unilateral extension in a GAR contract) then one of the parties breached the Agreement. While that party (i.e. the buyer) has lost the ability to enforce the contract against the seller, the seller may still enforce remedies against the buyer. For the seller, the parties are still “in contract.” Depending upon how the boxes are checked in the remedies section of the contract, the seller may be able to obtain the buyer’s earnest money, or pursue the buyer for specific performance, damages or both.
The mere fact that the parties passed the closing date without a closing does not mean that the contract is dead. If the parties have passed the closing date because, for example, the buyer has breached the contract, then the contract is very much alive for the seller who can enforce the seller’s default remedies against the buyer.
At one point, the GAR contracts made available the Special Stipulation, “In the event the closing does not occur on or before the date set forth in this Agreement, including any permitted extensions, then this Agreement shall automatically terminate and the non-defaulting party shall have the right to pursue all available claims at law or in equity against the defaulting party.”
As a business practice, we recommend sending the notice to terminate if the closing date specified in the contract has passed and either of the parties does not wish to extend. But remember, if the defaulting party (the one responsible for the contract not closing by the specified contract date) is the one that sends the notice to terminate, the other party could seek legal remedies in court, including specific performance. This is why it is always a good idea to attempt to get both the notice to terminate (which I recognize is unilateral) and the agreement to disburse earnest money signed by BOTH parties.
I welcome any legal opinion or comment on this confusing and misunderstood topic.
Please Take the Maximum One Contracts Classes for additional thorough discussions on contractual issues such as this one!
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“Appraisal Contingency Forms” (3/29/15)
There are various forms and clauses in forms to make any contract contingent upon the property appraising for the contracted Sale Price. In the GAR contract forms, the appraisal contingency language is contained within the Financing Contingency Exhibits; in the RE contract forms, the appraisal contingency is included in the body of the Purchase & Sale contract itself.
GAR Contract Forms
- F64 – Conventional Loan Exhibit – Appraisal contingency addressed in paragraph 7. Time Frame: _____ days from Binding Agreement Date. If Low Appraisal: Prior to end of this time frame, Buyer to submit Amendment to Seller along with a copy of appraisal asking Seller to sell at lower price. Seller must accept or reject this Amendment the earlier of 3 days from receipt of Buyer’s Amendment or original closing date. If Seller rejects, Buyer may terminate with no penalty. If Seller accepts, Buyer is obligated to complete the sale. If Buyer does NOT submit Amendment to reduce sale price prior to end of this appraisal contingency time frame, then Buyer has agreed to buy the property at the contracted price despite the low appraisal.
- F79 – All Cash Sale Exhibit – Appraisal Contingency in paragraph 5. The “type” of appraiser and which party selects the appraiser is addressed in this Exhibit. If Low Appraisal: Same procedures apply as above.
- F63 – FHA Loan Exhibit – Appraisal Contingency in paragraph 7. Time Frame – This contingency goes through day of closing. If low appraisal, Buyer may terminate with no penalty. Buyer may also choose to proceed with sale regardless of the appraised amount – and most likely have to bring the difference to closing in cash – check with lender for how to proceed.
- F65 – VA Loan Exhibit – Appraisal Contingency in paragraph 7. Same provisions as in FHA Loan Exhibit.
RE Forms Contract Forms
- RE100 – Contract for Purchase & Sale – Appraisal Contingency is addressed WITHIN the body of the Contract for Purchase & Sale in paragraph 6.2 with the time frame filled in for number of days from Acceptance Date.
- RE1 – Standard Terms – Appraisal Contingency explained in paragraph 6.2. Must be licensed appraiser. If low appraisal, Buyer has sole discretion to terminate the contract with no penalty by sending written termination & copy of appraisal to Seller prior to end of appraisal contingency time frame (from contract.) Either party has right, but not obligation, to propose an Amendment to the other party to sell house for a lower price. Neither party is obligated to accept this Amendment. This must all be completed prior to the end of this Contingency Time frame. If low appraisal and Buyer does not terminate within this time frame, Buyer is obligated to proceed with purchase regardless of appraisal value.
- RE200 – FHA Loan Exhibit – Appraisal Contingency in first paragraph. Same rights, obligations and responsibilities as FHA Loan Exhibit in GAR contract.
- RE201 – VA Loan Exhibit – Appraisal Contingency in first paragraph. Same rights, obligations and responsibilities as VA Loan Exhibit in GAR contract.
- RE204 – Appraisal Contingency Exhibit – This exhibit is NOT to be used if the parties are Binding on the RE Forms Contract because the appraisal contingency is ALREADY ADDRESSED in the body of the Purchase & Sale Agreement. This Exhibit is ONLY INTENDED if the parties go binding on a GAR contract and the Buyer’s agent does not have access to the GAR Exhibits and wants to include an Appraisal Contingency in the contract for the Buyer.
(FYI…. the same is true of the RE203 – Financing Contingency Exhibit. NOT to be used if binding on RE Forms Purchase & Sale. ONLY to be used if parties go binding on a GAR purchase & Sale & agent does not have access to GAR Financing Exhibits to protect this contingency for the Buyer.)
Please Take the Maximum One Contracts Classes for additional thorough discussions on contractual issues such as this one!
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“Time is of the Essence” (3/22/15)
All sales contracts should state that “time is of the essence” in the performance of the contract. This clause makes the dates stated in the contract strictly enforceable. In a contract with this clause, a closing date of June 1 is a fixed date, and there is no expectation that closing can occur on June 2. However, if the time is of the essence clause is not in the contract, the dates stated in the contract become “reasonable expectations,” so a closing on June 4 or 5 could be reasonable even though the contract specified June 1.
“Time is of the Essence” which means that the parties must execute the terms of the agreement according to the dates and times set down in the real estate contract. Failure of the parties to submit to deadlines can put either in breach of contract (the breaking of a legal contract or agreement by violation of the terms stated within).
Both sets of contracts contain this phrase (GAR Purchase & Sale paragraph C.4.d and RE Forms Standard Terms paragraph 11.6) In the 2015 GAR Purchase & Sale, there is a new clause, paragraph C.4.i. “Extension of Deadlines.” This clause states that “No time deadline under this contract shall be extended by virtue of it falling on a Saturday, Sunday or federal holiday except for the date of closing.” Although this provision is allowed for contractually, I strongly suggest you check with the Closing Attorney’s schedule to schedule closings.
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Survival after Closing (3/15/15)
When you write a contract the promises between the parties terminate upon closing by “merging into” the deed of sale. Therefore any unfulfilled obligation ends at closing unless it is specified in the contract that is shall “survive closing.” The contractual obligations & parties’ promises that survive the closing are specifically outlined in the contracts. “Surviving the closing” means that if there is a lawful remedy to any provision not completed if specified to survive.
In the GAR Purchase & Sale Agreement, there are only 4 items which survive & these are identified in paragraph C4b:
- Party’s obligation to pay Commission
- Warranty of title
- All representations of the Seller regarding the Property
- Any obligations which the parties agree shall survive closing.
So what about repairs… the biggest issue for disagreements between the parties at the closing table ? What happens if the Seller agrees in an Amendment to repair or replace specific items and does not complete these repairs before closing, does the Seller still have to and does the Buyer have a legal remedy to pursue the Seller for repairs not made by closing? The answer is… it depends on how you wrote the Amendment! If you are binding on a GAR contract and you do not specify that the Sellers obligations to replace or repair certain items “survive closing” then if the Seller does NOT complete them by closing, the Buyer may not sue the Seller for these issues because you did not specify that this Seller obligation “survives closing.” So may the Buyer NOT close? Did you write that provision in the Amendment that the “Buyer retains the right to terminate the contract without penalty should repairs not be completed ____ days prior to closing?” If you did not specify that in the Amendment and the Seller did not do the repairs, then the Buyer is still obligated to close! Are you starting to understand why I implore you to NOT WRITE YOUR OWN SPECIAL STIPULATIONS / AMENDMENT PROVISIONS?!?! You are a real estate agent and NOT an attorney! Spend some time reviewing and familiarizing yourself with the many many Special Stipulations drafted by an attorney provided in the contract forms. Now you know why you will see at the end of the majority of these pre-written clauses “This provision shall survive closing.” Many of these paragraphs are appropriate for your Amendment to Address Concerns with the Property as well as being used as a stipulation. Other resources for these special issues include contacting your Maximum One Affiliated Closing Attorney to assist you with drafting a Special Stipulation or reviewing the many Special Stipulations already discussed in the Contract Tips section of this newsletter & MX1 Blog & on the MX1 Extranet (both accessible as a tile onwww.eAGENTweb.com.)
In the RE forms, the issues which survive closing are more broadly identified. The survival clause in the RE Forms is specified in RE-1Standard Terms paragraph 11.7 “Unless expressly agreed otherwise in the Contract or unless provided otherwise in any other document provided by the Seller and Buyer at or prior to closing, the provisions of the contract shall survive the closing.” In addition to this paragraph, Broker’s commission rights survive closing as specified in the Exclusive Seller Listing Agreement and Exclusive Buyer Brokerage Agreement.
Please Take the Maximum One Contracts Classes for additional thorough discussions on contractual issues such as this one!
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Closing Dates in Contracts (3/8/15)
When you write a contract the ultimate goal is to close the transaction! Sometimes the closing date becomes a contractual issue.
Specific Closing Date: All enforceable contracts for real property in the state of Georgia must have a specifically identifiable closing date. You may not tie a closing date to some non-specific occurrence… for example you may not say “closing to occur 30 days after approval of short sale.” This approval may or may not happen and you may not keep the parties’ interest in a property open for an indiscriminate period of time for an enforceable contract. You must state a specific closing date and then modify by Amendment as necessary.
If the parties do not close on or before the date agreed-upon in the original binding contract, then without any additional paperwork, after midnight that day, the parties are no longer in contract so you must keep them in contract until the transaction closes.
Amendments: Both the GAR contracts and the RE Forms have an Amendment by which the parties may agree to change the closing and possession dates. Since this is an Amendment, it would require agreement by the parties and BOTH sets of signatures.
- GAR F104 – Amendment to Change Closing / Possession Date
- RE-261 – Amendment to Contract
Notice to Unilaterally Extend Closing up to 7 Days (GAR F133) – If the parties are binding on a GAR contract, then there is the provision for one of the parties to unilaterally (without agreement of the other party) extend the closing date up to 7 days. If you are binding under an RE Forms contract, the parties do NOT have this option! A contract may be extended unilaterally for ONLY 1 of 2 reasons
- Valid Title Objections – this does NOT include liens that may be paid off to remove the lien
- Delays to Lender processing Mortgage – but not due to any fault of the Buyer such as not providing documents; in fact the lender must have already issued a loan commitment letter.
Make sure to stay in communication with your lender & attorney to make sure that you will close on time to be able to discuss potential delays with the clients PRIOR to the day before closing. Also keep in mind that the new CFPB Guidelines going into effect in August will also more than likely cause delays in closings for a variety of reasons. Don’t know what CFBP stands for? Attend your Sales Meetings where these changes have been a topic of discussion since January!!
Please Take the Maximum One Contracts Classes for additional thorough discussions on contractual issues such as this one!
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2015 GAR Purchase & Sale – The Option Payment Clause (3/1/15)
We have addressed this issue in a previous newsletter but I feel this issue needs further discussion. If you have taken one of our many many classes on the 2015 GAR Contracts then you have already learned this information as this particular new addition to the 2015 GAR Purchase & Sale was discussed for over 30 minutes in class. If you did not take that class, please take it when it circles back around throughout the Training Calendar.
In the 2015 GAR Contract revision, the forms committee unfortunately added an option money clause to the due diligence paragraph:
- Inspection and Due Diligence.
a. Due Diligence Period: Property is being sold subject to a Due Diligence Period of _____ days from the Binding Agreement Date.
b. Option Payment for Due Diligence Period: In consideration of Seller granting Buyer the option to terminate this Agreement, Buyer: (1) has paid Seller $10.00 in nonrefundable option money, the receipt and sufficiency of which is hereby acknowledged; plus (2) shall pay Seller additional option money of $_____________________ by o check or o wire transfer of immediately available funds either o as of the Offer Date; OR o within _____ days from the Binding Agreement Date. Any additional option money paid by Buyer to Seller shall become nonrefundable when the Agreement becomes binding and shall not be applied toward the purchase price at closing.
Basically what this clause entails is the Buyer paying for the right to tie up the Seller’s property for a certain time frame – that of the Due Diligence period. These funds go DIRECTLY from the Buyer to the Seller. These funds are NOT applied as a Buyer Credit to the Sale Price. These funds are NOT refundable. GAR’s rationale for including this clause was to allow for a Buyer to try and make his / her offer more attractive to a Seller by paying a Seller a couple hundred bucks to take the home off the market. GAR intended it to be used in a multiple offer situation or in a situation where an investor is making an offer on a house when they haven’t even seen it & most likely will terminate the contract.
This option money is NOT Earnest Money and does not have any of the protections or contractual instructions as Earnest Money does. A Buyer & Seller may have a Binding Contract WITH a Due Diligence period WITHOUT any additional option money exchanging hands.
This provision then prompts several questions & potential problems for your contract including but not limited to:
- The money goes directly from the Buyer to the Seller – we don’t really want them having contact with each other bypassing the agents
- It is not refundable – even if the Buyer terminates upon Due Diligence or for any other agreed-upon contingency.
- If this section is filled in and the Buyer terminates under Due Diligence prior to having remitted the money to the Seller, that Buyer obligation still exists in the contract – as this money is additional money for that option regardless of what the Buyer chooses to do within that option.
- If the Buyer stops payment on the funds or the check bounces, it does not constitute default of the contract – just makes for potentially problematic issues throughout the rest of the transaction in getting to the closing table
- Many lenders are having major issues with this being a part of the contract but the money not being applied towards Sale Price & if it is, it must be sourced.
- How much should this amount be?
- What happens if the Buyer requests an extension of the Due Diligence period, will the Seller require additional Option Money?
- What if a Seller defaults on the contract, does the Buyer get the money back?
- What is to prevent a Seller from accepting multiple offers for the Option Money & then terminating on all contracts by default but one?
The GAR forms committee did not seem to realize that as agents, we have already discovered a myriad of ways to handle the multiple-offer market we find ourselves in
- Buyers are putting down more earnest money
- Limiting other contingencies
- Shorter Due Diligence time frame
- Quicker closing
- Higher price
- Etc.
- Sellers are able to pick among multiple offers and take the house off the market for that Due Diligence option without the extra incentive of money for this period
- Sellers may negotiate for the option of keeping the house on the market to attract other back-up contracts during the Buyer’s Due Diligence period
There are some Special Stipulations you may use regarding this Option Money:
- GAR SS 414 ADDITIONAL OPTION MONEY – Additional option monies paid to the Seller shall be applied to the Purchase Price at closing, subject to the approval of the lender, if any.
- In the event of Seller default, in addition to any other remedies provided for herein, Buyer shall be entitled to an immediate and full refund of any option money paid.
- Consult with your Affiliated Closing Attorney for other Special Stipulations you may need
GAR has created so much confusion by adding this to the contracts when many agents & Buyers & Sellers do not understand. Clients to NOT need to include this provision in the contract and may still negotiate for a Due Diligence option. This may look attractive to a Seller, and it is then your job to remind the Seller that he hired you to sell the house not to make him a few hundred dollars. Make sure Buyers realize these funds are NON-REFUNDABLE.
This clause is not bad in ALL situations, there are times when a Seller ends up taking the property off the market when a Buyer is making “shotgun” multiple offers and potentially missing out on a “serious” Buyer. As previously mentioned, this mostly characterizes investor offers. If you represent a Seller and you receive an offer from an investor who has not even seen the property, then by all means get a little cash for the Seller. That Seller still may miss out on a serious Buyer but he’ll have some cash in his pocket. I still suggest negotiating the provision to allow the Seller to keep the property on the market to attract and negotiate other offers to get a Binding Back Up.
At Maximum One, we strongly suggest our agents put in $0.00 in that section of the GAR contract when the Buyer has a Due Diligence period. Do not put “N/A” but enter $0.00 to indicate that the parties negotiated this issue and negotiated for $0. If a Buyer does wish to pay the Seller this additional option money, it does NOT go to Maximum One but DIRECTLY from Buyer to Seller.
I venture a guess (& a strong hope) that the GAR Forms Committee will take this provision out of the contract & simply make this clause a Special Stipulation that clients may use in specific situations.
Please Take the Maximum One Contracts Classes for additional thorough discussions on contractual issues such as this one!
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Useful Special Stipulations from 2015 GAR Contracts (2/22/15)
In previous newsletters, I have thoroughly discussed the importance of not writing your own Special Stipulations but how vital it is to use a Special Stip already drafted by an attorney. Both the GAR Contract forms and the RE Contract forms have a library of attorney-drafted stipulations to suit your clients’ contractual needs. Additionally, contact your the Closing Attorney affiliated with your Maximum One Branch to assist you if necessary. You run a fine line between fulfilling your role as a professional agent and practicing law by writing your own Special Stipulations and the majority of the stips you write on your own are not enforceable. Below are some useful stipulations from the 2015 GAR:
SS 302 AMENDMENT TO ADDRESS CONCERNS AS NOTICE TO TERMINATE
In the event that a subsequent Amendment to Address Concerns with Property is not accepted by Seller and delivered back to Buyer prior to the end of the Buyer’s Right to Terminate as set forth in the Due Diligence provision of the Agreement, said Amendment to Address Concerns with Property shall serve as notice of termination of this Agreement upon expiration of the Right to Terminate period as set forth herein.
SS 308 KICKOUT PROVISION (DUE DILIGENCE)*
Seller shall have the right to continue to offer Property for sale. In the event that Seller receives an acceptable offer to purchase the Property, Seller shall give Buyer notice of the same. Buyer shall then have _________ hours after receipt of the notice to deliver to Seller an Amendment to this Agreement, signed by Buyer, in which Buyer agrees to remove all contingencies in favor of Buyer, including any Due Diligence Period in the Agreement, and deposit with Holder additional earnest money of $_________________.
In the event Buyer does not deliver within the time period stated above: (1) the signed Amendment to Seller and (2) the additional earnest money (if any referenced above) to Holder, then this Agreement shall terminate and earnest money shall be refunded to Buyer. In the event Buyer delivers the Amendment referenced above and the additional earnest money (if any) to Holder within the time period stated above, Seller shall execute the Amendment and deliver a copy of same to Buyer.
SS 310 REPAIR OF DEFECTS NOT FOUND DUE TO SEASONAL ISSUES
Buyer and Seller acknowledge and agree that the following item(s) in or on the Property cannot be properly inspected, due to seasonal weather or other conditions: ___________. Seller warrants that said items are in good working order and repair as of the Binding Agreement Date. If, for a period of _____ days from the closing date of this Agreement, Buyer uses such items for the first time and finds that such items are not in good working order and repair, Seller
shall be responsible, at Seller’s sole expense, to repair and/or replace any defect(s) in said item(s) at that time. If Buyer does not use such item(s) for the first time within the period specified above, or if the defect(s) of which the Buyer complains were caused by the Buyer or his guests, agents or representatives, Seller’s obligation to repair or replace defects in such items shall terminate. This provision shall survive the closing.
SS 314 REPAIRS BY SELLER AFTER LOAN APPROVAL (EXTEND CLOSING DATE)
All parties acknowledge that Seller shall not be obligated to initiate any repairs to the Property prior to receipt by Seller of written loan approval from Buyer’s lender. In the event said repairs cannot be completed before the closing date, Buyer or Seller, may, at its option, by notice to the other party, unilaterally extend this Agreement’s closing date up to _____ calendar days from the closing date to allow for the completion of the repairs.
SS 331 UTILITIES, DUE DILIGENCE TO BEGIN
Notwithstanding any provision to the contrary contained herein, the Due Diligence Period shall commence on the date that the Seller notifies the Buyer that the following utility services serving the Property have been turned on and billing accounts have been established (hereinafter collectively referred to as “Utility Activation”): [ ] water, [ ] public sewer, [ ] electric, [ ] gas. In the event Utility Activation has not occurred within ______ days from the Binding Agreement Date, Buyer shall have the right, upon notice to Seller, to terminate this Agreement.
SS 406 EARNEST MONEY CONVERTED TO NON-REFUNDABLE DEPOSIT
In the event Buyer does not terminate this Agreement under the Due Diligence Provision or under any other contingencies in favor of buyer, earnest money shall be paid to Seller, non-refundable, as consideration for Buyer exercising its rights under the Due Diligence provision.
SS 622 CONFORMED COPY OF AGREEMENT
Buyer and Seller acknowledge that the above Agreement is a conformed copy of an Agreement between the parties dated ____________. In the event of any conflict between this conformed Agreement and the original thereof, all parties agree that the original Agreement shall control.
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Sale or Lease Contingency (2/15/15)
In today’s real estate market, we are once again experiencing a prevalence of move-up Buyers. Many of these Buyers must make the purchase of their new home contingent upon the successful sale of their existing home. To protect the Buyer in this scenario, you must use the proper contingency verbiage. In both the GAR contract forms and the RE Contract forms there is a Contingency Exhibit specifically for this instance:
- GAR F90 – Sale or Lease of Buyer’s Property Contingency Exhibit
- RE-251 – Sale or Lease Contingency Exhibit
Make sure that you thoroughly read these forms and understand them whether you represent a Buyer or a Seller. Basically these exhibits make the new transaction contingent upon the successful transfer of an existing property. The specific addresses and dates must be completed. The parties have the option of making this contingency bound by the time period specified or by allowing for a “kick-out” clause. In essence the kick-out clause provides that if the Seller is presented with another Buyer whose contract they want to accept, the Seller must give the current Buyer who is in the primary position the option (with a limited time frame as specified in the Exhibit) of removing the contingency and proceeding with the transaction OR terminating the transaction and getting a refund of their earnest money.
If you represent a Seller, it is preferable to have a kickout clause included; if you are a Buyer, it is preferable to not be able to be forced to remove this contingency.
Despite which party you represent, it is best to ascertain the following information so that all parties may make a better informed decision on utilizing this contingency provision:
- Do you have a pending contract on the existing property?
- Do you have Pre-Approval on the Buyer of that property?
- When is the Due Diligence Period over?
- When is it scheduled to Close?
- Any other contingencies in the contract on the existing property?
Do NOT attempt to address this contingency in a Special Stipulation you write yourself; these existing exhibits are already written for you by attorneys allow for a myriad of options, responsibilities and consequences.
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Due Diligence / Buyer’s Right to Terminate (2/8/15)
There are many issues pertaining to the Due Diligence option period in a contract. In both the GAR Contracts and the RE Forms contracts, there is the provision for the Buyer to have an Option Period during which the Buyer does whatever is necessary to exercise his / her option to purchase the house – in other words be 100% satisfied with this purchase. In the GAR contract, this time frame is called a “Due Diligence” period and in the RE Forms, this period is called the “Buyer’s Right to Terminate” period.
The length of this time frame is negotiated between the parties up front in the contract. In the 2015 GAR contract, there is a provision for the Buyer to pay for this option time frame if they choose – though this is not required. (PLEASE take a class on the 2015 GAR contract to fully understand this new provision in the GAR contract!!!)
During this option time frame, the Buyer is to do anything and everything he/she wishes to make sure he is happy with going through with this purchase. These actions include and are not limited to: home inspections, structural inspections, termite inspections, reading HOA covenants, checking out schools & neighborhoods, checking out any zoning changes, determining if the property is in a flood plain, what the hazard insurance premium would be, what the neighbors are like, any barking dogs at night, any sex offenders in the neighborhood, what the commute to work will be, have a survey done, make sure they can get financed, etc..
Within this time frame, the ball is in the Buyer’s court. The Buyer may terminate the contract prior to the end of this period and get a full refund of earnest money; the Buyer may ask the Seller to address any concerns the Buyer has with the property – noting that the Seller is not obligated to do anything! The Buyer may also proceed with the contract after this time frame passes and agrees to buy the house AS-IS if the parties do not agree to the Amendment to Address Concerns PRIOR to the end of this period.
The Seller may NOT terminate a contract during Due Diligence – this is only an option for the BUYER to decide to proceed with the purchase. The Buyer may NOT unilaterally extend this time frame.
Negotiating items for the Seller to address during the Due Diligence / Buyer’s Right to Terminate period. Any items to be negotiated must be completed agreed upon before 11:59pm on the last day of this time frame. If the parties are still negotiating through any issues, if they have not yet been agreed upon, then the Buyer must choose to either proceed with the purchase understanding that he / she is buying the house AS IS or Terminate prior to the end of the period.
Make sure you use the CORRECT Amendment during this period:
- GAR – F107 – Amendment to Address Concerns with the Property
- RE -262 – Amendment During Buyer’s Right to Terminate Period
Do NOT use the GAR Amendment F100 – Amendment to Remove Inspection Contingency. Your contract is NOT subject to an Inspection contingency … it IS subject to a Due Diligence option. (Note – if you want to make your contract subject to inspection then you MUST use GAR Exhibit F129 – “Property Sold with the Right to Request Repairs” but this outlines completely different rights and responsibilities for the parties – this is NOT Due Diligence!)
Pay close attention to the verbiage in the Amendments you use – GAR & RE Forms are different. In the GAR F107 Amendment, the parties have the option of immediately ending the Due Diligence period with AGREEMENT on items to address. In the RE Forms RE-262 Amendment, the Buyer has the option of terminating the contract prior to the end of this time frame if the parties do NOT agree on terms (to protect the Buyer’s Earnest Money.)
GAR has a Special Stipulation the Buyer may use to also terminate the contract prior to Due Diligence if the Seller does not agree on requested items:
- SS 302 AMENDMENT TO ADDRESS CONCERNS AS NOTICE TO TERMINATE – In the event that a subsequent Amendment to Address Concerns with Property is not accepted by Seller and delivered back to Buyer prior to the end of the Buyer’s Right to Terminate as set forth in the Due Diligence provision of the Agreement, said Amendment to Address Concerns with Property shall serve as notice of termination of this Agreement upon expiration of the Right to Terminate period as set forth herein.
I encourage you to professionally protect yourself and your client with regards to their rights and options during their option period:
- Have Agreement on the Binding Agreement Date of the Contract – PRIOR to what you may think is the last day of due diligence / Buyer’s right to terminate.
- If you are using the GAR contracts, pay attention to the early end of Due Diligence with agreement on the Amendment to Address Concerns
- If you are using the RE Forms Contracts, pay attention to the Buyer’s right to terminate the contract if the Seller doesn’t agree to the items the Buyer wants addressed.
- If you are using the GAR contracts, use the appropriate Amendment based on your contract (i.e. your transaction is NOT subject to an Inspection Contingency)
- Take a Class on BOTH the GAR contracts and the RE Forms contracts – because regardless of which form you typically use, you WILL SEE BOTH CONTRACTS throughout your transactions!
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3 Ways to be an Authorized User of the 2015 GAR Contracts (2/1/15)
The GAR Contract forms are licensed by GAR and every year you must become an “authorized user”as recognized by GAR to utilize their forms. Every year, you must renew you license agreement with GAR to use the forms for that calendar year. There are 3 ways to be an authorized user. Read the entire License Agreement for Use of 2015 GAR-Approved Real Estate Forms here.
- Member of GAR – If you belong to a local Board of Realtors, then you also belong to GAR & NAR. By virtue of your membership to GAR, you are an authorized user of the forms – at no additional cost. You will need your NRDS number to access the forms for the first time in the year.
- Receiving a Temporary User Number – If you do not belong to GAR, then you may pay GAR a fee ($219 this year) for an annual Temporary User Number.” Once you purchase the right to use the forms for the year, you will need to enter this number into FMLS & GAMLS systems to access the forms from those sites as well as from the GAR website (www.GARealtor.com.)
- Others as Approved in Writing by GAR – This written approval extends to other agents and parties involved in a real estate transaction in which at least one of the agents is an Authorized User. In other words, if you are a co-op agent in a transaction, the authorized user may hare the GAR contract forms with you. (Paragraph 1.G & K)
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Procuring Cause of Sale (1/26/15)
Procuring Cause of Sale is a potentially complicated issue and no one factor can determine this answer to this question. The question basically revolves around two different Brokers asserting that they each have earned the commission on a sale. It’s MORE than just showing the house, it’s demonstrating an ongoing relationship / communication / efforts of a specific Broker with NO BREAK to actually cause the Buyer to decide to consummate the sale. Another way of thinking about it is the sale would not have occurred if it not for the efforts of the Broker. It is more than simply showing a house, or signing a Buyer Brokerage Agreement or simply writing an offer. Procuring cause of sale as defined by the courts, leaves little practical guidance as to the determination of procuring cause of sale in our practice of real estate.
According to NAR Code of Ethics and arbitration panels, here are some of the questions designed to determine which Broker shall receive commission if this issue arises:
- Who first introduced the buyer to the property?
- When was the first introduction made?
- How was the first introduction made?
- Did the broker who made the initial introduction to the property engage in conduct (or fail to take some action) that caused the buyer to utilize the services of another broker?
- How do the efforts of one broker compare to the efforts of another?
- If more than one cooperating broker was involved, how and when did the second cooperating broker enter into the transaction?
- What was the length of time, between the broker’s efforts and the final sales agreement?
- Did the broker who made the initial introduction to the property maintain contact with the buyer?
- Did the buyer make the decision to buy independent of the broker’s efforts/information
- Did the buyer seek to freeze out the broker?
For several examples of situations where the procuring cause of sale is in question and suggestions, click to read Seth Weissman’s article, “Procuring Cause Revisited”
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Retainer Fees (1/19/15)
If you are going to collect a Retainer Fee from a Buyer or Tenant, refer to the provision printed in the Brokerage Engagements. How these retainer fees are handled contractually is as trust money & therefore deposited into the Trust Account. This fee is refundable to the Buyer / Tenant in the event the Broker is paid the full commission as addressed in the Brokerage Agreement. When the Buyer or Tenant Agreement expires or terminates, at that point, the Broker may transfer the funds out of the Trust Account and pay this fee to the agent. These fees are not payable to the agent upon receipt and are not paid to the agent if the Buyer / Tenant goes under contract (with the provision specified as above.) Any changes to the disbursement of a retainer deposit would have to be agreed upon by the Buyer/ Tenant in a special stipulation. Consult with your Affiliated Closing Attorney for the verbiage you would need.
GAR F4 – Exclusive Buyer Brokerage Agreement
GAR F9 -Exclusive Tenant Brokerage Agreement
RE Form 150 – Exclusive Buyer Brokerage Agreement
RE Form 155 – Exclusive Tenant Brokerage Engagement
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Unfair Trade Practice: Referrals (1/12/15)
According to License Law: OCGA 43-40-25b (36) it is an unfair trade practice for “failing to obtain a person’s written authorization to refer that person to another broker for real estate services and failure to disclose any compensation for such referral.”
We are all used to completing a Broker-to-Broker referral form for compensation for a referral but are you securing the principal’s signature on the proper form to comply with this License Law? You must get the person being referred’s signature AGREEING to be referred and you must disclose the compensation you will receive for sharing the client’s name and and contact information.
GAR: CO 11 – Referral Authorization
RE Forms: RE-157 – Prospect’s Acknowledgement and Consent to Referral
2015 GAR Contract Sneak Peek: Option Payment:
GAR has added a NEW paragraph where a Buyer may pay a non-refundable fee directly to the Seller for the option of taking the house off the market. This is NOT Earnest Money and is not applied to the purchase price of the house. This clause may cause confusion among your clients – check with your Broker prior to selecting this option in your contract!
Stigmatized Properties: Disclosures & Fair Housing Laws (1/5/15)
In real estate, a “stigmatized property” is one that Buyers (or tenants) may shun for reasons other than physical reasons. These reasons may include, murder, suicide, AIDS, viral diseases, ghosts, famous adulteries, cult activities, other misfortunes or crimes. So as a real estate agent, what is your duty to disclose these issues on the listing side and discover these issues on the buying side?
When a defect is physical (for example, a leaking roof or unsound foundation), the issue is clear. Licensees must disclose. When the defect is emotion (for example, murder or ghosts), the answer varies.
The Official Code of Georgia Annotated Section 44-1-16 addresses this issue directly:
(a)(1) No cause of action shall arise against an owner of real property, a real estate broker, or any affiliated licensee of the broker for the failure to disclose in any real estate transaction the fact or suspicion that such property:
(A) Is or was occupied by a person who was infected with a virus or any other disease which has been determined by medical evidence as being highly unlikely to be transmitted through the occupancy of a dwelling place presently or previously occupied by such an infected person; or
(B) Was the site of a homicide or other felony or a suicide or a death by accidental or natural causes; provided, however, an owner, real estate broker, or affiliated licensee of the broker shall, except as provided in paragraph (2) of this subsection, answer truthfully to the best of that person´s individual knowledge any question concerning the provisions of subparagraph (A) or (B) of this paragraph.
(2) An owner, real estate broker, or affiliated licensee of the broker shall not be required to answer any question if answering such question or providing such information is prohibited by or constitutes a violation of any federal or state law or rule or regulation, expressly including without limitation the federal Fair Housing Act as now or hereafter amended or the state´s fair housing law as set forth in Code Sections 8-3-200 through 8-3-223(b).
No cause of action shall arise against an owner of real property, real estate broker, or affiliated licensee of the broker for the failure to disclose in any real estate transaction any information or fact which is provided or maintained or is required to be provided or maintained in accordance with Code Section 42-9-44.1. No cause of action shall arise against any real estate broker or affiliated licensee of the broker for revealing information in accordance with this Code section. Violations of this Code section shall not create liability under this Code section against any party absent a finding of fraud on the part of such party.
So, if you list a stigmatized property, you and the owner are not required to disclose the issue but you must answer truthfully to the best of the owner’s knowledge if asked directly, “Is this the house where the _____ occurred?”
UNLESS, the Buyer asks directly about an issue which conflicts with the Federal Fair Housing Laws – for example a question about AIDS. The the Owner and Agent should answer that he or she is “unable to answer such an inquiry.”
If you are working with a Buyer ad one of these issues would create a problem for that person, then make it a point of practice to directly ask the listing agent questions pertaining to the Buyer’s concerns DURING the Buyer’s Due Diligence period.
If a Buyer learns of the stigma and terminates the contract based on this issue AFTER the end of the Due Diligence period, then the Buyer would be in default of the contract.
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2015 GAR Contract Sneak Peek:Listing Agreement – Special Circumstances:
- GAR has added a paragraph in the Listing Agreement stating that approval must be obtained for Special Circumstances such as Divorce, Bankruptcy or Other situations.
Special Stipulations (12/22/14)
Special Stipulations in a contract can change the transaction for the benefit of the parties involved or can have absolutely no bearing on the contract at all! I encourage you to use special stipulations, when appropriate, but you should use the special stipulations already prepared by an attorney. These may be found in both sets of contracts (GAR & RE Forms) or contact your Affiliated Attorney to prepare a Special Stipulation that meets your needs.
Example of Special Stipulation that is Totally Useless
Many of the Special Stipulations that agents write themselves do not have the intended effect on the parties. For example, consider the following: “Seller to provide elevation certificate within 14 days of Binding Agreement Date.”
- So what happens if the Seller does not provide the requested document? Can the Buyer terminate?
- What happens if the contract has a Due Diligence period of 10 days, but this special stipulation has a time frame of 14 days?
- What happens if the Seller provides an elevation certificate that is dated 2001?
- A better stipulation would have included date of elevation certificate (i.e. 2011 – 2014) time frame same as Due Diligence and consequences should the Seller not comply: “Should Seller not provide this certificate, Buyer reserves the right to declare contract null and void within 3 days after specified time frame and receive full refund of earnest money.”
Repairs
Lately, we have had a lot of issues regarding repairs – the repairs supposedly contracted for in a contract or Amendment are not completed by the Seller. The Buyer only does a walk through the morning of closing and then discovers these issues have not been addressed or not fixed by a professional. These repair items were not written up in such a way as to provide any consequences for the Seller or Buyer – Buer may not terminate based on this and no recourse on Seller. Thank you to Amee Davis of Davis and Associates (Amee’s contact information is at the end of this newsletter) for providing the following verbiage to avoid this situation (& agents paying for repairs!)
- “All parties agree that the repair work contemplated and agreed upon herein shall be completed not less than three days prior to the closing dated of _________. All work shall be completed by vendors Licensed, in the State of Georgia, through the proper state licensing board, to complete the work required herein. Seller shall provide to buyer at least three days prior to closing, evidence of vendors license to do repair work, invoices and paid receipts for all work completed. Should seller not complete the work required herein at least three days in advance of closing, buyer shall have the right to either (1) immediately hire vendors of buyer’s choice and have work completed at seller’s expense to be paid at time of closing from seller’s proceeds or (2) terminate the contract agreement with full refund of all earnest money deposits.”
Down Payment Assistance Programs
Many Buyers are utilizing a down payment assistance program (i.e. Georgia Dream) for their down payment on the transaction. Agents are not making their contracts subject to the Buyer receiving this assistance and mistakenly believing that the Buyer may terminate the contract based on the Financing Contingency. A Buyer not having sufficient funds to close the transaction does NOT meet the terms of the financing contingency (in either GAR or RE Forms contracts) and the Buyer would be in default of the contract and lose their earnest money – go read the Financing portion of your contracts!!! So, if your Buyer is receiving their Down Payment from a grant program, make the contract contingent upon this. Check with your lender on the anticipated time frame of the DPA program.
- “This Agreement is contingent upon the Buyer’s approval for the receipt of down payment from _______ program within _____ days from Binding Agreement Date. Should Buyer not be approved for the DPA program within this time frame, Buyer may terminate without penalty if Buyer notifies Seller in writing and providing DPA denial letter.”
Short Sales
Terminating Short Sale contracts still prove to be challenging for many agents. Regardless of representing a Buyer or a Seller, if you go under contract where the Seller is requesting a Short Sale from their lender, you must include the Short Sale Contingency Exhibit. Some Buyers wish to terminate the contract prior to the approval of the Short Sale; some Buyers are willing to wait for the Short Sale approval but do not want to spend money on an inspection or appraisal until they are sure that the short sale will be approved. How do you as the agent account for these circumstances in a short sale contract? With no Special Stipulation to the contrary, the Buyer’s Due Diligence would expire ____ (i.e. 10) days after Binding Agreement Date as all time frames are timed from this date. So by the time they get the approval, the Buyer has no contingencies in the contract as the time frames have passed. So, many agents mistakenly write a stip: “Buyer’s Due Diligence to begin upon receipt of Short Sale Approval” thinking that the Buyer would not have to unnecessarily spend money on an inspection if the short sale is not approved. The only problem with this stipulation is that should a Buyer wish to terminate and go find another house, they would have to default on the contract. You can’t terminate based on Due Diligence because theis period has not yet started! So what should you do? Consider the following:
- “All time frames in contract & and Exhibits begin upon Binding Agreement Date and extend to specified number of days per provision after Buyer’s receipt of written approval of terms of short sale from Seller lien holder(s.)”
Please look at the Short Sale Exhibit in the RE Forms – it has built in the same provision regarding Due Diligence – beginning on Binding & extending 10 days after written Approval of Short Sale.
Maximum One will host MANY License Law Classes at all of our Branches throughout 2015. Check out our online calendar: www.eAGENTweb.com click “Calendar”
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2015 GAR Contract Sneak Peek: New Consumer Brochures: GAR has added two new Consumer Brochures
- What to Consider When Buying a Home in a Condominium
- What to Consider When Buying a Home with a HomeOwner’s Association (HOA)
Agent as Principal* (12/15/14)
Who are the Real Estate Commission’s most upset complainants? Probably those requesting investigations of the activities of licensees acting as principals. While a prospective purchaser may forgive an unlicensed seller for a minor error on a property disclosure statement, the same minor error made by a licensee always seems to become “a fraud” or “a substantial misrepresentation.”
Some licensees believe that if they act as a principal, their actions as a principal are not subject to review by the Commission. They are wrong. Georgia’s license law expressly makes a licensee’s actions subject to Commission review and disciplinary action whenever the licensee acts as a principal in a real estate transaction or as an officer, employee, or member of any business entity acting as a principal.
Why do I have to tell my broker that I am marketing a property that I own if I am not paying a commission?
Some licensees attempt to draw an improper distinction between their brokerage activity for others and their brokerage activity on real property they personally own. For example, such a licensee will place an earnest money deposit or a security deposit received from a member of the public into the custody of a broker for safe keeping. That same licensee who receives an earnest money deposit or security deposit on property that he owns refuses to give it to his broker. After all, “What business is it of my broker what I do with my own property?”
The license law does not allow a licensee to draw such distinctions. In order to protect the public, it requires a licensee to comply with its provisions whether acting as an agent or as a principal [ See O.C.G.A. Section 43-40-29 (c) ].
The license law requires brokers to review all of their affiliated licensees’ activities for compliance with the law, whether the activity is that of an agent or of a principal and agent. Thus, whenever an affiliate intends to act as a principal or as a principal and an agent in handling her own real property, the license law requires the affiliate to disclose her intentions in writing. When that disclosure is made, the affiliate and the broker should discuss all aspects of the transaction and agree on how the licensee should act. Among other items, they should discuss whether and how the licensee will pay any brokerage fees, how she will handle trust funds, what marketing strategies she will utilize, and what contract forms she will use.
No matter what variation of these questions arises, two things seem certain. First, to avoid unwanted problems, licensees should follow the guidelines above unless they have legal advice to the contrary. Second, if licensees timely address the issues raised by these questions, they can have successful, profitable transactions.
Original Article Printed by GREC: http://www.greab.state.ga.us/articles/licenseeasprin.html
Maximum One will host MANY License Law Classes at all of our Branches throughout 2015. Check out our online calendar: www.eAGENTweb.com click “Calendar”
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2015 GAR Contract Sneak Peek: VA Loan Exhibit has added “termite letter” as an additional cost for the Seller.
Completing a “Termination & Release” when Earnest Money has Not Yet Been Remitted by Buyer (12/8/14)
There is a question regarding the actual PAPERWORK to be signed for a Termination when the Buyer terminates prior to their obligation to remit the Earnest Money to the Holder.
- Obviously Buyer needs to sign & send the Termination Notice – but this is Unilateral and does not require Seller signature
- Question: Do Buyer & Seller also need to sign an Agreement to Release the Earnest Money – showing Agreement that Buyer is to retain EM not yet remitted per the contract
These are two SEPARATE issues within the contract: (1) terminating the contract AND (2) addressing the Earnest Money. These issues are addressed in the following manner in the contract forms:
Termination Paperwork:
- GAR: F83 – Unilateral Notice to Terminate; Agreement to Disburse Earnest Money
- RE Forms: RE-263 – Notice to Withdraw or Terminate
Release Paperwork:
- GAR: F83 – Unilateral Notice to Terminate; Agreement to Disburse Earnest Money
- RE Forms: RE-212 – Agreement to Disburse Trust Funds
When the Buyer has remitted the trust funds to the Holder, then when a contract has been terminated, the Holder MUST have the Release paperwork signed by BOTH parties as instructions on how to disburse those funds; but if the contract is terminated PRIOR to the Buyer’s contractual obligation to remit those funds (i.e. contract states Buyer to remit earnest money 10 days after Binding Agreement Date & Due Diligence time frame is 10 days after Binding Agreement Date) then there is no money for the Holder to actually “release” or “disburse” since Holder is not in possession of the funds.
When a party terminates a contract, the Notice given is unilateral. The Disbursement of Earnest Money requires BOTH parties’ signatures indicating Agreement. There are many times when the Seller does not agree that the Buyer terminated within Due Diligence (by contingency) – goes back to Binding Agreement Date issues – of which we have many!!!
If it turns out that the Buyer DID default, the Seller can pursue any lawful remedy against the defaulting party. This would include seeking “specific performance” by the buyer to purchase the property, and/or monetary damages equal to or exceeding the amount of the earnest money that the buyer was supposed to remit. Then Buyer may choose to send Seller EM as liquidated damages to avoid a law suit.
As the Broker representing one of the parties, the only way we would know (contractually) that there is a potential discrepancy regarding the termination (by contingency or default) would be by agreement of lack of agreement on the form addressing disbursement of Earnest Money which would prompt a discussion between the Broker & their client regarding options to address the default.
Therefore, whereas it is not a LEGAL contractual requirement for the parties to sign the Agreement to Disburse Earnest Money, IF the contract is terminated prior to Buyer’s obligation to remit (because there are no funds for Holder to disburse) it is Maximum One’s policy for the protection of our agents, clients & brokerage for us to require this “Release / Disbursement” document (F83 or RE 212) be signed by both parties with the disclosure that Holder is not in possession of the Earnest Money: “Buyer to retain Earnest Money not yet required to be remitted per paragraph _____ of Binding contract.”
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The Consultant* (12/1/14)
The term consultant can cover services in many industries. The real estate industry in particular has many professionals that refer to their services as consulting. The real estate consultant must be licensed by the Georgia Real Estate Commission. There are exceptions to this rule, but they do not apply to individuals holding an active or an inactive real estate license. The exceptions to licensure are detailed in License Law 43-40-29.
The purpose of this article is to make it clear that persons performing real estate activities for another party for a fee, and who are not doing so as a full time employee of that owner, company, or individual, must obtain and maintain a real estate license in Georgia.
To further clarify, consider the following examples:
1. Consultants that negotiate and interface with property owners and landlords for locations of property, including purchases, leases, or amendments to purchases and leases or other discussions that affect rights of use of property and improvements, such as cell towers or retail space and other structures, all have to be licensed by the Georgia Real Estate Commission.
2. If a licensee wants to work as an employee for a company to locate sites, can he/she still maintain his/her real estate license on inactive status? No. the license must be surrendered to work as the full time employee performing real estate activities. Reference License Law 43-40-12(g) “Any licensee whose license has been placed on an inactive status shall not engage in the real estate brokerage business except in connection with property owned by the licensee.” If the individual later wants to in real estate brokerage other than as an employee, he/she must apply for a license as an original applicant.
3. A consultant, business broker, or individual that provides services in anticipation of being paid in the sale of a business which includes the transfer of the lease on the property must be licensed as a real estate licensee.
4. A real estate licensee cannot legally share a commission in a transaction with an unlicensed person who is illegally practicing brokerage activities.
The Commission has authority to stop those practicing real estate without a license. This includes individuals practicing with an inactive license or a license that is not in good standing. The Commission issues a Cease and Desist Order to the individual practicing real estate without a license requiring him/her to Cease and Desist from any further that require a license issued by the Commission. The Commission is authorized to impose a fine up to $1,000.00 for each transaction constituting a violation, and each day the party continues to act in violation is considered another violation resulting in an additional $1,000 per day. Clearly, the fines can be extensive.
The Commission receives complaints concerning those practicing real estate without a license, and the Commission is required to investigate all Requests for Investigations. Consider two investigations resulting in cases involving individuals operating without a license: the first is a consultant never licensed by the Commission, and the second case involves a broker whose license was inactive or lapsed. Note that a transaction does not
have to be completed for a violation to occur.
Cease & Desist Order
The Commission received reliable evidence that an individual, for valuable consideration, offered, attempted, or agreed to perform, directly or indirectly, acts that require a license from the Commission. The individual advertised real estate services such as locating investment properties for investors for a fee. Therefore, he acted in the capacity of a licensee in Georgia, although he was not and had never been licensed as a real estate
licensee. A Cease & Desist Order was issued and in this case the individual consented to pay $1,000 and immediately stopped performing real estate activities. An individual in a different case continued to practice without a license after the Cease and Desist Order was in effect and as a result paid over $50,000 for administrative, investigative, and legal costs and expenses.
Citation to a Licensee
A commercial broker let his license lapse for 3 months, and was on inactive status for 3 months prior to that. During that time the licensee worked as a fulltime employee of an unlicensed company conducting real estate brokerage activities. A Citation was issued and the licensee was required to comply with the following:
- Reimburse the Commission for its administrative, investigative, and legal costs and expenses in this matter in the amount of $1,000.00 within 30 days.
- Successfully complete a three hour course approved by the Commission on the subject of legal issues and the avoidance of license law violations.
Regarding unlicensed consultants, two key points should be made:
1. The party performing the acts of a licensee without being licensed is violating the law.
2. The broker (or any real estate licensee) who pays a consultant, subcontractor, individual, etc. that is not licensed is violating the License Law as well. License Law 43-40-25. For example, if a licensee cooperates with an independent contractor that is not licensed in a real estate transaction and shares his/her commission with that unlicensed party, the licensee has also violated the license law. License Law 43-40-25. It is considered an unfair trade practice and violation to pay a commission or compensation to any person for performing the services of a real estate licensee who has not first secured the appropriate license under this chapter or is not cooperating as a nonresident who is licensed in such nonresident’s state or foreign country
of residence.
*Originally posted by GREC: http://www.greab.state.ga.us/PDFS/About/newsarticles/2014GRECRENewsMarch.pdf
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Comparison of the GAR & RE Forms – Purchase & Sale Contract (11/24/14)
In Georgia, there are two sets of contracts (GAR & RE Forms) and neither one is going away! EVERY agent will better serve their clients and themselves by becoming well-versed in each contract form. Below is a brief comparison of the Purchase & Sale Agreement for both forms. (The GAR contracts committee changes the GAR contract each year so this table is accurate until the end of January next year!) We strongly encourage EVERY AGENT to take CE course on BOTH the GAR contracts and the RE Forms contracts.
GAR Contract vs. RE Forms Contract:
| Issue | GAR | RE Forms |
| # of Pages | 7 | 4 + 8 pages of “Standard Terms” |
| Names of Parties | Signature Page | Front Page & Signature Page |
| Signatures / Initials | Signature Page | Initial Every PageSign Signature Page |
| Deed | Limited Warranty | Limited Warranty (change in August 2014) |
| Title | Good & Marketable | Good & Marketable |
| Earnest Money Deposit | 5 Banking Days | 3 Banking Days |
| Buyer Default on EM – Time to Cure | 3 Banking Days | 3 Calendar Days |
| Closing Cost – Amount | Specific Amount | Amount OR Percentage of Sale Price |
| Closing Costs – Use by Buyer | Mortgage lender may not allow & unspent sums go back to Seller | Any purpose whatsoever – merely at the discretion of the Buyer |
| Contingencies in Purchase & Sale | Due Diligence Only | Buyer’s Right to TerminateAppraisal ContingencyFinancing Contingency |
| Inspection | Seller to turn on utilities | Buyer or Seller to turn on utilities.Seller to complete repairs 3 days prior to closing |
| Failure to Appraise | Buyer must submit amendment to Seller to sell for lower price or Buyer buys at contract price.If Seller accepts, Buyer must buy; if Seller rejects Buyer may buy or terminate – specific time frames involved | Buyer may terminate at sole discretionEither party may propose Amendment to other party to re-negotiate Sale Price |
| Delay in Closing | 7 Day Unilateral Right to Extend | Must be Extended by Mutual Agreement |
| Damage to Property before Closing | Buyer or Seller may terminate. If no termination Seller has 1 year to restore property & transaction must close within that 1 year or within 7 days from property being restored | Buyer may terminate OR Buyer may buy with all Insurance Proceeds being transferred to Buyer |
| Notice (Email) | Email “Read Receipt” | |
| Survival of Closing | CommissionTitleWarranties of SellerAny obligation parties agree shall surviveSeller’s interest in warranties, service contracts, etc a Buyer’s acceptance & expense | “the provisions of the contract shall survive closing.” |
| Condition of Property | “substantially same condition” | “same condition normal wear & tear excepted” |
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RE Forms: Standard Terms (11/16/14)
In July 2014, the RE Forms contracts committee re-organized the Purchase & Sale Agreement. The main contract where you the agent fill in the information & where the clients sign was reduced to 4 pages – HOWEVER – the other necessary information is referenced as the “Standard Terms.”
These “Standard Terms” comprise the consideration of the contract. This information is written on another document which is 8 pages long. This document is referenced by the Purchase & Sale and incorporated into the contract by virtue of the parties’ signatures. Within the contract, there is a place where the clients may initial whether they choose to receive a written copy of these mutual promises or they are satisfied with reading them online: www.GAREFORMS.com
Maximum One requires that agents actually PRINT OUT these “Standard Terms” and attach them to the contract as an Exhibit. This policy is designed to protect YOU as an agent, your Clients and Maximum One. By printing them & attaching them as an Exhibit, your client cannot say that you did not tell them the terms by which they lose their earnest money, for example, and more! All of THIS type of information is thoroughly described in this document. Additionally, by attaching the Standard Terms to your Contract, then the Lender & Closing Attorney will see them as well.
Unfortunately, the RE Forms committee in essence created a 12 page contract – not a 4 page contract.
This Form is also accessible through FMLS Forms Pro & GAMLS – RE 101 – Standard Terms for Contracts for the Purchase and Sale of Residential Real Property.
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Presenting Offers in the State of Georgia (11/10/14)
The #1 Complaint Received by GREC: Currently, the number one type of complaint received by GREC is related to agents not presenting offers or agents presenting offers directly to short sale lenders rather than to the Sellers.
GREC Rule: 520-1-.10 Handling Real Estate Transactions / Presenting Offers: A licensee shall promptly tender to any customer or client any signed offer to purchase, sell, lease, or exchange property made to such client or customer. In a transaction in which the offerer is not a client or customer of the licensee, the licensee receiving an offer must provide a copy of the offer to the licensee working with or representing the offeree. However, a licensee who obtains an offer may negotiate a sale, exchange, or lease directly with an owner, a lessor, a purchaser, or a tenant if the licensee who obtains the offer knows that such offeree has a written outstanding agreement in connection with such property that expressly provides the other licensee will not provide negotiation services to the offeree.”
License Law O.C.G.A. 43-40-25. Violations by licensees, schools, and instructors; sanctions; unfair trade practices: Paragraph (19) “Failing to deliver, within a reasonable time, a completed copy of any purchase agreement or offer to buy or sell real estate to the purchaser and to the seller. ”
Brokerage Relationships in Real Estate Transactions Act (BRRETA) O.C.G.A 10-6A:
- 10-6A-5. Duties & responsibilities of Broker engaged by Seller: (B) Timely presenting ALL OFFERS to and from the Seller even when the property is subject to a contract of sale.
- 10-6A-6. Duties & responsibilities of Broker engaged by Landlord: (B) Timely presenting ALL OFFERS to and from the Landlord, even when the property is subject to a lease or letter of intent to lease.
- 10-6A-7. Duties of Broker engaged by Buyer: (B) Timely presenting ALL OFFERS to and from the buyer, even when buyer is a party to a contract to purchase property.
- 10-6A-8. Duties of Broker engaged by Tenant: (B) Timely presenting ALL OFFERS to and from the tenant, even when the tenant is a party to a lease or letter of intent to lease.
- 10-6A-14. Ministerial Acts (required actions of a transaction Broker:) (b) A broker acting as a transaction Broker shall do the following: (1) Timely present all offers to and from the parties involving the sale, lease and exchange of property.
Important Note Regarding Short Sales: Remember in a “Short Sale” transaction the Seller’s Lender is not a party to the Contract.
- The Seller still owns the home, and while the Seller’s Lender may have the right to say yes or no to allowing the Short Sale to move forward, they are not the Seller or our Client/Customer.
- The Purchase and Sale Agreement becomes Binding when Buyer(s) and Seller(s) Sign (see paragraph 18. H. of F20) and not when the Seller’s Lender/Bank approves the Short Sale.
- All offers must be presented to the Seller, and then when the Seller engages in a Binding Contract with a Buyer, the Binding Contract is presented to the Seller’s Lender/Bank.
- In all cases you must continue to present all offers to a Seller regardless of whether there is already a Binding Contract on the property. If the Seller decides to negotiate a Back up Contract then Contract must include a Back up Contingency Exhibit in addition to any other necessary Contingency Exhibits like the Short Sale Contingency Exhibit.
- While the Seller is under no obligation to engage in or accept a Back up Contract on the property, if they do engage in a Back Up Contract (signed by Buyer & Seller), and the property is a Short Sale Transaction, then the Back Up Contract should also be presented to the Seller’s Lender/Bank. See 18. U.S.C.A. 1014.
The Lender/Bank is not a party to the Contract and cannot kick out Buyer #1, but what they can control is what their Short Sale Approval looks like and the information that someone is under contract with a Back Up Contingency may influence their approval decision and cannot be withheld from them.
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Counter Offers (11/3/14)
Very few transactions become binding without counteroffers. There are many ways to counter an offer but the easiest and most concise way s to use the counteroffer form in whichever contract package you are using.
Anything can be countered from sale price to an appliance to remain with the property. Remember, however, that when a counteroffer is made, the previous offer becomes null and void and the receiving party can ignore it. In other words, let’s say that a buyer makes an offer on a “hot” property asking for the refrigerator to remain with the house; the Seller counters the price and fridge; the Buyer is fine with the price & would be okay without the fridge but wants to try one more time. If the Buyer makes another counter, the Seller may receive another offer in the interim and accept that one. The first Buyer would be back in your car looking for another home to purchase!
Additionally, a party may WITHDRAW their last Counter Offer prior to it being signed by the accepting party & then bound by that party giving notice to the last offeror.
Every new counteroffer voids the previous counteroffer as well. The FINAL agreement consists of: the last counteroffer that was signed by ALL parties PLUS the terms of the Original offer that were not changed.
Once a counteroffer has been signed by all parties, the parties do NOT go back and sign the original offer. The counteroffer references the Original offer and all of its exhibits but the original does NOT reference the counter; so if the counteroffer is signed, any reasonable party realizes there is more to the contract but not vice-versa.
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Conformed or “Clean” Copies (10/27/14)
When the Buyer and Seller come to an agreement and go binding using the Counteroffer forms, it may be difficult to get a clear sense of the final terms. At any time prior to closing, either party (or the lender or closing attorney) may ask for a Conformed or “Clean” copy of the contract combing all the agreed-upon terms on one form. Legally, a conformed copy of a contract is considered secondary evidence while the original is considered primary evidence.
To avoid any misunderstandings or potential legal issues, when writing a conformed copy of a contract, I strongly suggest you use the GAR Special Stipulation SS622 which states:
“Buyer and Seller acknowledge that the above Agreement is a conformed copy of an Agreement between the parties dated____________________. In the event of any conflict between this conformed Agreement and the original thereof, all parties agree that the original Agreement shall control.”
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Sale or Lease Contingency (10/20/14)
In today’s market there are an increasingly number of Buyers who must sell or lease their current home in order to consummate the purchase of a new home. In this situation, the contract for the new home should contain the Exhibit delineating this circumstance. Both sets of contracts have specific Exhibits for this contingency.
GAR: F90 – Sale or Lease of Buyer’s Property Contingency Exhibit
RE Forms: RE-251 – Sale or Lease Contingency Exhibit
In these exhibits, the Buyer must specify the address of the property they must sell or lease prior to closing on this new contract. These exhibits include a “Kick-Out” or “Demand to Remove Contingencies” provision that may or may not be included (this is negotiated between Buyer & Seller.)
The “Kick Out” or “Demand to Remove Contingencies” means that the Seller may continue to actively market the property for sale and negotiate offers. Should the Seller receive an acceptable offer from another Buyer, the Seller gives the current Buyer the opportunity to stay in contract by eliminating the contingency on selling or leasing their current house. If the Buyer is not able to do that, then this contract would be terminated because the Buyer would not be able to eliminate this contingency & the Seller would proceed with the second Buyer.
In order to remove this contingency for the Buyer, make sure that the lender (if a loan is involved) will be able to finance the Buyer despite not selling their first property.
So should you include this provision in your contract? Well, it depends on which party your represent and what will make the deal work. Best case scenario for the Buyer – No kick out; best case scenario for Seller – include the kick out.
If this situation applies to your clients, do not try and add a Special Stipulation to address this issue but use the specific exhibit for this contingency.
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GREC Schedule of Violations & Penalties GREC Rule 520-1-.14 (10/13/14)
As a licensed professional in the State of Georgia, there are sanctions including financial penalties, for violating the covenants, rules and laws which govern your license. When your Compliance Broker – Dawn Luttrell for Greater Atlanta and Tina Vliet for Executives – asks you for a document or for a correction to your contract due to compliance issues, they are covering your bottom to prevent you from violating your license and potentially costing you a lot of money in GREC fines! Read GREC Rule 520-1-.14 here. Thank you to Tina Vliet for putting this information in an easy-to-read chart.
(3) Schedule of Violations and Penalties. Violation of the following rules, regulations, and unfair trade practices may become the basis for the issuance of a citation. While the Commission may determine that circumstances warrant the imposition of a lesser penalty, the monetary penalties prescribed constitute the maximum penalty for a single violation of the cited rule, regulation, or unfair trade practice. In the event of any conflict between the description of a violation in the schedule below and the language in the code section or rule, the language in the code section or rule shall control.
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(a) Failure of a community association manager, salesperson, or associate broker to turn over trust funds to the broker as soon as practicably possible. 43-40-25(b)(23) & 520-1-.08. |
Fine of $500.00.
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(b) Failure of a licensee to include financing terms in a sales contract having a financing contingency. 43-40-25.1. |
Fine of $500.00. |
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(c) Failure of a licensee to provide a copy of any document used in a real estate transaction to any individual signing such document. 43-40-25(b)(19), 520-1-.06(1) & (2), & 520-1-.10(2). |
Fine of $500.00.
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(d) Where a Commission examination of a brokerage firm’s operations reveals a violation of requirements set forth in 43-40-11, 43-40-18, 43-40-25.1, 520-1-.06, 520-1-.07, & 520-1-.08(5)(c). |
Fine of $500.00.
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(e) Where an examination of an approved school reveals a violation of requirements set forth in Chapter 520 of the Rules of the Commission. |
Fine of $100.00. |
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(f) Failure of a licensee to present promptly a signed offer to a seller or failure to deliver copies of an accepted contract to the parties within a reasonable time. 43-40-25(b)(19) & 520-1-.07. |
Fine of $600.00.
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(g) Conducting business under a name other than that which is registered with the GREC. 520-1-.07. |
Fine of $600.00. |
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(h) Where a Commission examination of a brokerage firm’s operations reveals a trust account violation. 43-40-20 & 520-1-.08. |
Fine of $600.00. |
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(i) Failure of a community association manager, a salesperson, or an associate broker to notify the broker of personal real estate activities. 520-1-.11. |
Fine of $600.00. |
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(j) Failure of a licensee to include the correct amount of earnest money, security deposit, or terms in a sales or lease contract. 43-40-25.1. |
Fine of $600.00. |
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(k) Where an approved school violates the requirements set forth in the Rules of the Commission developing or offering computer-based courses. |
Fine of $200.00. |
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(l) Where a licensee pays a commission or a referral fee for performing a real estate brokerage activity to a person who does not hold a current, active real estate license in this or some other state except as provided in 43-40-25(b)(17). |
Fine of $600.00.
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(m) Advertising that violates a provision of 43-40-25(b)(11) or 520-1-.09(3), (5), or (6); but is not discriminatory or intentionally misleading or inaccurate in violation of 43-40- 25(b)(1) or (2) or 520-1-.09(2) or (4). |
Fine of $600.00.
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(n) Failure of a licensee to register with the GREC an account into which trust funds have been deposited. 43-40-20(b) & 520-1-.08(1). |
Fine of $600.00 per account not registered. |
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(o) Failure of a licensee to have the bank designate an account as a trust or escrow account, except where the bank has erred. 43-40-20(b). |
Fine of $600.00 per account not designated.
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(p) Failure of a licensee to disclose his or her licensure in a contract requiring such disclosure. 520-1-.11. |
Fine of $600.00 per contract. |
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(q) Where a broker continues to allow an affiliated licensee to conduct brokerage transactions after the licensee’s license has been in a lapsed status for more than one month. 43-40-18 & 520-1-.05(4). |
Fine of $600.00 per brokerage transaction.
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(r) Where a licensee performs real estate brokerage activity in violation of 520-1-.05(4) beyond the month in which a license lapses for non-payment of renewal fees. |
Fine of $600.00 per brokerage transaction.
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(s) Where an approved school offers a course without prior authorization, if such prior authorization is required. |
Fine of $200.00 per student enrolled, not to exceed the limits set forth in 520-1-.14 (1). |
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(t) Failure of a licensee to deposit trust funds promptly where the deposit was made more than three business days after receipt unless the contract provides otherwise. 43-40-25(b)(3). |
Fine of $600.00.
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(u) Failure of a licensee to notify the Commission of the final disposition of any administrative, civil, or criminal action within ten days of the conclusion of court or administrative proceedings. 520-1-.05(5). |
Fine of $600.00.
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(v) Failure of a licensee to obtain written permission before depositing trust funds into an interest-bearing account where the licensee retained the interest. 43-40-25(b)(30) & 520-1-.08(1). |
Fine of $600.00.
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Fine of $600.00.
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(x) Failure of a transferring salesperson or associate broker to account for or to return to the releasing broker all items belonging to that broker. 520-1-.07(5). |
Fine of $600.00.
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(y) Failure of a licensee to deposit into a trust account trust funds received in connection with a transaction in which a licensee is a principal. 43-40-20(f), 520-1-.08(1) & (4). |
Fine of $600.00.
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(z) Failure of a licensee to include a fixed date of expiration in a listing agreement or failure to leave a copy with the principal. 43-40-25(b)(18). |
Fine of $600.00. |
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(aa) Where an approved school allows a person who has not been approved by the Commission as a pre-license instructor to instruct a Community Association Managers Course, a Salespersons Prelicense Course, or a Brokers Prelicense Course. |
Fine of $300.00 per course, not to exceed the limits set forth in 520-1-.14 (1).
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(bb) Failure of a licensee to deposit earnest money, security deposits or other trust funds according to the terms of a contract. 43-40-25(b)(5) & 520-1-.08(1). |
Fine of $800.00 per contract.
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(cc) Where a broker upon disbursing trust funds without obtaining the express agreement to all the parties to the contract, fails to notify all parties in writing of the disbursal. 520-1-.08(3). |
Fine of $800.00.
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Failure of a broker to sign a release form immediately upon personally receiving the request of a community association manager, salesperson, or associate broker to be released from the broker’s firm. 520-1-.07(5).|
(dd) Where a licensee has made a false statement of material fact on his or her application or caused to be submitted or been a party to preparing or submitting any falsified application to the commission on paper, electronically, or by any other means or media. 43-40-15(d) & 520-2-.16(1), & 520-3-.07. |
Fine of $800.00.
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(ee) Failure to handle trust funds as required by 43-40-20; 43-40-25(b)(3), (4), & (5); & 520-1-.08 in a transaction in which a client or a customer claims a loss and full restitution has been made. |
Fine of $900.00.
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(ff) Where the annual percentage of students passing the real estate examination from any prelicense school falls ten percentage points or more below the percentage of all examinees passing the real estate examination in any two consecutive calendar years. 520-2-.16(2). |
Fine of $900.00.
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(gg) Where an approved school fails to have students complete the required number of hours in any course or to complete all exercises and/or examinations required by the school. 520-2-.10(3), (4), (5), & (6). |
Fine of $400.00 or $100.00 per student, whichever is greater, but not to exceed the limits set forth in 520-1-.14 (1).
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(hh) Failure to reconcile a trust or escrow account at least monthly; to provide the required information in the reconciliation statement; or, in the event of a discrepancy in the account, to provide an explanation or description of the discrepancy and the corrective action taken. 520-1-.08(6). |
Fine of $600.00 per violation if the account balances; fine of $900.00 per violation if the account is not in balance. And such other violations and fines as the Commission and the respondent parties agree upon.
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Proposed Rule Change Regarding Support Personnel: 520-1-.07 (10/6/14)
The proposed rule change affects firms and any licensee who has “support personnel” (i.e. an assistant.) This proposed change will be voted on October 8, 2014 and will become effective November 1, 2014. The Rule being amended is 520-1-.07 – Management Responsibilities of Real Estate Firms and addresses licensees with assistants.
This rule outlines what support personnel (unlicensed assistant) can and cannot do and what has to be in writing. Read the proposed Rule Change here. If you have one or more assistant, make sure you are in compliance with GREC.
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Can a Buyer Pay Cash if there is a Financing Contingency in the Purchase & Sale Agreement? (9/29/14)
The financing contingency in a contract states that if a Buyer terminates because they can’t get a loan, they must be denied for the loan as described on the contingency exhibit and the denial letter must be from a lender licensed to do business in Georgia The Buyer is not required to actually get the loan described on the exhibit; in fact the Buyer does not have to get a loan at all. The contract (both GAR & RE Forms) states that at closing, the Purchase Price shall be paid in CASH or its Equivalent.
We recently represented a Buyer with a contract on a Short Sale. He had a financing contingency included as part of the Binding Agreement. Throughout the course of the contract and waiting for the short sale to be approved, the Buyer decided for himself to pay cash for the property. The Seller (through the listing agent) sent the Short Sale approval notification to the Buyer. The Seller then checked to see if Buyer had made loan application per the Financing Contingency Exhibit. When the Seller discovered that the Buyer had not even contacted the lender several days after the time frame to apply for the loan, the Seller determined that the Buyer was in default and demanded a Termination & Release. The Buyer never responded because the Buyer intended to close on the transaction. Failing to hear from the Buyer, the Seller, put the house back in the listing service and proceeded to bind another contract with another Buyer. When the Seller continued to obsessively request the T&R, we looked in FMLS and discovered what the Seller had done.
In my conversation to discover what happened and why the Seller sold the house to another Buyer, I learned that the Seller believed that since the Buyer was not getting a loan and the contract was subject to a Financing Contingency, that the Buyer was not allowed to purchase the home with cash.
I reminded the Seller that this Buyer had not terminated and fully intended on closing and the good news is that the Buyer successfully closed on the house last week! (I am not sure how much it cost that Seller to “convince” the second Buyer to terminate their contract.)
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Using E-Signatures to Communicate with Co-op Agent’s Clients – Don’t! (9/22/14)
There are many systems available to real estate agents to make getting signatures from clients convenient when you are not with them in person. There is e-sign available through FMLS, GAMLS, Docusign and more. These programs make it convenient and easy to get signatures from others and to allow others to add information to a document. Many of these programs allow you to send a document to multiple parties simultaneously or in order of required signatures.
In today’s contracts, many agents are including their client and customer email addresses in the contracts – available for all the parties to see. Just because you have access to another Broker’s client or customer does NOT give you permission to contact them by email – even through e-signature.
There are many agents using these e-sign capabilities through FMLS & GAMLS to distribute contracts to all of the parties for convenience sake. Some agents are NOT notifying the other agent that they have even sent their client a contract to sign. Do NOT contact another Broker’s client – even if it is convenient!
Simply use these programs to communicate with YOUR clients for ease of signatures and then you may send the documents to the co-op agent. It will then be up to the co-op agent to choose how to communicate with THEIR clients and customers – by e-sign or not.
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GAMLS Compliance Violations (9/15/14)
GAMLS is strict regarding their compliance violations. They will fine you $25 for the first offense and then Additional $5/day until that violation is corrected. The GAMLS bill comes to the Brokerage & then we put those fines on your monthly office bill. Maximum One does not have any discretion over these fines – only GAMLS may change them the FOLLOWING month.
Be mindful of any GAMLS compliance notifications you receive from GAMLS or from any Maximum One staff member. The most common fines are as follows:
PCD Expired = Projected Closing Date Expired
- When a listing is placed under contract (U), pending approval (PA), under contingency with a kick-out clause (CK) or under lease-purchase (LP), the system will require the user to select a projected closing date (PCD) before it will save the status change. The PCD will serve as a reminder to the agent to update the listing. As the selected date approaches,
- To successfully correct the PCD issue, the user must update the status or extend the PCD. If the listing has not been updated properly two days after the PCD, it is subject to fines.
Not Listed with GAMLS
- What is the problem?
- It has been brought to our attention that the indicated property is advertised for sale by your office. After reviewing your office’s active inventory, we are unable to find a matching listing in Georgia MLS.
- GAMLS membership requires that any and all exclusive residential listings must be entered into the system within 48 hours after the broker and seller sign the listing agreement.
- The listing will need to be input through the reInsight system to resolve the violation.
- Please use the list date contained on the signed agreement.
Dup, Different Brokers
- Another member office also has the same property listed.
- If you wish to remove your listing, complete and submit a withdrawal form. As long as Georgia MLS can verify that the property has been relisted by another GAMLS broker, the usual fee will be waived. Be sure to include the other listing’s number and broker to ensure proper processing. A broker’s signature is required although the property owner’s signature is not.
- If you do not wish to remove your listing, you will need to contact the other office to determine the source of the delay. Georgia MLS can only process a withdrawal form if it contains the releasing broker’s signature.
- Georgia MLS can only withdraw a listing if the broker has signed approval to remove it. If the other office has expressed reluctance to withdraw their listing,a termination letter will need to be sent from the property owner to that broker.
Unacceptable Primary Photo
- The indicated listing has been flagged because the primary photo is not in compliance with our photo policy.
- Georgia MLS Photo Requirements are as follows
- The focus of the primary photo must be the listed property and should be a single image of the exterior front view taken in daylight.
- Images must be of sufficient quality to be reproduced.
- Images must not include contact information, recognizable signage, or marketing/promotional messages.
- Alterations to images such as decorative frames, watermarks, time stamps, or false color representation are not allowed.
- Primary photos should not contain images of people or animals.
- Renderings or plat maps are acceptable for listings under construction. These must be replaced with an acceptable image when the structure is recognizable. Members are encouraged to update the primary photo to reflect stages of construction.
- If a primary photo is provided for other non-residential property types, it must follow the same rules governing listed residential property.
- · You will need to replace the photo with an acceptable image. You can click on the ‘Edit Photos’ link on the previous page to get started.
LA-LB Mismatch
- The agent assigned to the listing is not currently affiliated with the listing broker.
- If the broker is continuing to market the property, the listing will need to be assigned to another agent on the office roster. Either the listing broker or an office administrator can change the List Agent ID in reInsight.
- If the broker wishes to release the listing because the agent has transferred to another broker or the agent’s license has become inactive, a completed withdrawal/transfer form will need to be submitted.
False sale
- Georgia MLS has been unsuccessful in confirming a sale occurred with the property as indicated on the listing.
- Complete and submit a withdrawal form to correct the status of the listing.
Verify Sale Price
- The sales price on the listing has come up for question. Either the listing’s sales price does not match public record or it differs so much from the list price that an automatic process has detected a possible discrepancy.
- If the sales price is wrong, it will need to be updated. All changes must occur in the listing modification section of the reInsight program. The sales price can be accessed under the “Sold Fields” quick action.
- If the listing was closed more than 14 days ago, please contact Georgia MLS to update the price for you. The “Sold Fields” quick action may no longer be available to you.
- If you have verified that the list price and the sales price are in fact correct, a simple email to Georgia MLS will resolve the error. Be sure to include the sale price, listing number and property address in the message to ensure prompt resolution.
Should you have any questions, concerns or difficulty, please contact Georgia MLS via email at compliance@gamls.com or by phone at (770) 493-9000 ext. 8.
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Licensees & Personal Real Estate* (9/8/14)
Part of gaining experience involves
making mistakes and learning from them.
We can also learn from the mistakes of
others. Cases reviewed by the Real
Estate Commission provide insight into
common mistakes and practical examples.
The Case of Lena Sanders actually provides a good checklist of what not to
do as a licensee acting as a principal. Salesperson Lena Sanders saw an
opportunity and bought 4 houses that were in foreclosure. She then rented them
to tenants.
Consider the list of violations made by Salesperson Lena Sanders:
1. The Salesperson failed to notify her Broker in writing before she made
offers, and later when she actually purchased the properties.
2. She failed to notify her Broker in writing of leases on the 4 properties.
3. She failed to turn over security deposits to her Broker.
4. She failed to properly account for funds received from others (security
deposits).
5. She commingled the funds of others with her own.
6. She failed to deposit funds of others into a trust account. (She never
registered a trust account either.)
7. She collected a commission from a property owner and failed to turn over
said commission to her Broker.
8. She failed to include her license number and the firm’s license number
on leases.
9. The Salesperson failed to state in the purchase agreements or the leases
that she holds a real estate license.
10. She failed to submit copies of all leases on her personal property to
her broker.
Salesperson Lena Sanders was issued a Citation, was required to pay a
substantial fee in addition to legal and administrative costs, and was also
required to take several education courses as a result of her numerous
violations:
Reference 43-40-25 (b) (3), (4), (5), (8) & (23) 520-1-.08(1) (c) 520-1-.10(2), (3) & (11)
* Originally Printed in GREC RENews
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“VRC” in FMLS & GAMLS (9/1/14)
“Variable Rate Commission” – GREC requires that agents and brokers identify that the advertised commission may be different than the commission that a Seller pays if the listing agent sells the property with no other agents involved.
- For example, if a listing brokerage has arranged with the Seller to pay 7% commission when two agents are involved in the transaction and 5% if the listing agent procures the Buyer so that no other agent is involved, then the listing MUST be advertised as “YES” to VRC.
- The Listing agent must notify ( by checking Yes to VRC) co-op agents of this arrangement with the Seller so that the co-op knows that the listing agent has an advantage if multiple offers come in & one is the listing agent’s.
- Please advertise your listings in FMLS & GaMLS in compliance with GREC regarding this issue of Variable Rate Commission!
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Consumer Brochures & Disclosures to Protect Your Client & You the Agent (8/25/14)
When working with the public, there are many brochures available for you to share with the consumer for their protection and your own! Nothing is a problem until it’s a problem! After the fact, many customers tend to get selective “amnesia” and may forget that you suggested they get an independent home inspection, get a survey, get a termite clearance letter, have licensed contractors do electrical & plumbing repairs, etc.. Any Broker will tell you to protect yourself (& your brokerage) as much as possible – one way to do that is to have the public sign any and all disclosures you provide to them that pertain to their side of the transaction.
Maximum One Form
- Service Recommendations – Client acknowledges that you suggested survey, inspection, title insurance, etc.
GAR Forms
- F141 – Vendor List – list of vendors for client – Broker does not warrant their work
- F19 – What Buyers Should Know – Flood Hazard Areas & Flood Insurance
- F148 – What Buyers & Sellers Should Know about Short Sales & Distressed Properties
- F55 – Lead Based Paint Pamphlet
- F56 – Mold Pamphlet
- F13 – Protect Yourself When Buying a Home
- F14 – The ABCs of Agency
- F15 – Protect Yourself When Buying a Home to Be Constructed
- F16 – Protect Yourself When Selling a Home
- F58 – US Code, Title 42, Chapter 63A, Section 4852d (Disclosure of Information COncerning Lead Upon Transfer of Residential Property)
- F59 – Dekalb County Plumbing Disclosure
- F72 – Estimate of Net to Seller
- F73 – Estimate of Cost to Buyer
- F76 – Reminder of Important Dates in the Purchase & Sale Agreement
- F77 – Disclosure to Principal of Fees Paid or Received by Broker
RE Forms
- RE-141 – EPA’s Protect Your Family from Lead in Your Home
- RE-142 – EPA’s a Brief Guide to Mold, Moisture, and Your Home
- RE-143 – Dekalb County Plumbing Disclosure Exhibit
- RE-144 – A Citizen’s Guide to Radon
- RE-145 – Home Selling – The Process
- RE-146 – Home Buying – The Process
- RE-050 – Confidentiality Agreement
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Disbursing Earnest Money on Terminated Contracts (8/18/14)
When a contract terminates, the earnest money must be disbursed. These are TWO separate issues which must be addressed in any contract that fails to close. The termination of any contract is unilateral and the disbursement of earnest money is bilateral. ANY party may terminate a contract. The issue then becomes did that party terminate by default or by contingency? Regarding the disbursement of earnest money, BOTH parties must AGREE regardless if the termination was by default or allowed-for contingency. This AGREEMENT is indicated by getting BOTH Buyer & Seller Signatures on the Release. If you do not get both sets of signatures, then the HOLDER decides who gets the Earnest Money.
The Holder reads through the contract, the Termination Notice, any supporting documents and information and then interprets those circumstances. The Holder then decides to which party to disburse those funds. The Holder then sends out a Notice of their decision to the parties, deliberates any disagreements and then disburses those funds.
If the Holder cannot make a decision based on the circumstances, then the HOLDER interpleads those funds into the registry of the court – for a fee! At that point there is a judge & typically lawyers involved & obviously more fees – the “loser” of the Earnest Money typically pays legal expenses for the other party. Unless the Earnest Money is close to $10,000 or more, it is more advantageous for the parties to come to a mutual agreement rather than having the Holder interplead the funds. There are other vital legal ramifications for the defaulting party to relinquish the Earnest Money to the other party as liquidated damages for defaulting on the contract.
The Holder of the Earnest Money will need a copy of the signed Termination Notice AND the Release Agreement. If this is NOT signed by both parties, then make sure to include a note that the Holder will need to proceed with the Disputed Earnest Money process. The Holder will also need an explanation as to why the transaction failed to close and why BOTH parties did not agree to the disbursement of the funds. Additionally, include: Buyer & Seller mailing address, Agent names & email addresses & the Brokers’ email addresses. The Holder must send Notice to the Parties by US Mail – registered, return receipt requested. If one of the parties in unrepresented, then the Holder will need their mailing address or fax number. For a represented party, the Holder may notify the representing Broker.
This process is completely outlined in both the GAR contract and the RE Forms contract.
In the GAR contract, these two separate issues are confusingly addressed on one document: F83: Unilateral Notice to Terminate; Agreement to Disburse Earnest Money. In the RE Forms, these two separate issues are addressed on two separate documents: RE-263 – Notice to Withdraw or Terminate AND RE-212 – Agreement to Disburse Trust Funds
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Contract Contingencies (8/11/14)
Your clients expect you to be professional and look out for their best interests as they relate to the contracts for purchase and sale for real estate. You must take your time and review each contract you write independently even if you have written hundreds of previous contracts. Review and think through each contract in terms of contingencies, time frames and financial circumstances. The following three examples are just a few items to take into consideration with each contract you write and/or receive.
Due Diligence / Buyer’s Right to Terminate Time Frames
- If your Buyer does not have the money at the time of the offer to hire an inspector (perhaps waiting on the next pay period) write a longer time frame for this contingency.
- If you present the Amendment to Address Repairs to the co-op agent at 10pm on the last day of the Due Diligence period, then prepare your Buyer to buy that house as-is or Terminate OR include the Special Stip (mark the box in the RE Forms) to indicate that the Buyer terminates if Seller does not accept the Amendment.
- The Due Diligence / Buyer’s Right to Terminate Period is the time frame within which to COMPLETE all your negotiations between the parties
- This is also the time for the Buyer to go through the HOA Covenants & Conditions & Restrictions AND to determine if there are any Special Assessments levied and how much the HOA transfer letters will cost at closing
Financing Contingency Time Frames
- Make sure you include a Financing Contingency if your Buyer is getting a loan – if no financing contingency is included with the contract, then a lender’s denial of the loan will NOT protect the Buyer’s Earnest Money
- Check with the lender in advance to determine how long it will take to underwrite the loan
- Discuss with the Buyer the importance of getting the appropriate documents to the lender to avoid delays that will not coincide with the agreed-upon financing contingency
- An Appraisal contingency is NOT a financing contingency
- Check with the lender to determine how long appraisers are taking to get appraisals back to the lender
- If a Buyer gets denied a loan but it is outside of the Financing Contingency time frame, if they terminate based on this reason they will be in default of the contract
Earnest Money Sources & Time Frames
- If you do not have the earnest money in your possession at the time of writing the contract, then consider the time frame you contractually require the Buyer to remit those funds.
- It is your responsibility to follow-up with those funds until they have been received.
- If the Buyer is mailing the earnest money to the brokerage, find out from them: when they mailed it, where, how was the envelope addressed, etc.
- If the Earnest Money is not received and deposited as you have written in the contract, then the Holder send notice to all parties that the Buyer has not remitted the EM; Buyer must cure this default in certified funds, Seller has right to terminate
- Consider if the Buyer is getting the Earnest Money from their 401k, then it may take longer to get those funds liquid or they may not want to withdraw money from this investment account until after they have completed their inspections, etc..
Vacation & Work Schedules & Technology Skills/Equipment
- People travel and may be inaccessible to discuss Contracts, Amendments, Changes – ask if they have any travel plans in the next 30 – 90 days
- People may be unavailable during business hours to discuss pertinent issues
- People may not have computers, smart phones, etc. – find out how you are going to communicate with your clients regarding contracts
- People may not be comfortable or understand electronic signatures and prefer to meet you with a paper copy of any forms needing to be signed
- YOU may have travel plans or time scheduled to be with your family!
Each Buyer and Seller have their own unique set of circumstances which will greatly influence the time frames you complete in the contracts. There are many other factors on which to consult your client – repairs, closing date, possession date, how to get repair receipts, etc.. It is imperative that you discuss these issues with your clients prior to drafting an offer, writing a counter offer or accepting a contract.
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Critical Data Management (8/4/15)
Real estate licensees are known for utilizing new technology to improve the transaction process and experience. However, something as simple as electronic record keeping requires updating office procedures to protect consumer information and to comply with the License Laws, Rules, and Regulations.
Records can be kept in electronic format, so the use of cloud storage, external drives,
or other portable data storage systems are commonplace. Whether an electronic or paper
system, it must all be addressed in an office policy. Sounds simple enough, but agents
transfer from one firm to another; staff and office personnel come and go making it
necessary to frequently change the passwords for cloud storage, computers, files, etc.
The broker can be held liable for the maintenance of all records in electronic or paper
form. General Counsel for the Alabama Real Estate Commission recently quoted an apt
guideline he uses regarding document retention for licensees. It applies to Georgia
licensees as well; “If a document is touched or created by a licensee during any real estate activities, the licensee should make sure the qualifying broker, or company has a copy of the files.” In Georgia, a list of records and documents to be retained is included in Rule 520-1-10. That documentation must be maintained for 3 years and made available upon request by the Commission. This means it must be readily available.
The handling of data and the liability of protecting and maintaining that data are issues
of concern to all licensees. It is common for real estate contracts to be transmitted and
signed electronically allowing them to be processed in shorter time. Consider the use of
electronic signatures. The use of electronic signatures must be done in a way that protects the public and maintains the integrity of the signature. The signatures should initially be encrypted with protected access, but the file must continue to be maintained in a safe manner. In addition, the electronic data and files must be accessible for 3 years to comply with the License Laws, Rules, and Regulations. Electronic documentation can leave a good audit trail, but the data management system needs to be set up properly to be able to retrieve it when needed.
Some consumers are averse to signing electronically or to certain electronic
communication methods. The office policies need to take in account individuals’ experience and comfort level with the latest technology in addition to the potential for identify theft. Access by staff and employees must be closely managed, and a system needs to be in place to assure future access to the data.
To summarize:
As technology changes, the broker must re-evaluate the firm office brokerage policy to incorporate the use of new methods and services as well as protecting against the increasing potential for the misuse of personal information..
- The files, email transmittals, folders, and document names, should be organized with appropriate names and dates so the information can be easily located later.
- Using physical drives could be additional security against an online service that is not renewed or no longer available.
- Be sure the storage of sensitive files is secure and office policies ensure the data is protected as much as possible.
* Originally Printed in the GREC RENewsletter – June 2014
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Presenting Offers in the State of Georgia (7/28/14)
Regardless if you are using a GAR contract, RE Forms contract, Builder’s contract or any other contract, you are legally required to present all offers & counter offers.
GREC Rule: 520-1-.10 (1) Handling Real Estate Transactions / Presenting Offers
A licensee shall promptly tender to any customer or client any signed offer to purchase, sell, lease, or exchange property made to such client or customer. In a transaction in which the offeror is not a client or customer of the licensee, the licensee receiving an offer must provide a copy of the offer to the licensee working with or representing the offeree. However, a licensee who obtains an offer may negotiate a sale, exchange, or lease directly with an owner, a lessor, a purchaser, or a tenant if the licensee who obtains the offer knows that such offeree has a written outstanding agreement in connection with such property that expressly provides the other licensee will not provide negotiation services to the offeree.
License Law O.C.G.A. 43-40-25 Violations by licensees, schools, and Instructors; sanctions; unfair trade practices.
Paragraph (19) Failing to deliver, within a reasonable time, a completed copy of any purchase agreement or offer to buy or sell real estate to the purchaser and to the seller;
Brokerage Relationships in Real Estate Transactions Act (BRRETA) O.C.G.A 10-6A
10-6A-5 – Duties & Responsibilities of Broker Engaged by Seller:
(B) Timely presenting all offers to and from the seller, even when the property is subject to a contract of sale.
10-6A-6 – Duties of Broker Engaged by Landlord:
(B) Timely presenting all offers to and from the landlord, even when the property is subject to a lease or a letter of intent to lease.
10-6A-7 – Duties of Broker Engaged by Buyer:
(B) Timely presenting all offers to and from the buyer, even when the buyer is a party to a contract to purchase property.
10-6A-8 – Duties of Broker Engaged by Tenant:
(B) Timely presenting all offers to and from the tenant, even when the tenant is a party to a lease or a letter of intent to lease.
10-6A-14 – Ministerial Acts (required of a transaction broker)
(b) A broker acting as a transaction broker shall do the following: (1) Timely present all offers to and from the parties involving the sale, lease, and exchange of property.
Note Regarding Short Sales: Remember in a “Short Sale” transaction, the Seller’ Lender is NOT a party to the contract. The Seller still owns the home and is the party to sign a contract. The Seller must meet the contingency of their lender agreeing to the terms of the Short Sale in order to move forward but that lender is NOT the Seller / Client / Customer. A purchase and sale agreement becomes binding when the Buyer(s) and Seller(s) sign and NOT when the Seller’s bank approves the Short Sale. All offers must be presented to the Seller. When a contract becomes binding, then the listing agent presents that Binding Contract to the Seller’s existing mortgage lender.
In all cases, you must continue to present all offers to the Seller regardless if there is a Binding Contract on the property or not. After the Seller has a Binding Contract on the property (short sale or not) If the Seller decides to negotiate a “back up” contract, then this second contract MUST include a Back Up Contingency Exhibit. (GAR F-91: Back-Up Contingency Agreement Exhibit or RE Forms RE-252: Back-Up Contingency Agreement Exhibit) The Seller is not obligated to engage in or accept a Back-up contract on a property (whether it be subject to a short sale or not.)
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Importance of Turning in Contracts to Brokerage – Don’t Let it Cost You $1000 or More (7/21/14)
It is vital that you turn in your contracts into the Brokerage (through Paperless Pipeline) within 72 hours of going Binding. This rule is in place for GREC compliance, Maximum One (& any Brokerage) completeness and YOUR protection! Below is an example that will potential cost an agent $1,000 or more!
Agent Closed on a Property representing Buyer. Agent turns in HUD-1 Settlement statement & closing commission check by uploading into Paperless Pipeline. Compliance Broker checks on final compliance.
- On the HUD-1, Closing Attorney gave the Buyer’s Broker credit for holding $1,000 Earnest Money – per the contract
- Transaction had never been turned in to the Broker – never started in Paperless Pipeline
- Binding Contract turned in to Brokerage (through Paperless Pipeline) 2 days AFTER closing
- Contract states that Buyer remitted $1,000 Earnest Money to Maximum One at time of offer 3 weeks prior to closing
- Cash deal – no lender involved
- No copy of earnest money with contract, no record of deposit of earnest money
- Since agent did not turn in contract until AFTER closing, Broker not able to perform review nor notification duties regarding Earnest Money not being in possession nor deposited by Broker
- GREC states that a Broker is not responsible for actions of agents who do not turn in contracts in a timely manner & not liable for mishandling of Earnest Money that Buyer never remitted nor deposited if Broker had no way of knowing they were supposed to be in possession of Earnest Money because Agent never turned in the contract
Agent sends note that this same Buyer had been under another contract for a different property which failed to close and agent thought Maximum One would simply use the $1,000 Earnest Money from that transaction and apply it to the new transaction which closed. Upon research of previous transaction
- Transaction started Fall of last year
- Agent uploaded contract into Paperless Pipeline 10 days after Binding Agreement
- Contract subject to Short Sale
- Contract indicated that Agent was in possession of $1,000 Earnest Money at time of writing this offer
- Compliance Broker sent note to Agent that there was no copy of Earnest Money nor Deposit by Branch Manager
- Agent replied that agent did NOT have Earnest Money, Buyer was going to send the earnest money the following day to one of the Branches by Overnight mail
- Contract continually gets extended by Amendment for 4 months
- Two Months Later, Agent sends note that contract extended for 2 more months – No Amendment
- Last of notes in this transaction
Compliance Broker sent note to agent that previous contract had never been terminated, Earnest Money had never been received nor deposited, Earnest Money had never been Disbursed nor transferred to this new transaction which just closed.
Status of these Contracts and Missing Earnest Money:
- Currently, Agent will be paid commission LESS the $1,000 Earnest Money that Attorney gave credit for but Maximum One has no record of deposit
- Potential GREC fine to Agent – $1,200 – $600 each incident of mishandling Earnest Money on two separate contracts
- Maximum One to review Deposits from the Fall of Last year
- Agent to contact Buyer for proof of Remittance of Earnest Money – cancelled check, overnight tracking, receipt for sending overnight
- First contract to be terminated properly
- Agent mandated to attend Contracts class
Lessons for All:
- As an Independent Contractor, agents are affiliated licensees of a Broker and do business in the name of the Broker and are therefore required to turn in paperwork / contracts / documents
- At Maximum One, we require that agents upload their documents 72 hours after Binding to be able to review them, notify agents of compliance issues, make sure that Earnest Money is handled properly, notify the parties of issues per the contract… in other words, this requirement is in place to protect the Brokerage, the clients / customers AND YOU the agent!
- Check your Transactions in Paperless Pipeline frequently – copies of earnest money deposits, records of emails and notes are all contained within each transaction
- Stay current on contracts and how to complete them properly
- Stay on top of any money that is involved in a transaction….. if a Buyer is to mail it to a Branch, find out when the Buyer mailed it, to whom it was addressed, did the Branch Manager receive it, if it was addressed to you, Maximum One does not open your mail without your expressed permission, was it deposited, what form did the Buyer send the funds, etc!
- Best way to handle Earnest Money – meet the Buyer in person
- If a transaction fails to close, terminate the contract and disburse the earnest money properly as outlined in the contract
- Through the Paperless Pipeline system, all earnest money checks are copied & uploaded into each transaction & all receipts of deposit are also uploaded into each transaction
- If a Buyer wishes to transfer Earnest Money from a terminated contract to a new contract, that must be done in writing (See “Transfer of Earnest Money” document in Paperless Pipeline and on the Extranet
How to Learn What You Don’t Know
- Classes – www.eAGENTweb.com click “Calendar”
- Support – www.eAGENTweb.com click “Support”
- Recorded Training – www.eAGENTweb.com click “Live & Recorded Webinars”
- Managing Broker / Broker Specialist / Compliance Broker – current roster on Extranet or “Office” section of Paperless Pipeline and www.eAGENTweb.com – click on “Staff & Broker Contact”
- Branch Manager – www.eAGENTweb.com – click “Staff & Broker Contact”
We sincerely hope that the Buyer remembers never sending the Earnest Money and will send it now so that this lesson does not cost this agent $1,000. We will also thoroughly search our records because we support our agents in MAKING money and prospering themselves and others!
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RE Forms: Revised Purchase & Sale – Only 4 Pages (7/14/14)
Effective July 15th, RE – 100 Contract for the Purchase & Sale of Residential Real Property will only be 4 pages long! (As well as the other RE Purchase & Sale contracts). The revised purchase and sale contract references a new “Standard Terms for Contract” document that includes the entire standard, infrequently negotiated, boilerplate language needed to effectively protect the parties involved in your transaction. The “Standard Terms for Contract” can be electronically emailed, printed out, or simply just referenced in the new purchase and sale contract. These “Standard Terms for Contract” will be accessible on www.gareforms.com, which is a public website for anyone to view, including lenders, co-op agents and the general public.
Reducing the number of pages needed in the purchase and sale contract, is environmentally friendly and makes the contract more succinct and easier to work with because once the various parties to the contract become familiar with these standard terms, they will not have to continually review them as part of counter offers or subsequent contract negotiations.
Click below to see the revised:
- RE 100 – Contract for the Purchase & Sale of Residential Real Property
- RE 1 – Standard Terms for Contract
- RE 101 – New Construction Contract for Purchase & Sale of Residential Real Property
- RE 102 – Multi Family Contract
- RE 103 – Contract for Purchase & Sale of Developed Lots
- RE 104 – Contract for Purchase & Sale of Undeveloped Lots
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Brokerage (Agent) Relationship with Public (7/7/14)
In the Purchase & Sale Agreement (both GAR forms and RE Forms) there is a section to indicate the relationship that the Brokerage has with both the Buyer and the Seller. There are 4 possible relationships that the public Buyer or Seller may have with the Brokerage: Client, Customer, Designated Agency, Dual Agency.
Options to Complete in Contract:
Client: This option means that the public has engaged in a fiduciary relationship with the Brokerage & that Brokerage legally represents their best interest in the contract.
Customer: This option means that the public has engaged the Brokerage merely to complete the contract form. The agent has a duty to be honest and ethical but is not charged with looking out for the customer’s best interest relative to the terms of the contract.
Designated Agency: This option means that Both the Buyer & Seller have a client relationship with the same Brokerage and the Broker has designated one agent to work with the Buyer & a different agent to work with the Seller in negotiating this contract. Each agent is charged with looking out for the best interest of their respective client although both working for the same Brokerage.
Dual Agency: This option means that Both Buyer & Seller have a client relationship with the same Brokerage and the same agent is representing the best interest of both parties.
Other Form to Describe the Relationship you Indicated in the Contract: When you complete the contract and choose one of these options, it also means that you have another document signed by the public that further describes the Buyer & Seller relationship with the Brokerage.
Seller as Client: When the Seller signs a Listing Agreement with the Brokerage, this is the document that creates and describes the client relationship.
Buyer as Client: When a Buyer signs a Buyer Brokerage Engagement, this is the document that creates & describes the client relationship. BRETTA requires that an Agent have the Buyer sign this document for Buyer Agency.
Seller as Customer: The Authorization to Show Unlisted Property is the document that creates and describes the customer relationship – and spells out the arrangements for the Seller to pay commission.
Buyer as Customer: The Customer Acknowledgement is the document that creates and describes this relationship.
All Brokerages require that clients sign a Listing Agreement and Buyer Brokerage Agreement with their firm. Each Brokerage has its own policy requiring the customer documents. Maximum One requires that agents have their Buyer & Seller customers sign the above documents.
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Running Close on Due Diligence Deadline (6/30/14)
In the majority of Binding contracts, the Buyer and Seller agree to a Buyer’s Due Diligence / Right to Terminate period. This time frame creates an option contract within the Purchase & Sale contract. This is the time period within which the Buyer should satisfy himself with proceeding with the purchase. Georgia is a caveat emptor state meaning “Let the Buyer Beware” ….the principle that a person who buys something is responsible for making sure that it is in good condition, works properly, etc.. During this time frame, a Buyer may request that the Seller address various concerns and negotiate through these items. After this time frame, the Buyer agrees to purchase the property “as-is.” A Buyer also has the option of terminating the contract for any reason and receive a full refund of the earnest money provided they do so PRIOR to the end of this negotiated time frame.
In the GAR Contracts, the appropriate amendment is: F107 – Amendment to Address Concerns with the Property. In the RE Forms, the appropriate amendment is: RE262- Amendment During the Buyer’s Right to Terminate Period.
So what do you do as an agent if you represent a Buyer, the Buyer wants to negotiate with the Seller to address various concerns with the property and you cannot get any response from the Seller. How should you proceed to protect the Buyer’s earnest money?
- Send an Amendment to Listing Broker extending the Buyer’s Due Diligence / Buyer’s Right to Terminate time frame & explain in an email why you are making this request
- Make sure that the Buyer goes on the inspection & perhaps you want to go as well to determine at the time if there are any major issues to request of the Seller. You do not need to submit the inspector’s report along with the Amendment to Address Concerns with the Property
- If the Buyer does want to make any requests of the Seller, make sure that the Buyer is readily accessible during the time frame after the inspection & prior to the end of Due Diligence in order to negotiate through any items in a timely manner.
- If you do get towards the end of your Due Diligence / Buyer’s Right to Terminate Period time frame, there is a Special Stipulation you can use on your Amendment that states that if the Seller does not accept the Amendment, then the Buyer terminates. This is included in the RE Form Amendment with a check box and in the GAR contracts you would have to append the Special Stipulation with the verbiage.
Remember that if the Buyer does terminate with this option, you must follow this up with the Agreement to Disburse Trust Funds / Earnest Money.
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Binding Agreement Date (6/23/14)
The Binding Agreement Date (GAR term) or Acceptance Date (RE Forms term) is the date on which the LAST party to make a counter offer or change to the contract is NOTIFIED that the other party has accepted their last change. All of the dates in the contract are timed form this date. Therefore it is imperative that all parties agree on this exact date.
Definitions:
- GAR Purchase & Sale: Per paragraph C4f: “The Binding Agreement Date shall be the date when the party making the last offer, or the Broker, the Broker’s employees or affiliated licensee of Broker representing this party as a client, receives notice that the offer has been accepted. This party (or the Broker or affiliated licensee of the Broker representing the party as a client) shall fill in the Binding Agreement Date below and promptly give notice of this date to the other party.”
- RE Forms Purchase & Sale: Per paragraph 11.9.1 “Acceptance (Accepted): Prior to being withdrawn, revoked or terminated, in writing, and in accordance with any provision in this Contract, if the receiver of an offer accepts it exactly as presented, without modification, provided acceptance is communicated, in writing, to the party making the offer.”
Who Completes the Binding Agreement Date?
The agent who RECEIVES the notice that all terms have now been accepted and there will be no more negotiating.
How Do I Ensure That All Parties Agree on That Date?
Make sure that all agents have a copy of the fully executed contract with the Binding Agreement Date properly filled in by the appropriate party. Additionally, you may use the GAR F124 – Binding Agreement Date Notification to insure that all parties are in complete agreement as to the Binding Agreement Date. If you are using the RE Contract Forms, then use the RE Form 265 Notice of Acceptance to communicate this same information.
Potential Problems With Ambiguity Over the Binding Agreement Date: (6/23/14)
Since the performance dates in a contract are timed from the Binding Agreement Date, there are many potential problems if there is any ambiguity over this date. These issues typically revolve around a party fulfilling their contingency obligations within the allowed-for time frame or defaulting on the contract. If a Buyer believes that the Acceptance Date is later than the Seller believes then the Buyer may terminate on Due Diligence or Financing Contingency believing that they are within their time frame per the contract and will receive their Earnest Money; the Seller may believe that the Buyer terminated by default AFTER their time frame and want the Earnest Money as liquidated damages. This type of issue may be prevented with full knowledge & agreement of the actual Binding Agreement Date (Acceptance Date) at the time the parties go under contract!
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Contract Information for an Unrepresented Party (6/19/14)
When one of the parties in a contract is unrepresented by a Brokerage (has a Customer relationship vs. a Client relationship with the Brokerage) you must include that party’s contact information in the contract. If there is no contact information for an unrepresented party, there is no way of providing legal Notice to that party. This fact holds for the GAR contract and the RE Contract. Therefore, you must include an email address, fax number or mailing address for any customer in a transaction.
GAR- Purchase & Sale Agreement (Notices – Paragraph 14; Agency – Paragraph 11)
- All Notices must be in writing – this include offers, counteroffers, demands, terminations, etc.
- Notice is received when it is delivered to the person for whom it was intended OR the person’s “authorized agent.”
- If Buyer or Seller is NOT in an Agency relationship with a Brokerage, then they are “solely responsible for protecting their own interests and the Broker’s role is limited to performing ministerial acts for that party.”
- “Notices to a signatory to this Agreement shall only be effective if sent to the Fax number, email address &/or the physical address of the signatory listed on the signature page of this Agreement or subsequently provided by the signatory to the other signatories hereto in accordance with the notice provisions herein.”
RE Forms – Contract for the Purchase & Sale of Residential Real Property (Brokerage – Paragraph 8; Notices – Paragraph 10)
- Any Notice must be sent to the party to the party at its address (email or physical) as set out in the contract.
- Any party not represented by a Broker shall take full responsibility for protecting his own interests.
Bottom Line: As an agent involved in a transaction with an Unrepresented Buyer or Seller (No Listing Agreement or Buyer Brokerage signed) MUST include contact information IN THE CONTRACT of that unrepresented party in order for any of the parties or brokerage to communicate with that unrepresented party and for that communication to hold up in court as “legal notice.” This would be extremely important in complying with the time frames of the contract (i.e. notice regarding meeting contingencies, terminating within specific time frames, Holder’s Notice of decision to disburse earnest money in dispute, etc.)
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The Consultant (6/9/14)
The term consultant can cover services in many industries. The real estate industry in particular has many professionals that refer to their services as consulting. The real estate consultant must be licensed by the Georgia Real Estate Commission. There
are exceptions to this rule, but they do not apply to individuals holding an active or an
inactive real estate license. The exceptions to licensure are detailed in License Law 43-40-29.
The purpose of this article is to make it clear that persons performing real estate
activities for another party for a fee, and who are not doing so as a full time employee of
that owner, company, or individual, must obtain and maintain a real estate license in
Georgia.
To further clarify, consider the following examples:
1. Consultants that negotiate and interface with property owners and landlords for
locations of property, including purchases, leases, or amendments to purchases and
leases or other discussions that affect rights of use of property and improvements,
such as cell towers or retail space and other structures, all have to be licensed by the
Georgia Real Estate Commission.
2. If a licensee wants to work as an employee for a company to locate sites, can he/she
still maintain his/her real estate license on inactive status? No. the license must be
surrendered to work as the full time employee performing real estate activities.
Reference License Law 43-40-12(g) “Any licensee whose license has been placed on
an inactive status shall not engage in the real estate brokerage business except in
connection with property owned by the licensee.” If the individual later wants to
in real estate brokerage other than as an employee, he/she must apply for a license as
an original applicant.
3. A consultant, business broker, or individual that provides services in anticipation of
being paid in the sale of a business which includes the transfer of the lease on the
property must be licensed as a real estate licensee.
4. A real estate licensee cannot legally share a commission in a transaction with an
unlicensed person who is illegally practicing brokerage activities.
The Commission has authority to stop those practicing real estate without a license.
This includes individuals practicing with an inactive license or a license that is not in good
standing. The Commission issues a Cease and Desist Order to the individual practicing
real estate without a license requiring him/her to Cease and Desist from any further
that require a license issued by the Commission.
The Commission is authorized to impose a fine up to $1,000.00 for each transaction
constituting a violation, and each day the party continues to act in violation is considered
another violation resulting in an additional $1,000 per day. Clearly, the fines can be
extensive.
The Commission receives complaints concerning those practicing real estate without a
license, and the Commission is required to investigate all Requests for Investigations.
Consider two investigations resulting in cases involving individuals operating without a
license: the first is a consultant never licensed by the Commission, and the second case
involves a broker whose license was inactive or lapsed. Note that a transaction does not have to be completed for a violation to occur.
Cease & Desist Order
The Commission received reliable evidence that an individual, for valuable consideration,
offered, attempted, or agreed to perform, directly or indirectly, acts that require a license
from the Commission. The individual advertised real estate services such as locating
investment properties for investors for a fee. Therefore, he acted in the capacity of a
licensee in Georgia, although he was not and had never been licensed as a real estate
licensee. A Cease & Desist Order was issued and in this case the individual consented
to pay $1,000 and immediately stopped performing real estate activities. An individual
in a different case continued to practice without a license after the Cease and Desist
Order was in effect and as a result paid over $50,000 for administrative, investigative,
and legal costs and expenses.
Citation to a Licensee
A commercial broker let his license lapse for 3 months, and was on inactive status for 3
months prior to that. During that time the licensee worked as a fulltime employee of an
unlicensed company conducting real estate brokerage activities. A Citation was issued and
the licensee was required to comply with the following:
1. Reimburse the Commission for its administrative, investigative, and legal costs and
expenses in this matter in the amount of $1,000.00 within 30 days.
2. Successfully complete a three hour course approved by the Commission on the subject
of legal issues and the avoidance of license law violations.
Regarding unlicensed consultants, two key points should be made:
1. The party performing the acts of a licensee without being licensed is violating the law.
2. The broker (or any real estate licensee) who pays a consultant, subcontractor,
individual, etc. that is not licensed is violating the License Law as well. License Law 43-40-25. For example, if a licensee cooperates with an independent contractor that is not
licensed in a real estate transaction and shares his/her commission with that
unlicensed party, the licensee has also violated the license law.
License Law 43-40-25. It is considered an unfair trade practice and violation to pay a
commission or compensation to any person for performing the services of a real estate
licensee who has not first secured the appropriate license under this chapter or is not
cooperating as a nonresident who is licensed in such nonresident’s state or foreign country
of residence.
It is interesting to note that a dictionary states that a license is required to practice
real estate services. The Language of Real Estate, by John W. Reilly, now in its Seventh
Edition, defines a consultant as “one who gives advice in a specific area, such as a
financial adviser. A real estate consultant who performs services similar to a real
estate broker would have to be licensed under state law.”
Professionals who want to practice real estate brokerage must invest considerable
time and money to become trained and obtain and maintain a real estate license. The
Georgia Real Estate Commission is tasked with enforcing the License Laws, Rules, and
regulations and protecting the public interest regarding real estate matters.
Reprinted from GREC Newsletter March 2014: http://www.grec.state.ga.us/PDFS/About/newsarticles/2014GRECRENewsMarch.pdf
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Appraisal Concerns (6/1/14)
After taking a CE class on Appraisals and having conversations with at least 2 active appraisers in our market, below are some tips which will help your closings!
List The Property in FMLS / GAMLS – In today’s market, many listings are selling quickly even before you have a chance to list it in the services. Regardless of gong under contract quickly, you need to list that property in FMLS & GAMLS!
- The Appraiser must indicate if the transaction was “arms length.” Without it being exposed to the “open market” by virtue of the listing services, the assumption is that a family member or business acquaintance purchased the home directly from the Seller. This will affect the appraisal value.
- Exposure to the Open Market – The Appraiser for additional reasons must indicate that the property was exposed on the open market. The only way for this exposure to occur is through the listing services.
- Future Comps – Without the listing showing, you will not be able to use this sale as a comparative property for future business.
- Your Agent Productivity – You may improve you own agent statistics for future business by showing the price you sold the property for & the short number of Days on Market
- FMLS gets paid anyway – FMLS is due a fee if you have an Exclusive Listing Agreement & the property is in a compulsory area. FMLS is due this fee (& Brokers are collecting) when these circumstances are met regardless of how quickly you go pending.
Present The Comps to the Appraiser – The Appraiser will greatly appreciate seeing the research you have done to justify the sale price., If you are the listing agent, you will already have comps from when you fist listed the property to determine an appropriate list price. If you are the selling agent, then you will have a set of comps to justify the sale price to your Buyer. So regardless of which side of the transaction you are on, please help the appraiser by sending a copy of your research to him or her BEFORE he completes the appraisal. The time to get this information to the appraiser is BEFORE; if you gather all this research and present it after you get a low appraisal value, it goes through an entirely different process & the original appraiser is no longer involved. Also, if an appraiser must return to the property for a re-appraisal, there is a fee that will be charged to the Buyer… you can possibly prevent costing a party this expense.
Meet the Appraiser at the Property – This way you can point out the features / upgrades / renovations / repairs to the property of which the appraiser may not be aware. For example, new wiring, new appliances, etc have value. It’s easy to make this happen if you are the listing agent. Simply tell the lender when the appraisal is ordered that there is no lockbox so appraiser will have to schedule appointment with you; indicate a large dog inside the house – appointment necessary, etc! Also, the appraisers to whom I spoke mentioned that cookies, other food & wine are also greatly appreciated!
In conclusion, help the Appraiser help you get to a smooth and timely closing!
- Names of the Parties: Buyer & Seller
- Agreement Between Buyer & Seller
- Sufficient Legal Description of the Property
- Purchase Price & Terms of Payment
- Closing Date
- Miscellaneous Conditional Clauses
- Stipulations Concerning Brokerage & Brokerage Fee & Compensation
- Signatures of all Essential Parties to the Agreement
- The wording must be definite enough for the parties to know whether and when fulfillment of the contingency or the condition occurs.
- The clause must identify clearly the party to the contract with the responsibility to perform each act that is the subject of the contingency clause.
- There must be a clear indication of the right to waive the contingency.
- The wording of the contingency must offer protection to each party to the contract.
Earnest money is OTHER PEOPLE’S MONEY that is entrusted to YOU to handle! Please treat it as if it was your own or as if your license was on the line… because it is!
Earnest Money must be received and deposited per the contract in which you are involved. You are responsible for tracking those dates. If you do not have Earnest Money in hand when writing the contract, make specific arrangements to get it (in person is the best way.) If your client (or a co-op client) is to mail it to a brokerage, make sure that the earnest money check references the property and that somewhere in that correspondence, you as the agent are referenced. If an office receives a check for earnest money, with no property address or agent name, we have NO WAY of attributing that money to the proper Buyer/property. If a Buyer emails earnest money to the office and addresses the envelope to you, staff will put this in your mailbox. It is YOUR responsibility to determine the receipt of the earnest money for a contract.
There are contractual consequences to earnest money not being deposited in a timely manner or if earnest money is dishonored by the bank.
- Earnest Money to be deposited within 5 banking days from the later of receipt or Binding Agreement date
- If Earnest Money is dishonored by bank or not timely paid, then the Buyer is in DEFAULT of the contract
- The Holder shall give notice to the parties.
- Buyer has 3 banking days to cure the default
- If no cure, Seller has right to TERMINATE the contract within 7 days.
RE Forms Contract for the Purchase & Sale of Residential Real Property Paragraph #3: “Earnest Money”
- Earnest Money to be deposited within 3 banking days of receipt of Accepted contract
- If Earnest Money is not received or not honored by the bank, the Buyer is in DEFAULT of the contract
- The Holder shall give notice to the parties
- Buyer has 3 days to cure default
- If Buyer does not cure, Earnest Money is no longer part of the contract
- Seller may TERMINATE the contract within 3 days OR
- Seller may demand full performance of contract
MX1 Contract Compliance: Paperless Pipeline will track Binding Agreement Date, Receipt of Earnest Money, Deposit of Earnest Money. If the receipt and deposit are not per the contract, your file will not be marked compliant.
Rule 520-1-.14: Citations
(t) Failure of a licensee to deposit trust funds promptly where the deposit was made more than three business days after receipt unless the contract provides otherwise. 43-40-
25(b)(3). Fine of $600.00.
- choose one offer and sign it unchanged
- elect not to accept any of the offers presented
- decide to make a counteroffer on one and reject the others
- elect to make a counteroffer on one and simultaneously make contingent counteroffers on the others
- elect to make contingent counteroffers on two or more of the offers
HANDLING AN OFFER RECEIVED AFTER A CONTRACT IS CREATED
BREAKING ONE CONTRACT TO ACCEPT ANOTHER
It is against the law for a licensee to induce the seller to break an existing contract for the purpose of accepting another offer, even if the terms of the subsequent offer are more favorable to the seller. The licensee’s obligation is solely to present subsequent offers to the seller. If the seller wishes to enter into a back-up contract with a subsequent offeror, he or she may do so, and the licensee may facilitate the same provided the original contract is not breached and the back-up contract is contingent upon a termination of the original contract.
Multiple Counter Offer Verbiage
This Counteroffer is being made to more than one prospective buyer. Notwithstanding any other provision to the contrary contained elsewhere in this Counteroffer or in the original Offer, acceptance of this Counteroffer will not create an enforceable contract between the Buyer and Seller herein unless it is accepted and delivered back to the Seller prior to the following: (1) the time limit of the Counteroffer, and (2) prior to the acceptance and delivery back to Seller of this Counteroffer by any of the other prospective buyers to whom this Counteroffer has been made.
This Counteroffer may only be accepted in writing delivered to Seller’s Listing Broker by facsimile at the following number: _______________________________________________. Notice to Seller’s Listing Broker shall be deemed to be notice to Seller. Listing Broker shall maintain a list of the prospective buyers and determine which prospective buyer, if any, is the first to accept and deliver back to Seller this Counteroffer. All parties agree that the determination of the Listing Broker in this regard shall be final and binding upon Seller and all prospective buyers. Upon the receipt by the Listing Broker of the first acceptance of this Counteroffer meeting the terms and conditions specified above, the Listing Broker shall promptly notify said buyer that a Binding Agreement has been formed between said Buyer and Seller. The Listing Broker shall also promptly notify the other prospective buyers that a binding agreement has been formed with another party.
OR
We are involved in a multiple offer situation on the above referenced property. ALL OFFERS will be considered subject to the
following:
1. All offers must in writing-no verbal offers will be accepted.
2. The Listing Agent must receive your written “best” offer no later than _______(time) on_ _____(date). “Multiple Offer
Period”
3. Delivery of such offer may be via email or facsimile to:
Listing Agent & Broker: ________________________________________
Telephone Number: _____________________________
Facsimile number: ______________________________
Email Address: ______________________________________
4. The Listing Agent will submit all offers to Seller(s) via Seller’s email, at close of Multiple Offer Period.
5. The following terms and conditions shall be applicable to you and to any offer you wish to submit:
a) Seller(s) shall have sole and absolute discretion to accept or reject any offer received. Seller(s) is not required to accept
any particular offer, regardless of its terms, and has the absolute right and discretion to reject all offers.
b) The acceptance of any offer shall be conditioned upon the subsequent execution by the Buyer(s) and Seller(s) of a written contract of sale, including all required addenda and setting forth terms and conditions satisfactory to the Seller.
c) The Seller(s) shall have no obligation to sell the property unless and until such written contract is fully executed.
Please sign below to acknowledge your understanding and acceptance of these terms and procedures and return this form to
the Listing Broker no later than the time designated for the transmittal of offers. Failure to transmit such acceptance may
prevent your offer from being considered.
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FMLS Compulsory Listing Requirements & Areas (4/14/14)
All Brokerages that are a member of FMLS & all agents affiliated with those Brokerages are required to adhere to all of the FMLS Rules & Regulations. There have been some issues lately between FMLS & Brokerages & Agents regarding FMLS fees not being collected on listings that sell because the listing agent did not enter the listing into FMLS (because it sold too quickly!)
According to FMLS Rule 18, once a Listing Agreement is signed, it is considered filed with FMLS (if it is in a compulsory area.) It is imperative that all FMLS members, both brokers and agents, be aware of, and abide by, our longstanding Rule 18 as quoted below:
Rule 18 – FMLS Listing Effective as Provided in the Listing Contract
At such time as any listing contract is signed (Agreement Date), the property is considered filed with FMLS. Should the property be sold before the listing is entered into the FMLS computer system or sent to FMLS, the sale must be reported as an FMLS sale and any FMLS fee must be paid.
Rule 6 – Compulsory Listing Area
6.1 The geographical area covered by FMLS is divided into two (2) categories:
a) A compulsory listing area in which all properties, subject to the provisions of Rules 3 and 4 hereof, must be listed with FMLS. The compulsory areas are the following counties: Barrow, Bartow, Cherokee, Chattooga, Cobb, Dawson, DeKalb, Douglas, Floyd, Forsyth, Fulton, Gordon, Gwinnett, Hall, Haralson, Jackson, Lumpkin, Paulding, Pickens, Polk and Walton.
b) All other areas are considered non-compulsory. Listings on properties in these areas, subject to the provisions of Rules 3 and 4 hereof, may be listed with FMLS.
All FMLS Rules & Regulations are available on www.FMLS.com and on the online Orientation Manual.
FMLS Listing & Fees for New Construction – Exempt until house or condo is sheet rocked.
Per Rule 3.2c New residential dwellings including condominiums under construction from date of starting until the interior has been sheet rocked. Note: When the interior of such a residential dwelling is sheet rocked, such dwelling must be listed with FMLS, except as provided in Rule 5.
Due to our Membership with FMLS, Maximum One will be collecting FMLS fees for any listings that are sold when they are in a compulsory area even of the Listing Agent did not enter the listing into FMLS.
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Procuring Cause of Sale (4/7/14)
The concept of Procuring Cause of Sale is not easily defined in today’s real estate marketplace. The issue boils down to which brokerage rightfully is due a commission for bringing a buyer to a seller and consummating that relationship in a sale.
Based on case law in Arizona, NAR defined “procuring cause” as a broker whose “efforts are the foundation on which the negotiations resulting in a sale are begun.” The Georgia courts have tended to express the definition of procuring cause in terms of whether the broker initiated the key uninterrupted series of events which resulted in the sale of the property.
This legal definition, however, is not so easily resolved in practice. These issues are unclear when a Buyer signs a Buyer Brokerage agreement with an agent of one brokerage, that agent shows them property, signs them up for a Listingbook account or Client Gateway account or a Buyer Search on their agent website and then that Buyer goes out on their own and signs binding contract with an agent from another brokerage.
In their arbitration manual, NAR has suggested the following list of issues to consider when attempting to determine the answer to disputes over which brokerage is due a commission in a dispute over procuring cause of sale:
- Who first introduced the buyer to the property?
- When was the first introduction made?
- How was the first introduction made
- Did the broker who made the initial introduction to the property engage in conduct (or fail to take some action) that caused the buyer to utilize the services of another broker?
- How do the efforts of one broker compare to the efforts of another?
- If more than one cooperating broker was involved, how and when did the second cooperating broker enter into the transaction?
- What was the length of time, between the broker’s efforts and the final sales agreement?
- Did the broker who made the initial introduction to the property maintain contact with the buyer?
- Did the buyer make the decision to buy independent of the broker’s efforts/information?
- Did the buyer seek to freeze out the broker?
Under most circumstances, a broker is due a commission when they find a ready, willing and able Buyer who writes a contract acceptable to a Seller (O.C.G.A. 10-6-32.) This definition allows for a commission deemed earned when this event happens (and no other agreement is in place to the contrary) regardless if the transaction actually closes.
There are other issues to consider in this matter as well! For example, depending upon the verbiage of the Buyer Brokerage Agreement that the Buyer signs, the Buyer’s broker may be entitled to a commission by virtue of the agency relationship alone. The question in this situation then becomes one of who is responsible for paying that commission to the brokerage… the Seller or the Buyer? A Buyer is entitled to their own representation apart from a listing broker; the time, however, that the Buyer asks for that representation and the process by which that Buyer contracts to purchase a home, may be more indicative if the BUYER rather than the Seller would be responsible for paying the commission to the Buyer’s Broker.
The generally accepted “test” of procuring cause of sale is being able to answer the question, which Broker was responsible for initiating the uninterrupted sequence of events that results in a binding contract between a Buyer & Seller (Landlord & Tenant.)
The broker risks the commission unless he or she actively participates in the activities of bringing buyer and seller together and helps in the negotiations. To strengthen the case for a commission earned, the broker’s agent should closely monitor the progress of the parties after they sign the contract and assist in the consummation of sale. The broker does not earn a commission when he or she has been unable to obtain an appropriate offer and negotiations have broken off, even if later either the owner or another broker closes the transaction with the same person. The right to a commission under a procuring cause theory expires upon the expiration of the agency relationship.
The bottom line is there is no clear answer to this issue when a Buyer signs a Buyer Agency Agreement with Broker #1 & then signs a contract with Broker #2. Merely bringing properties for sale to a Buyer’s awareness nor the “threshold test” (i.e. actually showing property) in and of themselves do not constitute procuring cause. Neither does signing a Buyer to a Buyer Brokerage Agreement in and of itself protect the Broker for a commission earned under the procuring cause reason.
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Real Estate Sales Contract Must Be Definite & Complete (3/30/14)
Under Georgia Law, there are 8 elements (and per BRRETA) which must be definite & complete in a contract for real property in Georgia.
These elements include:
1. Names of the Parties (& the Brokers)
2. Legal Description of the Property
3. Agreement Between the Parties
4. Purchase Price and Terms
5. Closing Date
6. Stipulations Regarding the Brokerage & Compensation of the Brokers
7. Various Contingency Clauses
8. Signatures of the Essential Parties
9. Agency Relationships between the Brokers and Parties (BRRETA)
Closing Date
The Contract MUST identify a specific Date by which the transaction must close in other words a specific end to the terms, obligations and interests of the parties with regards to the Agreement for Purchase & Sale. So the contract must state a specific or definite date OR a a date or or before which the transaction must close. The parties may agree to extensions in the initial closing date specified and there may be contractual extensions (i.e. unilateral extension in the GAR Purchase & Sale Agreement.
However, a contract is potentially unenforceable without a specific date or ultimate date by which the transaction must close. For example, you may not write in, “Closing to occur within 60 days of Buyer’s receipt of Short Sale Approval.” In other words, you cannot time a closing based off of some unspecified /ambiguous date. Who knows when or if the Seller’s lender will approve of the terms of the short sale.
Another example we typically see in Investor Contracts: “Closing to occur within 15 days from end of Due Diligence Period.” This is a bit more acceptable IF the Due Diligence period has been specified by a specific number of days after the Binding Agreement Date – however this is not quite enforceable! To make this scenario complete according to Georgia Law, the contract should read: “Closing to occur within 15 days from the end of the Due Diligence Period and to not extend beyond March 26, 2014.”
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Hidden Time Frames in Financing Contingency Exhibits (3/24/14)
Regardless if you represent a Buyer or a Seller, there are many time frames in the Financing Exhibits to which you must pay attention. Some of these dates are obvious yet others are hidden. The time frame for the Buyer’s Loan Application & the time frame for the actual contingency portion are obvious. Remember that these time frames are referenced from the Binding Agreement Date so it is VITAL that you include that on ALL of your contracts, Counteroffers & Amendments.
Some of the not-so-obvious time frames are timed from other events within the exhibits.
GAR: Conventional Loan Exhibit
- Additional Lenders: Buyer must “immediately” notify Seller of a lender from whom they apply for a mortgage if it is a lender other than the one stated on the Exhibit.
- Loan Commitment Letter: If the Buyer does NOT terminate based on the financing contingency, the Seller may request a Loan Commitment Letter from each lender from whom the Buyer applied for a loan. Buyer has 7 days from receipt of this notice to provide this letter. The Seller may not make this request less than 7 days from the date of closing.
- Appraisal Contingency: If property appraises for less than sale price, Buyer has ___ days to request Seller to reduce the price. This number of days is negotiated up front. Seller may accept or reject the earlier of 3 days from receiving Amendment OR day of closing. If Seller does not accept Amendment, Buyer may terminate with notice within 3 days of notice that Seller not accepting lower price or the date that the Seller had been given to accept the reduced price.
GAR: FHA Loan Exhibit
- Additional Lenders, Loan Commitment Letter: Same as in the Conventional Loan Exhibit
- Appraisal Contingency: If the property appraises for less than the agreed upon amount (negotiated up front between the parties) the Buyer has until the Day of Closing to terminate the contract and receive their earnest money back.
- Public Sewer & Public Water Connections: If available, property must be connected to these public services & Seller shall provide this certification at Closing.
GAR: VA Loan Exhibit
- Additional Lenders, Loan Commitment Letter: Same as in the Conventional Loan Exhibit
- Appraisal Contingency: If property appraises for less than Sale Price, Buyer has until Day of Closing to terminate the contract and receive their earnest money back.
- Public Sewer & Public Water Connections: Same as in the FHA Loan Exhibit
- VA-Mandated Repairs: If repairs exceed the dollar amount as agreed upon between the parties, Seller has the right to terminate prior to closing.
RE Forms: Contract for the Purchase & Sale of Residential Real Property (Appraisal & Financing Contingencies contained IN the Purchase & Sale)
- Appraisal Contingency: This time frame is negotiated between the parties up front. If, the property does not appraise for Sale Price, Buyer may terminate or send Seller Amendment to sell for lower price within this time frame.
- Financing Contingency: Time frame for loan contingency is negotiated up front between the parties.
- Underwriting Criteria of FHA / VA / USDA / FNMA / FHLMC Increasing Seller Costs: If this occurs, Seller may terminate within 3 days of receipt of notice of these increased costs.
RE Forms: FHA Loan Exhibit and VA Loan Exhibit
- Appraisal Contingency: If the property appraises for less than the agreed upon amount (negotiated up front between the parties) the Buyer has until the Day of Closing to terminate the contract and receive their earnest money back. (Same as GAR.)
- Appraiser-Mandated Repairs: If these exceed amount agreed-upon between the parties, Seller may terminate.
- Septic Tank or Well Inspections: If required by Buyer’s lender, Seller shall provide inspections / certifications to Buyer at least 10 days prior to closing.
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Hidden Time Frames in The Contracts (3/17/14)
There are many time frames to which the Buyer & Seller must adhere for a successful closing! Many of these time frames are readily apparent and others are hidden!
Every time you go under contract (whether you repesent the Buyer or Seller) I suggest you print out a blank calendar and go through the contract & write down the actual dates/deadlines for all of the responsibilities and obligations of the parties. Give a copy of this calendar to your client & your co-op agent. In the GAR forms, there is a helpful form: F76: Reminder of Important Dates in Purchase & Sale Agreement.
In addition to these obvious dates, there are many “hidden” dates inherent in your binding contracts. Read through the contract to familiarize yourself with these important time frames and their consequences on your clients’ responsibilities and obligations. Please make sure to note the if the time frames in the contract are Banking Days or Calendar Days.
GAR Purchase & Sale:
- Closing & Possession – Paragraph B5a – Parties may unilaterally extend closing 7 days upon notice to other party given these specific circumstances (The Unilateral right to extend the closing is NOT provided for in the RE FOrms Contract for Purchase & Sale of Real Property.)
- Earnest Money Not Received or Not Honored by Bank – Paragraph B6 – Buyer has 3 Banking Days right to cure this default. If the default is not cured, the Seller has 7 calendar days to terminate the contract. After that time frame, the parties proceed with no earnest money in the transaction.
- Earnest Money Disbursement – Paragraph B6 – Holder does not have to disburse the earnest money to any party until it has cleared the bank. Every Brokerage has a policy on this issue – Maximum One will not disburse any earnest money written on a personal check for 10 days. This is important for quick closings or quickly terminated contracts or contracts where earnest money has been deposited to the Brokerage and then is required to be held by another brokerage or closing attorney.
- Earnest Money Disbursement Upon Dispute – Paragraph B8b – The Holder of the Earnest Money has at their disposal the option of interpresting the contract, sequence of events and disburing the earnest money to one of their parties after giving a 10 day period after giving notice of their decision. Read this paragraph for the specifics of additional time frames.
- Risk of Damage to Property – Paragraph – C3 – If the property is destroyed or substantially damaged prior to closing, Seller must give notice to the Buyer & the Buyer or Seller have 14 days from the date of this notice to terminate the contract. If neither party terminates, then the transaction must close within 1 year from the original date of the contract or within 7 days of notice that property has been restored… whichever comes first.
RE Forms Contract for the Purchase & Sale of Real Property in Georgia
- Deposit of Earnest Money – Paragraph 3.1 – Escrow Agent shall deposit 3 banking days after receipt
- Buyer’s Failure to Remit Earnest Money or Not Honored by Bank – Paragraph 3.2 – Buyer has 3 calendar days to cure the default. Seller has 3 calendar days after that to terminate or all parties proceed with no earnest money in the transaction.
- Earnest Money Disbursement Upon Dispute – Paragraph 3.3 – Escrow Agent may interpret the sequence of events leading to the failure to close & determine to which party to disburse the funds & may do so 10 days after giving notice to the parties.
- Property Condition – Paragraph 7.2 – Seller to have all agreed-upon repairs completed no later than 3 days prior to closing
- Damage to Property Prior to Closing – Paragraph 7.3 – If Property is destroyed or materially damaged prior to closing and Seller is unwilling or unable to restore it prior to closing, Buyer has right to terminate or accept property in damaged condition with rights to insurance claims.
- Default – Paragraph 9 – Parties have 3 banking days to cure default after receiving notice.
- Notices – Paragraph 10 – Parties have 5 Banking Days to notify other party of change of mailing address.
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HOA & Condo Issues (3/10/14)
All condominiums and many other properties have mandatory associations, and there are several additional requirements and considerations in getting these properties ready to close. The HOA information will show up on a title search of the property so consult with your closing attorney after you first make an attempt to discover the following information. Due to the increasing costs of these HOA clearance & transfer letters, you and your clients will be best served by researching all the HOA information during the Buyer’s Due Diligence time frame to avoid any unforeseen expenses at the closing table for the Buyer or Seller or YOU, the agent!
- Community Association Disclosure in Purchase and Sale Agreement – Be sure that this form is included and completed, including initiation fees, pending or current special assessments, and amount of dues (annual, quarterly, or monthly)
- Contact info for HOA treasurer or management company – Listing agent should get this info from the seller as early as possible. This is more difficult when the seller is a bank or Fannie Mae, and the agent may need to get the info from neighboring owners.
- Ordering the HOA status letter – This is done by the closing attorney, but many HOA management companies now require the letter to be prepaid by the seller before providing the letter to the attorney. This can be difficult to explain and obtain from many sellers, especially banks and Fannie Mae.
- Receiving the HOA status letter – Many HOA management companies have a billing structure that charges more for “rush” letters, sometimes up to $200. Each company has its own definition of “rush”, some being less than 7 days.
- Initiation Fees – Many HOAs have a provision for an initiation fee in their by-laws that has not been enforced until recently. A Seller may disclose that there is no initiaiton fee because they never had to pay on; with so many distressed properties, HOAs are trying to recoup some of their lost fees by enforcing the initiaion fee to new Buyers.
- Approving the figures on the HOA status letter – Most REO sellers require additional time, sometimes up to 72 hours, to review and approve any amounts due from the seller on an HOA letter. This is in addition to the usual 48-72 hours to approve the HUD-1.
- Funding for Condos – Depending on the number of distressed properties in a complex, certain types of funding for a condo purchase may be difficult.
- Condo or Townhouse – Condo refers to ownership NOT style! Please make sure you know the type of ownership of the until despite if it is one story or two, attached or separate
- Investment Property – Depending on the percentage of owner-occupants in a complex, an owner may be prohibited from renting out a condo. Find this information out during a Buyer’s Due Diligence time frame.
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Bonuses/Incentives Offered on Listings (3/3/14)
If a Seller is offering a Bonus to the Selling Broker, make sure that you have that agreed upon in writing and signed by both the Listing Brokerage & Selling Brokerage. The advertisement of a bonus or incentive is not a guarantee that it will be paid without this written agreement. Additionally, make sure that you know if there are any time-frames attached to that Bonus. So if an incentive such as a Selling Bonus or Home Warranty is advertised in FMLS or on any marketing literature, those incentives must be written and agreed upon contractually.
For example, HUD has very specific rules regarding the Broker Bonuses they pay. The Bonus must be specified in the initial contract and the amount of the bonus depends on how many days it takes the Buyer to close.
All Selling Bonuses must be paid to the Broker, not to the agent directly. License Law provides that a real estate licensee may accept compensation for real estate brokerage services only from his / her broker unless he / she has consent from the broker.
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Survey: Should the Seller Attach an Existing Survey to a Contract? (2/27/14)
There is not one hard and fast answer to that question… as always, it depends on which party you represent as well as the survey itself. Additionally, it depends on which form upon which the contract is written.
GAR: Purchase & Sale Paragraph A2 and B2
- A Buyer may terminate a contract if they get a new survey and it is “materially different from any survey of the property PROVIDED BY SELLER AND ATTACHED HERETO AS AN EXHIBIT.”
- There is no specific time frame in this provision, therefore this Buyer right to terminate extends through closing.
- If there is no existing survey attached, then a Buyer’s new survey would not provide a right to terminate because it cannot be “materially different” from something that is not attached.
RE Forms: Contract for the Purchase & Sale of Residential Real Property
- There is no specific provision in the RE Forms contract to the attachment of an existing survey. The only paragraph that would pertain to this issue would be paragraph 5.3 “Clearance of Title Defects.”
- Perhaps if there was an easement or something that would show on a Buyer’s new survey that would constitute a “title defect,” then the rights and remedies are spelled out in this paragraph.
There are still many vacant houses on the market that Buyers are purchasing. Many of these properties do not have the utilities operational. When a Buyer has the home inspected and appraised, the utilities need to be turned on… which party is responsible for connecting these services? Answer: It depends on how you write the contract and which set of contract forms you use!
GAR: Purchase & Sale Agreement – Paragraph B9a
- “SELLER shall cause all utilities, systems and equipment to be on so that Buyer may complete all inspections.”
RE Forms: Contract for Purchase & Sale of Real Property in Georgia – Paragraph 7.1
- “In order to facilitate the inspection of the property (check one) BUYER OR SELLER shall make all required utilities operational and available on the property through and including the day of closing.”
In the GAR Special Stipulations, there are a couple regarding the Utilities:
- SS 331 – “Notwithstanding any provisions to the contrary contained herein, the Due Diligence period shall commence on the date that the Seller notifies the Buyer that the following utility services serving the Property have been turned on and billing accounts have been established (hereinafter collectively referred to as “Utility Activation”): [ ] water, [ ] public sewer, [ ] electric, [ ] gas. In the event Utility Activation has not occurred within ______ days from the Binding Agreement Date, Buyer shall have the right, upon notice to Seller, to terminate this Agreement.”
- SS 310 – “Buyer and Seller acknowledge and agree that the following item(s) in or on the Property cannot be properly inspected, due to seasonal weather or other conditions: ________________________________________________. Seller warrants that said items are in good working order and repair as of the Binding Agreement Date. If, for a period of _________ days from the closing date of this Agreement, Buyer uses such items for the first time and finds that such items are not in good working order and repair, Seller shall be responsible, at Seller’s sole expense, to repair and/or replace any defect(s) in said item(s) at that time. If Buyer does not use such item(s) for the first time within the period specified above, or if the defect(s) of which the Buyer complains were caused by the Buyer or his guests, agents or representatives, Seller’s obligation to repair or replace defects in such items shall terminate. This provision shall survive the closing.”
The GREC Annual Instructor Workshop and School meeting was held November 2013 in Athens, Georgia. Like other licensees, Instructors approved by the Commission to teach pre-license courses must meet continuing education requirements. Like other educators, Instructors must continually learn in order to keep current on subject matter as well as stay up-to-date on new teaching and training techniques. Much of the material presented in the meeting program was designed to inform not only Instructors but also Salespersons, Brokers, and Appraisers.
One of the highlights of the GREC Annual School meeting was the Georgia Real Estate Commission panel that included several members of the Investigation Department. The staff members have insight into the big picture as to what a licensee needs to do to practice real estate brokerage activity in compliance with the License Laws and accompanying Rules. The staff member’s talking points were focused on how to conduct your daily practice or structure your daily routine in a way that keeps your business in compliance with the License Laws and Rules. The Commission staff gave some tips that are words to the wise from those who know. Here are a few quotes and notes that summarize their presentations.
1. Bill Rogers Jr., Real Estate Commissioner, updated attendees on the number of licensees, trends, and explained the effects of declining license numbers on the Commission. He also provided interesting license statistics that are detailed on page 3 of this newsletter.
2. Craig Coffee, Deputy Real Estate Commissioner, cautioned licensees to remember the human element. “Human behavior and how we treat people in a transaction is very important and affects their ‘satisfaction’ in the transaction.” “Dissatisfaction is often the reason a Request for Investigation is submitted to the Commission by an individual.” The Commission is required to investigate all Requests for Investigations.
He listed the 4 most common sources of investigations conducted by the investigative staff.
- i. Applying for a License. An applicant with a criminal conviction or a disciplinary action imposed by another licensing authority must be cleared by the Commission to receive a license. 10% of the licensing applications received by the agency each year involve this type of issue.
- ii. Consumers Dissatisfied with the Transaction. Consumers do not know the License Law and Rules. They only know that they are dissatisfied with the transaction. Once a dissatisfied consumer files a Request for Investigation the entire transaction is reviewed for violations of the License Laws and Rules.
- iii. Licensees Dissatisfied with Another Licensee. A licensee may file a Request for Investigation against another licensee based on something that transpired in a real estate transaction. These are often filed after a transaction in which one licensee was dissatisfied with the behavior of another licensee.
- iv. Brokers Informing GREC of a Violation by an Affiliate. A broker is required to inform the Commission if one of his or her affiliated licensees violates the License Laws or Rules.
3. Letitia Jackson, Education Advisor, broke the ice by recommending that every licensee “keep a copy of the License Laws and Rules on your desk so it is handy for reference” or use the online copy accessed from the GREC web site. Ms. Jackson’s job is to assist the Instructors and Schools in complying with the License Laws and Rules concerning education activities. She addressed how schools advertise and how they post education credits and emphasized that schools should not wait until the last minute so that required deadlines for posting credits or advertising courses do not become an issue.
4. Diane Keys, Compliance Supervisor, addressed preconceived notions about Trust Accounts; “You can do a lot, just follow the License Laws and Rules, document what you do, and have all parties agree in writing before doing.” Ms. Key’s discussed using an interest bearing checking account for a trust account and transferring funds from one trust account to another trust account. She noted that the Trust Account Questionnaire used by the Compliance Section will soon be available on the GREC web site to assist brokers with trust account compliance.
5. Audrey Brown, Investigations Supervisor, provided straight-forward, sound advice that each licensee needs to “Know the Laws and Rules governing your profession.” She stated many of the violations clearly stem from not knowing the license laws. She recommends obtaining a hard copy and keeping it on your desk. She gave a source to purchase a printed copy Georgia Real Estate Licensing and Appraiser Laws and Regulations Annotated or http://www.lexisnexis.com
6. Margaret Snow, Investigator, explained “Investigators do try to get all the facts and information, and it is in the licensee’s best interest for them to do so.” She also commented that Investigators are experienced individuals yet it is possible that they could make a mistake. If a mistake is found, the staff will acknowledge it. This sentiment was echoed by all of the staff members present. She also quizzed the attendees on their knowledge of trust account issues and suggested everyone, including educators, review the License Laws and Rules on a regular basis.
The staff was very accessible and personable in their presentations. An open Q&A period followed with a reminder to attendees to take advantage of the many resources offered by the Georgia Real Estate Commission. GREC resources include:
- www.grec.state.ga.us – GREC Website
- License Laws, Rules, and Regulations accessible from the website.
- Georgia Real Estate InfoBase
- Classes offered at various locations.
- Courses offered Online
Although other presenters at the meeting primarily focused on technology and digital learning, the program circled back around to remind licensees to consider the human
*Reprinted from GREC RE News December 2013
In the contracts for the purchase and sale of property, the Seller makes various guarantees regarding the condition of the property. If the property is damaged or destroyed prior to closing, there are certain rights and remedies afforded to the parties depending upon which set of forms the contract was written: GAR Forms or RE Forms.
GAR Forms: Purchase & Sale Agreement Paragraph C3 “Risk of Damage to Property”
The Seller warrants that the property will be in “substantially the same condition” as on the Binding Agreement Date. Prior to closing, if the property is destroyed or “substantially damaged,” each party has recourse.
- The Seller gives prompt notice to Buyer of damage
- Seller gives Buyer information regarding the availability of insurance to address the damage (or disposition of any insurance claims regarding the damage)
- Within 14 days of this Notice, Buyer or Seller may terminate the contract
- If neither party terminates, Seller must return property to substantially same condition as on Binding Agreement Date
- Closing is extended until the earlier of 1 year from original closing date or 7 days from return of property to condition.
RE Forms: Contract for the Purchase & Sale of Residential Real Property Paragraphs 7.2 & 7.3
Seller warrants property to be “in the same condition” at Closing as it was on Acceptance Date. The Seller also agrees to keep sufficient hazard insurance on the property until the transaction has been closed and the deed has been recorded. If the property is destroyed or “materially damaged” prior to closing, the parties have obligations and contractual rights.
- Seller is to restore the property to its previous condition
- If Seller is unable to or unwilling to restore the property by the date of closing, Buyer may cancel contract and receive full refund of earnest money
- If Seller is unable or unwilling to restore property condition by closing date, Buyer may accept the property in its present condition
- If Buyer accepts property in its damaged condition, any insurance proceeds due the Seller shall be applied towards the Purchase Price or payable to the Buyer.
GAR has revised the F40: Lease for Residential Property and has made some revisions and typographical errors in their revision. Be mindful when using this lease in your practice. Read through the entire lease prior to engaging your client or customer in a legally binding agreement.
Revisions:
- For consistency, GAR has moved all the “fill-in-the-blanks to page #1 & page #2.
- There is now a place to identify: “Manager” if the property is to be managed.
- Fee to Halt Dispossessory Action – New terminology
- Paragraph 14A – “Rules and Regulations” – these are now all included vs. 2013 which had check boxes by each statement
- “Liquidated Damages” – GAR has included this terminology when describing various defaults
Key Concepts:
- Tenant = Who is responsible for rent payment
- Use = Who will occupy property
- Rent Due Date & Late Fee: Rent is due on the date specified on the lease and late after that date with no grace period.
- Security Deposit MUST BE HELD in Escrow Account if:
- Landlord owns more than 10 properties
- Landlord is not a person (i.e. LLC or corporation)
- Landlord is a real estate licensee
- Management / Rent Collection is handled for a fee by third party
Typos:
- GAR inadvertently missed numbering the items on page 1
- Paragraph 18 A & B “Early Termination by Tenant” – These are two opposite concepts and are SUPPOSED to have a checkbox so that you can choose which of these options is part of the Agreement. I suggest that you clearly indicate in a Special Stipulation which of these options pertains to the lease as well as completing the corresponding option on page 1 of the Lease.
NOTE: GREC is checking on real estate licensees who own rental property to make sure that laws & rules & regulations are being followed. Maximum One is hosting a Property Management Class taught by Tom Gillett which will cover your responsibilities as an agent owning rental property. February 13th at 9:30am for $25 Property Management Class CE. This class will fill up!
GAR has revised the F94: Short Sale Contingency Exhibit in a couple of significant ways. One of these changes involves the Right to Terminate Period and the other change involves Earnest Money.
The Right to Terminate Period as defined in Paragraph 2 is now timed from Binding Agreement Date (rather than Closing Date as in previous versions.) This right to terminate is afforded to both Buyer AND Seller. Make sure you calculate an adequate number of days to account for the Seller’s communication with their existing lender.
This contingency exhibit also addresses the delivery of the Earnest Money. Paragraph 4 specifies a time frame for the Buyer to remit the Earnest Money to the Holder timed from their receipt of written approval of the Short Sale. Make sure that this time frame is consistent with the Earnest Money terms on page 1 of your contract. For example, if you write that the Buyer shall remit earnest money two (2) days from Binding Agreement Date or at time of offer, then you would put “N/A” in this paragraph of this Exhibit.
See Sample Short Sale Contingency Exhibit Here.
GAR has revised and improved the Counteroffer Form. As the title states – a final accepted contract consists of the ORIGINAL offer PLUS the LAST accepted Counteroffer. So any items (that differ from the original offer) negotiated on counteroffer forms that get accepted by the parties need to be carried through on subsequent counteroffers. To assist agents with this concept, the revised counteroffer form has no place to number the counteroffer.
Additionally, the revised Counteroffer form is formatted like the front page of the GAR contract to make it easier to counter: Sale Price, Closing Costs, Closing Date, Possession, Closing Attorney, Holder of Earnest Money Issues, Due Diligence. There is also a space to add any other items the parties wish to negotiate.
Check out a Training Sample of the 2014 GAR Counteroffer Form here!
Maximum One will continue to teach 2014 GAR and 2014 RE Forms Contract classes throughout the year!
All Maximum One Agents are required to take at least one contracts class annually beginning in 2014.
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“Gifts for Referrals” (1/6/14)
Question: Are you allowed to give a gift to someone as a “thank you” for sending a referral? Answer: It depends! It depends on several issues including the timing of WHEN you give the gift, is the gift contingent upon a successful closing and does the referred party know (and consent) that someone is benefiting financially from referring them for business.
License Law: 520-1-.10 Handling Real Estate Transactions. Authority: O.C.G.A. Secs. 43-40-2, 43-40-8, & 43-40-25.
(6) Disclosure of Commissions, Fees, Rebates, or Other Valuable Consideration.
- (a) The disclosures required by O.C.G.A. §43-40-25 (b)(6) from a licensee to a principal may be made in advance of the payment or receipt of a commission, fee, rebate or thing of value to a licensee based upon pre-established terms set forth in a brokerage agreement, a brokerage engagement agreement, management agreement or other written agreement.
- (b) In a transaction where a licensee refers a principal to another broker for brokerage or relocation services (and the broker to whom the principal is referred knows of the referral and the referring licensee’s expectation of receiving a commission, fee or other thing of value for the referral), the payment of a commission, fee or other thing of value to the referring licensee by the broker working with the principal shall be disclosed in writing to the principal by the broker to whom the referral was made no later than at the closing of the purchase, sale, exchange, or lease, of any property in a transaction where a commission, fee or other thing of value will be paid by the broker to the referring licensee.
- (c) The disclosures required in O.C.G.A. §43-40-25 (b)(6)(c) shall be in addition to any requirements of federal law pertaining to the payment or receipt of anything of value for the referral of any service or product in a real estate transaction.
- (d) For the purposes of O.C.G.A. §43-40-25 (b)(6), the term “licensee’s principal” shall, in the specific real estate transaction for which disclosure is required, mean both the client of the broker and a customer of the broker if the customer is working primarily with the broker and is not being represented by another broker in the transaction.
- (e) A licensee may rebate to a principal any part of a commission, fee, or other compensation received by the licensee related to the purchase, sale, lease or exchange of real estate as long as said rebate is disclosed on the closing statement for that transaction and as long as the rebate does not mislead any other licensee, other principal, lender, title company or government agency involved in the transaction regarding the source of funds to complete the transaction or regarding the financial resources or obligations of a buyer principal.
Notwithstanding anything to the contrary above, no disclosure is required for gifts, products, services, or other things of value given to a principal by a licensee provided that they are not contingent upon the purchase, sale, lease or exchange of real estate for that transaction.
If you are sending a referral & getting paid a referral fee, then regardless if the Buyer or Seller is a client or customer, the public person MUST acknowledge in writing no later than the close of the transaction that something of value is being paid by the broker to the referring agent.
Have the Client/Customer sign one of the following forms depending upon which set of contracts you are using:
- GAR: CO11 – Referral Authorization
- RE Forms: RE-157 – Prospect’s Acknowledgement and Consent to Referral
Any real estate agent must be paid BY A BROKERAGE not from another agent directly. Additionally, a person or company must hold a real estate license in order to be compensated for real estate related activities. Even relocation companies & Third Party Affinity Groups have a Brokerage license solely for the purpose of their referral business. See this article: Soliciting Prospects and Paying Referral Fees in GREC for more information. And review RESPA & BRRETA laws!
Maximum One will host classes throughout January & February (& throughout the year) on the 2014 GAR Contracts, 2014 RE Forms, 2014 Contracts in General. Please refer to online Training Calendar for ongoing scheduling: www.registerforREclasses.com
All Maximum One Agents are required to take
at least one contracts class annually beginning in 2014
When a Buyer writes a contract to purchase a property, they typically include a specific amount of time allowing them to be satisfied with their purchase before proceeding. Within that time frame, a Buyer usually has some sort of inspections done. When the Buyer wishes to bring any issues to the attention of the Seller to ask/negotiate through any items of concern, there are various Amendments you may use DEPENDING upon how your contract was written! You must use the proper Amendment to coincide with your specific contract!
Amendment to Remove Inspection Contingency (GAR F100)
This Amendment is to be used ONLY if you wrote your contract and included the Exhibit GAR F129 “Property Sold with Right to Request Repairs. This is different from the general “Due Diligence Period.”
Amendment to Address Concerns with Property (GAR F107)
This Amendment is to be used when the contract is subject to a Due Diligence Period.
Amendment During Buyers Right to Terminate Period (RE-262)
This Amendment is to be used when the contract is subject to a Buyer’s Right to Terminate period (from the Contract for Purchase & Sale of Real Property) OR when the contract is subject to a due diligence (i.e. contract written on the GAR forms and Amendment on the RE Forms.)
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15.1 In the event that a Member has shown a client a property under an FMLS listing with another Principal Member and secures an offer from the same client after the FMLS listing has expired or been withdrawn, the following procedures shall govern:
a) If the property has not been re-listed by any real estate firm on an exclusive basis within ninety (90) days after expiration or withdrawal of the FMLS listing but is on an “open listing” status, then the offer must be presented through the firm that had the FMLS listing at the time the property was originally shown.
15.2 When a property is listed by a Principal Member and a contract presented within ninety (90) days after expiration is accepted, providing the buyer was introduced to the property prior to its expiration, a fee shall be due FMLS from the selling and listing Principal Member, according to the FMLS fee schedule, when the property closes.
15.3 When a property is listed by a Principal Member and a contract presented within ninety (90) days after withdrawal of the listing is accepted, providing the buyer was introduced to the property prior to its withdrawal, a fee shall be due FMLS from the selling and listing Principal Member, according to the FMLS fee schedule, when the property closes.
Late last night, an agent called and said that she wanted to show one of my listings today at 1:00. I called my homeowner and was told that they had actually hoped for no showings this weekend due to family activities but, since they need to sell, they were thrilled to have a showing so they would clear out for the 1:00 showing. I promised to call them as soon as the agent had shown the home so that they could return.
I watched the lockbox notifications and had not seen one for this property so, at 2:00 I began calling and texting the agent but did not receive a response. I finally reached her at 3:30:
Me: Hi, this is Keith Grogan, I notice that you are obviously running extremely late for your showing at 123 Main Street and, since my sellers have been riding around for three hours, I would like to let them know approximately what time you will be showing so that they can plan accordingly.
Agent: Oh, my buyer had to catch a plane. Ran out of time.
Me: So, did you call the seller to let them know?
Agent: No.
Me: Why not? On a day when they really needed to be at home, the seller left for your showing and has been riding around for three hours waiting to return home.
Agent: Which property was this again?
Me: 123 Main St.
Agent: Yeah, I don’t think they liked that location.
Me: So, why would you not call the seller to let them know. They are now extremely upset and are asking for the name of your broker.
Agent: I am the Corporate VP.
Me: So that somehow gives you the right to ignore proper protocol in showing resales and to be so inconsiderate?
Agent: It was my buyers, not me.
Please, please please, if you have scheduled to show a property and for whatever reason find that you are not going to show it or not going to show at the appointed time, call the agent or the homeowner to let them know. Many homeowners go to incredible lengths for a showing; candles burning, music playing, all the lights on, and load the kids, dogs, and cats in the car to ride around the neighborhood until the showing has ended. Be considerate and think about the homeowners. This is just common courtesy and I am always shocked when agents feel that is OK to conduct themselves in such an unprofessional manner as this agent but I am incredibly shocked that a corporate VP for one of the “big 4” is so unprofessional. I have to say that my opinion of this entire company was drastically lowered as a result of this incident.
*Reprinted from Facebook Post of Keith Grogan
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The Case of the Unlicensed Assistant (11/25/13)
Whether licensed as a salesperson, an associate broker, or a broker, all licensees can utilize an unlicensed assistant to make them more productive as long as it is done in accordance with the License Laws, Rules, and Regulations. Both the firm and the affiliated licensee using an assistant are responsible for the acts of the unlicensed assistant. If a firm allows agents to utilize unlicensed assistant, there are 3 written agreements needed in order to comply with the License Laws, Rules, and Regulations:
1. A written agreement between the firm and the affiliated licensee which contains:
a. Authorization of the use of the unlicensed assistant
b. Delineation of the duties that the unlicensed assistant may perform,
c. Approval of the compensation arrangement between the affiliated licensee and the unlicensed assistant.
2. A written agreement between the firm and the unlicensed assistant specifying any duties that the unlicensed assistant may undertake in behalf of the affiliated licensee.
3. A written agreement between the licensee and the unlicensed assistant specifying:
a. Any duties that the assistant may perform
b. The manner in which the unlicensed assistant will be paid.Rule 520-1-.07 (6) provides further details and reasonable guidelines of tasks that may or may not be performed by their unlicensed assistants.
However the list is not all inclusive and does not identify every possible activity. An unlicensed assistant may only perform ministerial duties and tasks that do not require the discretion or the exercise of judgment of a licensee. The Resources Section of the GREC School page at http://www.jmre.com/grec. includes a printer-friendly list of tasks that can/cannot be performed by unlicensed assistants: Tasks Unlicensed Staff CAN do , Tasks Unlicensed Staff CANNOT do.
Consider the case of Mirkle and Benson (All names are fictitious.) Mirkle reluctantly agreed to be the managing broker for Bold Realty which managed over 50 active salespersons in the office. Managing broker Mirkle did not make herself readily available to affiliated licensees for such tasks as reviewing contracts, because she was so busy doing deals herself. Although she knew salesperson Benson recently hired support staff, she did not consider what needed to be done to utilize an unlicensed assistant in compliance with the License Laws, Rules, and Regulations. During an audit of the firm where other violations were discovered, it was determined that the managing broker failed to assure that there were any written agreements regarding the use of an unlicensed assistant.
The specific violations are listed below: 520-1-07 (6) (d) (1) (2) (3)
1. The managing broker did not require salesperson Benson to have a written agreement between himself and his unlicensed assistant specifying the assistants’ duties or to outline compensation to the assistant.
2. The managing broker Mirkle failed to enter into a written agreement with Benson authorizing the use of the unlicensed assistant, delineate the duties allowed to be performed by the unlicensed assistant, or to approve any compensation paid to the unlicensed assistant.
3. Mirkle also failed to enter into a written agreement with the unlicensed assistant of Benson specifying the duties the unlicensed assistant could perform for the licensee.
Managing broker Mirkle, Salesperson Benson, and the firm were required to pay significant fines in addition to legal, investigative, and administrative fees to the Commission.
Reprinted from GREC RENews July 2013
When May a Seller Terminate a Contract? There are very few instances in which a Seller may terminate a contract once they are binding.
The majority of the contingencies in a contract are BUYER contingencies meaning that it is up to the BUYER to initiate a termination based on that specific contingency. (The Due Diligence / Buyer’s Right to Terminate is a BUYER contingency – a Seller may NOT terminate a contract based on this issue without being in default of the contract.) Unless specifically written as a Special Stipulation or included as an Exhibit (i.e. Short Sale Contingency) there are very few provisions in which a Seller may initiate a termination.
Before a Seller signs a binding contract to agree to sell their house, inform them of the serious & potentially costly consequences of “changing their mind” or defaulting on one contract to accept a higher contract from a different Buyer.
What are the Possible Consequences to a Seller-initiated Termination?: There are many possible consequences only one of which is ideal:
- Buyer may accept that Seller doesn’t want to sell, agree to keep their earnest money and move on.
- Buyer may sue the Seller for specific performance of the contract (i.e. sale price) PLUS damages PLUS legal fees
- Buyer’s Broker may sue the Seller for commission
- Listing Broker may sue the Seller for commission
- Buyer and Seller may negotiate an amount to mutually terminate the contract
What are the Contractual Provisions for a Seller-Initiated Termination: There are very few contractual provisions allowing for a Seller-initiated termination. Please read your specific contract for the time-frames and Notification procedures of each of these provisions. These include:
- When the earnest money is dishonored by the bank, the Holder gives notice to the parties; the Buyer has the right to cure the default. If the Buyer does not cure the default, the Seller has the right to terminate.
- In a financing contingency, after the financing contingency time frame has passed, the Seller may request from the Buyer “evidence of ability to close,” if the Buyer does not provide this loan commitment letter, the Seller may terminate (within a specific time frame.)
- In the Short Sale Contingency Exhibit, if the Seller’s lien holders do not agree to the terms of the short sale in writing by the specified number of days prior to closing, the Seller (or Buyer) may terminate the contract.
- If there are any special stipulations in the contract that allow for the Seller to terminate a contract, then a Seller may initiate a termination.
Note: Some of these contractual termination clauses are specific to the GAR vs. RE Forms contract – PLEASE READ YOUR CONTRACT.
The real estate license law requires the licensee to present every singed offer according to 520-1-.10. The law reads as follows:
520-1-.10 Handling Real Estate Transactions.
- Timely presenting all offers to and from the seller, even when the
- property is subject to a contract of sale;
- Timely presenting all offers to and from the landlord, even when the
- property is subject to a lease or a letter of intent to lease;
- Timely presenting all offers to and from the tenant, even when the
- tenant is a party to a lease or a letter of intent to lease;
- Timely presenting all offers to and from the buyer, even when the buyer is a party to a contract to purchase property; § 10-6A-5.
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Contact Information for Unrepresented Party in a Contract (11/4/13)
- When one of the parties in a contract is unrepresented by a Brokerage (has a Customer relationship vs. a Client relationship with the Brokerage) you must include that party’s contact information in the contract. If there is no contact information for an unrepresented party, there is no way of providing legal Notice to that party. This fact holds for the GAR contract and the RE Contract. Therefore, you must include an email address, fax number or mailing address for any customer in a transaction.
- All Notices must be in writing – this include offers, counteroffers, demands, terminations, etc.
- Notice is received when it is delivered to the person for whom it was intended OR the person’s “authorized agent.”
- If Buyer or Seller is NOT in an Agency relationship with a Brokerage, then they are “solely responsible for protecting their own interests and the Broker’s role is limited to performing ministerial acts for that party.”
- “Notices to a signatory to this Agreement shall only be effective if sent to the Fax number, email address &/or the physical address of the signatory listed on the signature page of this Agreement or subsequently provided by the signatory to the other signatories hereto in accordance with the notice provisions herein.”
- Any Notice must be sent to the party to the party at its address (email or physical) as set out in the contract.
- Any party not represented by a Broker shall take full responsibility for protecting his own interests.
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Earnest Money Disbursement upon Termination of a Contract… Even When Parties Want to Continue to Work to Purchase & Sell the Same Property (10/28/13)
When one of the parties (Buyer or Seller) terminates a contract, the earnest money must be disbursed. If the contract was terminated by something allowed for in a contingency or if the contract was terminated by default, there are procedures that still must be followed.
The agent of the terminating party must complete TWO documents or cover TWO issues:
- The Termination
- The Agreement to Disburse Earnest Money
Either party may terminate a contract unilaterally (one party’s signature)
BOTH parties are required to agree on the disbursement of the Earnest Money.
If both parties do not agree, the agent must STILL turn in the required paperwork to the Brokerage. The Holder of the Earnest Money will then interpret the circumstances of the termination of the contract and write the “10 day” letter in order to disburse the funds. The Holder also has the option of interpleading the money into the registry of the court.
GAR Forms: One form required but two sets of signatures
- BOTH concepts (termination & release) are addressed on one form: F83 “Unilateral Notice to Terminate; Agreement to Disburse Earnest Money
RE Forms: BOTH forms are required
- Termination: RE263 – Notice to Withdraw or Terminate
- Earnest Money Release: RE 212 – Agreement to Disburse Trust Funds
If the parties decide to still do business regarding the purchase & sale of the property. A new contract must be written with new terms regarding earnest money. The parties may not continue to negotiate a terminated contract.
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Short Sale Exhibits: Must Include Closing Date in Purchase & Sale Agreement (10/21/13)
When you are writing or receiving an offer on a short sale and you are using the Short Sale Exhibit (which I sincerely hope you are) you must include a closing date in the purchase & sale agreement. This is true in the short sale exhibits for both the GAR contracts & the RE Forms.
These exhibits describe the options / responsibilities / consequences for both the Buyer & the Seller based on if the Seller is able to meet the short sale contingency or not. However, the options for both Buyer & Seller to terminate with no penalty based on when the Short Sale is approved is specifically tied to the closing date in the contract.
Therefore, you cannot include a special stipulation timing the closing based on receipt of the short sale approval letter (i.e. “This transaction to close within 45 days of Buyer’s receipt of written notice of approval of short sale.)
GAR Short Sale Contingency Exhibit F94:
“Timeline for Performance – In the event the mortgage lender(s) and if applicable, other lien holders do not agree in writing to the above terms at least _____ days prior to closing, either Buyer or Seller may terminate this agreement without penalty upon written notice to the other party.
RE Forms Short Sale Exhibit RE-253:
“The Seller shall provide written notice of the short sale approval to the Buyer at least twenty days (20) days prior to the agreed upon closing date, which shall be known as the “Short Sale Approval Deadline. The parties further agree that the Buyer’s Right to Terminate… shall begin upon Acceptance Date and shall continue for ten (10) days after the Seller has delivered written notice of Short Sale Approval to Buyer. Options of Parties if Short Sale Approval Deadline is Not Met – The parties may choose one of the following options if the short sale approval deadline is not met:
1. Either party may terminate the contract, without penalty, by delivering written notice to the other party. ……..”
Regardless of which set of contracts you typically use in your business, I strongly encourage you to use the Short Sale Exhibit from the RE Forms for the best protection of your clients because there are many time frames built-in to the exhibit without the agent having to write any special stipulations (particularly regarding the Buyer’s Right to Terminate or Due Diligence period!)
For both Exhibits regarding the Seller’s Contingency of selling their house subject to their lender agreeing to a short payoff, you must include a specific closing date in the contract to protect both your Buyer & Seller clients!
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Issues with a Contract Accepted on RE Form and Re-Written on a GAR Form (10/14/13)
Presenting offers regardless of the form on which they are written is mandated of real estate agents by license law. Many agents who are initiating contracts on the RE Forms are being asked to “re-write” the contract on a GAR form.
GAR has said that each Broker may have a policy regarding the forms that are used: “WHO HAS THE AUTHORITY TO DETERMINE HOW AUTHORIZED USERS RESPOND TO OFFERS/COUNTEROFFERS SUBMITTED ON NON-GAR FORMS? * Brokers have the ultimate decision regarding forms co-op use. * As with any brokerage operational question, each Authorized User should refer to his/her Broker for guidance and office policy in regard to operational procedures.”
There are potentially many many problematic issues with this action. To date, there is no case law to provide any answers to these issues and I sincerely hope that none of you are involved in any future lawsuits regarding this issue! Some of the problems are as follows:
1. The terms and requirements and responsibilities of the parties are different between the two contracts (i.e. use of seller contribution to closing costs) so by which terms must the parties abide?
2. The RE Forms have a financing and appraisal contingency included in the purchase and sale agreement, the GAR form requires separate Exhibits for these contingencies. In re-writing a contract, you must add exhibits that are not part of the initial or agreed-upon offer.
3. The GAR forms allow for a 7 day unilateral extension of the contract after the initially agreed-upon closing date; the RE forms do not.
4. If a Buyer & Seller come to a Binding Agreement on the RE Forms and a Brokerage mandates that the contract be re-written on a GAR form, questions arise regarding the Binding Agreement Date and the differing terms.
5. If an agent has explained the responsibilities, time frames and consequences to a Buyer from the RE Forms, then they receive those supposedly same terms on a GAR contract, the Buyer would want some time to go over and understand the provisions and pre-printed verbiage on the GAR contract prior to signing. If this process takes a few days, what is the true Binding Agreement Date… date of original contract or date parties have signed & given notice of signatures on the new contract?
6. Is the GAR contract considered a conforming contract or is it a new contract? If it is a conforming or contract or “clean copy,” then do the terms of the RE Forms prevail? If so, what is the sense in re-writing a contract?
7. If the re-written contract is not considered merely a “clean copy,” then would those terms prevail over the originally binding RE Contract because this contract is dated subsequent to the RE Contract?
8. For example, in the financing contingency portion of the RE Forms, after the period specified has past, the Buyer is not obligated to send the Seller a “Loan Commitment Letter.” In the GAR Financing Contingency, the Buyer is obligated to send the Seller this letter or the Seller may terminate. In this “switcheroo” which terms prevail?
9. Are Brokers enforcing their “policies” consistently? Do they have to? Are these Brokerages that require their agents’ contracts be turned in to the Brokerage on a GAR form not only enforcing this requirement for contracts written on the RE Forms but on new builder contracts as well?
These are only some of the many legal issues involved when a Brokerage’s policy requires that their agents use the GAR forms and are not allowed to use the RE Forms. At some point, these and other issues will have to be addressed by GAR and various Brokerages or ultimately answered by a judge’s decision.
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“VRC” in FMLS & GAMLS (10/7/13)
“Variable Rate Commission” – GREC requires that agents and brokers identify that the advertised commission may be different than the commission that a Seller pays if the listing agent sells the property with no other agents involved.
- For example, if a listing brokerage has arranged with the Seller to pay 7% commission when two agents are involved in the transaction and 5% if the listing agent procures the Buyer so that no other agent is involved, then the listing MUST be advertised as “YES” to VRC.
- The Listing agent must notify ( by checking Yes to VRC) co-op agents of this arrangement with the Seller so that the co-op knows that the listing agent has an advantage if multiple offers come in & one is the listing agent’s.
- Please advertise your listings in FMLS & GaMLS in compliance with GREC regarding this issue of Variable Rate Commission!
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Financing Contingencies: Required Documents / Information that Buyer Must Send Seller (9/30/13)
In the financing contingencies in the GAR contracts, there are several pieces of information with which the Buyer must supply the Seller. The Buyer is to send the Seller a GFE, name & contact information of any additional lenders with whom the Buyer applied for a loan, loan denial letter OR loan commitment letter.
As agents (Buyer’s agent and Seller’s agent) it is up to you to ensure that the Buyer adheres to the time frames agreed upon for this documentation & for sending / receiving this information. Make sure you read and understand the Financing Contingency Exhibits in their entirety rather than simply filling in the blanks. The RE Contracts are addressed as well later in this article.
Good Faith Estimate (GFE) or Lender Letter from Loan Application:
- Buyer has ____ days to apply for the loan as described in the Exhibit and send the GFE for that loan or letter proving loan application.
- This letter must be dated showing application that meets date completed in the Exhibit.
- If Buyer has agreed to apply for loan with an identified lender on the Exhibit, the GFE or Lender Letter MUST come from that lender as identified.
Contact Information of Lender Other than as Initially Identified on Exhibit:
- If the Buyer applies for a loan with another lender not initially identified on the Exhibit, the Buyer must send the Seller the name and contact information of the new lender.
Loan Denial Letter:
- Buyer has ___ days from Binding Agreement Date to meet financing contingency AS DESCRIBED IN THE EXHIBIT. If Buyer’s loan is denied, Buyer must send Seller the Loan Denial Letter within the time frame specified.
- There are certain specifications required to protect the Buyer’s earnest money…. these are outlined in the Exhibit
- This letter MUST be based on the loan as described in the Exhibit.
- This letter must come from one of the identified lenders (initially identified on the Exhibit OR whose contact information was subsequently sent to the Seller)
- CONVENTIONAL LOAN EXHIBIT
- If Buyer does not terminate the contract based on the Financing Contingency, the Seller has the right to request a Loan Commitment Letter from EACH lender from whom the Buyer has applied for a mortgage.
- Seller must make this request less than 7 days from Closing Date.
- Buyer must comply within 7 days of receiving Seller’s request for Loan Commitment Letter.
- FHA LOAN EXHIBIT & VA LOAN EXHIBIT
- If the Buyer does not terminate the contract based on the Financing Contingency then the Buyer is REQUIRED to send the Seller the Loan Commitment Letter within ____ days from the end of the Financing Contingency Period to send this letter to the Seller.
- If Buyer does not send this Loan Commitment Letter, the Seller may terminate within 7 days after this time frame.
- The Buyer authorizes the Seller and BOTH Brokers to communicate with the Lender.
- There is specific information that may be communicated.
- If property appraises for less than contracted price, Buyer must send Seller the Amendment to Reduce Sale Price OR Buyer agrees to purchase property at the contracted price regardless of the appraisal.
- Buyer must send Seller copy of appraisal with this Amendment.
- There are specific time frames for this amendment and resolution
Appraisal Value in FHA Loan Exhibit AND VA Loan Exhibit:
- Buyer is NOT obligated to purchase property if it does not appraise for sale price.
- This appraisal contingency extends through day of closing
- The Buyer shall not lose their earnest money if property fails to appraise and Buyer does not close on transaction.
- The FHA Loan Exhibit shall control over any other provision or Exhibit in the transaction.
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Release of Earnest Money Upon Termination (9/23//13)
When a contract is terminated, both parties must agree in writing on the disbursement of the earnest money. The earnest money must be disbursed to either the Buyer or the Seller (or divided between the two.) The earnest money does NOT get disbursed to a Brokerage. If you write this in the Agreement to Disburse Trust Funds or if you receive this verbiage in the form, do NOT accept it.
We recently received an Agreement to Disburse Trust Funds from a Co-operating Brokerage with a defaulting Buyer that included this verbiage,
“The Listing Brokerage and the Selling Brokerage will discuss with the Seller as to the distribution of the earnest money.”
Are you kidding me?!!?!?
The contracts, both GAR forms and RE Forms clearly describe the disbursement of the earnest money upon termination of a contract. There are options upon Buyer default and upon Seller default. Please READ YOUR CONTRACTS and realize that YOU are responsible for hundreds of thousands of dollars for your clients. Make sure you understand these contracts. Take a contracts class… take SEVERAL! Contact a Broker! Read your contracts… they are instructions for the parties regarding the promises they make to each other regarding the transaction.
To disburse the earnest money, use the appropriate form: (requires BOTH PARTY’S signatures)
- GAR Contracts: Termnation & Release Agreement
- RE Forms: Agreement to Disburse Trust Funds
To terminate a contract, use the appropriate form: (requires ONE PARTY’S signature)
- GAR Contracts: Termination & Release Agreement
- RE Forms: Notice to Withdraw or Terminate
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Seller Possession After Closing (9/16/13)
In a contract how many Buyers grant the Seller a few days possession after closing? It’s the “polite” thing to do, right?!?! Well think again!
We had a situation this week…. Transaction closed; Seller had 3 days possession after closing; Buyer did final walk-through BEFORE closing and all was well! Buyers go to move in on Day #4….. The Seller had inadvertently left the water running that went to the Washing Machine in the 2nd Story Laundry Room. It had been running for several hours. There were several thousands of dollars in damage to the flooring, carpet upstairs & water had leaked to the floor below.
Who’s responsibility is it to pay for the damage?
Buyer! The Seller no longer owned that home as of the funding of that closing. The Sellers no longer had homeowner’s insurance on that property. (The Buyer asked the agent to pay for the damage!)
- Make sure that the Sellers move out prior to closing.
- Have the Buyers do a final walk-through AFTER the Sellers have vacated and before closing
- If the Sellers are going to maintain possession, have a temporary occupancy agreement in place and address potential damage upon moving out. EVEN if occupancy is for 1 day after closing.
- Have one of the brokerages escrow funds from the Seller to repair damage caused during the move. The closing attorney or one of the brokerages may hold the escrow. If there are any repairs to be made, the Buyers submit invoices to the holder of the escrow to be paid and then any remaining funds get returned to the Seller. Handle this contractually prior to closing!
- Make sure that the Sellers move out prior to closing.
- Make sure that the Sellers move out prior to closing.
- Make sure that the Sellers move out prior to closing.
- Make sure that the Sellers move out prior to closing.
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Special Stipulations and Contractual Consequences of Poorly Written Stips (9/9/13)
In a contract for the purchase and sale of real property in Georgia, we have available to agents two sets of general contracts BOTH authored by prominent law firms in Georgia. These contracts, Exhibits, Special Stipulations and Amendments have been written based on contract law, Georgia law and case law. You, as a real estate agent, are not an attorney so you must be extremely careful if you choose to write in a special stipulation. Your first option is to see if your issues are already included in the body of the contract or if the issues may be addressed by an Exhibit or pre-written special stipulation. Whether you are representing a Buyer and writing a Special Stipulation or representing a Seller and deciding to accept or deny a Special Stipulation, please keep this informaiton in mind or there could be (expensive) un-intended consequences of your actions!
Example:
Seller’s agent receives (& accepts) a contract with the following:
- Due Diligence Period of 15 days from Binding Agreement Date
- Cash Transaction so no Institutional Lender involved
- Special Stipulations:
- “Sale is contingent upon satisfactory home inspection.”
- “Sale is contingent upon home appraising for $____” (sale price filled in on contract.)
- “Inspection was not satisfactory.”
- “Appraisal did not come in at: $_____”
- Special Stipulations come after the due diligence paragraph therefore take precedence.
- Special Stipulations were typed rather then pre-printed and therefore take precedence.
- With no time frames in the special stipulations, they would expire when the contract terminates (upon closing or termination.)
- There was nothing specifically written regarding who was to do the appraisal, what proof was to be provided to the Buyer.
- There was nothing specifically written defining “satisfactory.”
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HUD Buyer Select Program: BSCA Forms (9/1/13)
When a Buyer purchases a HUD REO, there is the new Buyer Select Program under which the Buyer may select their own closing attorney. Each company has a specific way of handling the earnest money.
Buyer Select Program:
- (1) Buyers get to choose their own closing agent.
- (2) Buyer Select Closing fees is a buyer expense.
- (3) HUD will pay only a portion of the closing fees, if the buyer includes closing costs on line 5 of the sales contract at the time of bid submission and there are sufficient funds remaining to allow for this fee to be paid. If there are no closing costs included in the bid, the buyer will be required to pay all settlement and closing fees.
- (4) At the time of bid submission, the selling agent is required to complete the Buyer Select addendum providing the asset management company with the name and contact of the selected escrow company.
- (5) The earnest money payee and delivery will vary based on geographic area, refer to the earnest money guidelines for complete instructions.
- (1) Pemco – www.HUDPemco.com
- (2) Oforio – www.OforiREO.com
- (3) HomeTelos – www.HomeTelosFirst.com
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Non Discrimination Policy at Maximum One (9/26/13)
It is the law of the land that no person shall be discriminated against on the basis of sex, race, color, religion, national origin, handicap or familial status. As a condition of continued association with Maximum One™, I agree to abide by and promote the following:
1. It is the policy of this office that no person will be discriminated against in either hiring or firing of personnel on the basis of sex, race, color, religion, national origin, handicap or familial status.
- 2. Furthermore, it is the policy of this company that the independent contractors (sales associates) will not discriminate in the showing, selling, leasing, advertising or listing of real estate because of sex, race, color, religion, national origin, handicap or familial status
- 3. Should a sales associate be accused of discrimination, an investigation will be conducted by the broker and if the investigation confirms the accusation, the sales associate’s actions will be reported to the Georgia Real Estate Commission for further investigation and necessary action.
- 4. Maximum One™, its management, administrators and associates endorse and affirm the “Voluntary Affirmative Marketing Program” as evidenced by the signature of its principal broker. A basic premise to which we subscribe is that individuals with similar financial resources and interests in the same housing market area have a like range of housing choices available to them regardless of their race, color, religion, sex or national origin.
Further principals to which we subscribe are: a) that a free housing choice is a choice free of practices or influences that would limit that choice because of race, color, religion, sex or national origin and b) that information and services will be made available to enable all buyers and renters to have free housing choices.
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Email Notice in the Purchase & Sale Contract (8/19/13)
GAR: Purchase & Sale (Paragraph #14) & RE Forms: Contract for the Purchase & Sale of Real Property (Paragraph #10) – Notice shall be in writing and notice by email is an acceptable form of delivery. The only email address that serves as legal notice for purposes in the contract are those email addresses listed on the signature page of the purchase & sale; if no email address is included then Notice by email is not effective for these purposes.
When is E-Mail Notice Deemed “Received?” – In the RE Forms, this issue is not specifically addressed. In the GAR Contract, notice by email is considered “received” when the SENDER receives confirmation that the receiver has OPENED the email (i.e. by receiving an automatic reply such as a “Read Receipt.”) So what if the Sender does not request a Read Receipt? Then when the receiver acknowledges the email, it could reasonably be interpreted as being “opened.”
When is This an Issue? – We have had several earnest money disputes lately regarding a Buyer terminating a contract based on Due Diligence but the time frame has come into question. If there is no Binding Agreement Date completed on the contract OR the Binding Agreement Date is in question, then all of the other time frames in the contract are also unclear. In order to prevent future issues, make sure to complete the Binding Agreement Date (GAR) or Acceptance Date (RE Forms) in your contract or you may use the Binding Agreement Date Notification (GAR Form F124.)
Specific Example – A Buyer terminates a contract (written on a GAR form) based on Due Diligence on the final day of the Due Diligence period. The Seller does not sign the T&R because they claim that they received the T&R AFTER the expiration of the Due Diligence option time frame based on the Binding Agreement Date.
Controversy Around Binding Agreement Date – Buyer and Seller have been negotiating terms (through the agents;) Seller sends counter offer to Buyer by email (counter offer has been on the original offer with scratch through’s and changes initialed, dated and timed) PLEASE USE THE COUNTER OFFER FORMS RATHER THAN THIS METHOD OF NEGOTIATING! The Buyer accepts the final terms and sends back the accepted contract to the Seller by email at 11pm on July 12 as evidenced by date and time stamp on email transmission. The Seller opens the email the following day, (July 13) and fills in the Binding Agreement Date as July 13th. The Seller informs the Buyer of this and says that there are two items that the Seller must still initial, so they will initial those last two items (already negotiated just not initialed) and send a copy back to the Buyer. The Seller has technical difficulties and finally sends the contract back to the Buyer on July 16. On July 23 at 11:15pm, Buyer sends a Termination & Release Agreement based on Due Diligence with the Earnest Money requested to go back to the Buyer (the time frame for Due Diligence was 7 days.) The Seller opens the email the following day, July 24. The Seller refuses to sign indicating that the T&R was outside of the Due Diligence period, Buyers are defaulting and the Earnest Money should be disbursed to the Seller. Who is Correct!?!?
Issues: The Issues of the Proper Date Revolve Around the Provision of Notice – What is the true Binding Agreement Date?
- July 12 – When the Buyer sent the notice of the accepted terms of the contract?
- July 13 – When the Seller opened the email and verbally told the Buyer that they had a “meeting of the minds” but there were still two sets of initials missing on the agreed-upon terms?
- July 16 – When the Seller actually delivered the contract (with all initials) back to the Buyer? The Contract had July 13 written in as the Binding Agreement Date.
Issues: Did the Buyer Terminate (July 23) within the Due Diligence Time Frame of 7 days from Binding?
- July 19 – If the true Binding Date was the date on the email transmission (July 12) – probably not deemed received in the GAR contract but could be argued as having met terms of Notice in the RE Forms
- July 20 – If the true Binding Date was July 13 – when the Seller Opened the email and completed this date on the contract… BUT there were still initials missing from the contract
- July 23 – If the Binding Date was July 16 when the Seller sent back the contract with the Seller’s initials included on those last two items.
- July 24 – When the Seller OPENED the email of the T&R sent by the Buyer?
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If it is NOT in Writing, it Does Not Exist! (8/12/13)
GET IT IN WRITING!!!- Nothing is a problem … until it’s a problem! You may have the nicest most wonderful clients in the world!…. until they conveniently get “amnesia” about a vital in-depth conversation you had about reducing the price of their listing or the importance of getting an inspection or the end of the due diligence time frame or getting a survey! Protect yourself and protect your clients and get it in writing! Remember that YOU are the real estate professional and you are held to a higher standard of care than your clients… in other words, you have specialized knowledge that your clients do not and you practice real estate on a regular basis whereas your clients buy/sell a house once every 5 – 10 of years.
- NEGOTIATING CONTRACTS – Lately there have been a rash of supposed contracts that simply turned out to not really be contracts! If you are negotiating a contract, make sure you do this in writing on a Counteroffer form. If you scratch / initial / date / time changes throughout the negotiations, if a party misses an initial do you have a binding contract? There are may times that you will negotiate a contract with a co-op agent, you finally come to terms over the weekend on the phone. The co-op tells you that his clients are out of town and that he’ll get their signatures on the final counter offer on Monday. You tell your Buyers that they may stop looking because the Seller agreed and they are now “under contract” and that you’ll send them the binding contract on Monday. Monday morning comes and no word from the co-op agent. You figure you’ll get the contract around lunch time. Lunch comes & goes and still no paperwork. You call the other agent asking for the signed counter offer, and you hear (to your horror) “Oh, darn! I forgot to call you! On Sunday, the Seller got a higher offer than your Buyer’s and accepted that one instead! Thank you so much for the offer and good luck in your search!” WHAT!??!!? What happened to your agreement? Well, it was all verbal and therefore did not exist! The Seller is not legally held to any verbal contracts when selling real property in the state of Georgia!
- PRICE REDUCTIONS ON LISTINGS – If you are reducing the price of your listing, please get it in writing! Write in post-dated price reductions as a special stipulation in your Listing Agreement, then send your client an email or telephone reminder of the new “adjusted price” of their listing to which they already agreed! Or, complete an Amendment to Brokerage Engagement (GAR) or Amendment (RE Forms) with the new price, and have the Seller sign this.
- EXTENSION OF A LISTING AGREEMENT or BUYER BROKERAGE: Complete an Amendment to Brokerage Engagement (GAR) or Amendment (RE Forms) and get the client’s signature.
- KEY TIME FRAMES IN YOUR CONTRACT – Do not jeopardize your client’s earnest money by missing a specific deadline in your contract!! Let them know the key deadline dates in the contract so that they too are responsible! Consider using the “Reminder of Important Dates in the Purchase & Sale Agreement” form (GAR – under the “Financing” folder) or creating your own similar form for each transaction you do! We have created a form that you are free to use or modify… click this link for Key Dates in Contract. Consider printing a blank calendar with each property you get pending; write down all the contractual dates on this calendar (Binding, Closing, Due Diligence, Financing Contingency, Appraisal Contingency, Time to send the Loan Commitment Letter, etc.. You keep a copy and give one to your client so that they too may be responsible for the deadlines.
- INSPECTIONS, SURVEYS, TITLE INSURANCE – These are also important issues of which to make your clients aware! Remind them and protect yourself by getting it in writing if they choose to not get an inspection, survey, etc. Feel free to use this form, Service Recommendations, or make your own!
- UPLOAD IT TO PAPERLESS PIPELINE – Whenever you get anything signed by a client/customer, send it to Paperless Pipeline within 72 hours so that we may keep a record of it also! Also this is a GREC compliance issue!
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Anti-Trust Compliance Policies of Maximum One (8/5/13)
1. The commission rates of our firm are based upon the cost of the services we provide, the value of these services to our clients, and competitive market conditions. Our commission rates are not determined by agreement with, or recommendation or suggestion from, any person nor a party to a listing agreement with our firm.
2. Salespersons affiliated with this firm shall not participate in any discussion with any person affiliated with, or employed by, any other real estate firm concerning the commission rates charged by this form, or any other real estate firm in our community.
3. When soliciting a listing, or negotiating a listing agreement, no salesperson affiliated with this firm shall make any reference to a “prevailing” commission level in the community, the “going rate” or any other words or phrases that suggest that commission rates are uniform or “standard” within our marketing area, or that agencies will not show properties unless there is a specific commission rate.
4. The amount of sub-agency compensation or “commission split” offered by this firm to cooperating brokers is determined by the level of service we can expect a cooperating office to perform, and the amount of compensation, or commission splits, are not intended and may not be used to induce or compel any other real estate firm in our marketing area to raise or lower the commission they charge to their client.
5. When soliciting or negotiating a listing agreement, no salesperson affiliated with this office shall disparage the business practices of any other real estate firm, nor suggest that this office, or any other office, will not cooperate with any other real estate firm. Listing presentations shall focus exclusively upon the level of service and professionalism provided by this office, the results we have achieved for other clients, and the value the client can expect to receive for the fees we charge. Potential clients should be invited, and encouraged, to compare the value of our services to those of any other real estate firm in our marketing area. Likewise, any salesperson who is invited by a potential client to compare our service with those of any other real estate should do so by emphasizing the nature and quality of the services we provide.
6. Whenever a salesperson is unsure about the proper way to respond to the concerns of an actual or potential client or customer, or whenever a salesperson has been present during an unauthorized discussion of fees or commissions, he/she should verbally disavow any involvement in the conversation, leave the premises, and contact his/her Broker immediately. If necessary, the Broker will consult our firm’s attorney.
Disbursement of Disputed Earnest Money (7/29/13)
Earnest Money is specifically labeled as such and is handled specifically in a contract for the purchase and sale of real property. When a contract terminates and there is a disagreement regarding the reason for termination between the Buyer and Seller, the “holder” of the earnest money interprets the contract and circumstances to determine how to disburse the earnest money. This decision is based on which party caused the failure to close whether that by by default or an allowed-for contingency. There may be other extenuating circumstances in the interactions between the parties that had a cost associated to them, but the Holder is not a judge to solve a civil issue between the Buyer & Seller.
For example, there was a contract that failed to close because the Seller had a lien on the title that she was unable to clear prior to the agreed-upon time frames prior to closing. The Buyer chose to move on to another property. The Buyer terminated the contract and signed the Agreement to Release the Earnest Money requesting the earnest money be disbursed to the Buyer because the Seller could not convey unencumbered title at time of closing. The Seller refused to sign the Agreement. The Seller stated that she had other issues with the Buyer regarding the inspection that cost her money and she felt that the Holder should disburse the earnest money to her due to these issues. Apparently, the Buyer had the property inspected and did some damage to the electric panel that cost the Seller money to have repaired. The Seller clearly outlined and explained the damage that had been caused by the inspection and explained to the Holder the cost involved in repairing those damages. The Holder disbursed the Earnest Money to the Buyer because the Seller was unable to clear the title by the last agreed-upon closing date.
The issue of damage potentially caused by an inspection and the cost associated with any damage is a civil issue that must be handled between the parties in court. The Holder is not a judge to decide fault and assess damages in a civil litigation matter. The Holder only interprets the terms of the contract and disburses the disputed earnest money based on the best interpretation as to why the transaction failed to close.
Make sure you read in your contract the paragraphs describing the disbursement of earnest money. Make sure you point out these paragraphs to your clients. If you have any questions regarding earnest money, contact your Broker.
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GREC Advertising Guide (7/22/13)
All advertising must conform to GREC guidelines. Please send us copies of your advertising for approval. Below are the GREC Guidelines. These are also published in the Orientation Manual and Policy & Procedures Manual.
All Advertising (including Specific Property)
- Is not misleading
- Does Not Discriminate
- Is in the name of the Broker
- Is reviewed and approved by Broker
Advertising Specific Property (House, Apt, SD, Commercial, Land, etc)
- REQUIRED
- Broker’s Name as registered with GREC equal or greater size, frequency or prominence than agent(s)
- Broker’s telephone number is equal or greater size, frequency or prominence than agent(s) phone number
- OPTIONAL
- Affiliate/Licensee or Team name
- Other phone number other than Broker’s
- Email/Web Address
Advertising Licensee-Owned Property
- Written notification to Broker
- Broker’s written consent/approval
- Include appropriate licensee disclosure
- Complies with general rules on advertising specific property
Business Cards
- Must include firm name and telephone number
Complete rules on Advertising may be found in Rule 520 -1 – .09 www.GREC.state.ga.us
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HOA & Condo Issues (7/15/13)
All condominiums and many other properties have mandatory associations, and there are several additional requirements and considerations in getting these properties ready to close.
The HOA information will show up on a title search of the property so consult with your closing attorney after you first make an attempt to discover the following information. Due to the increasing costs of these HOA clearance & transfer letters, you and your clients will be best served by researching all the HOA information during the Buyer’s Due Diligence time frame.
- Community Association Disclosure in Purchase and Sale Agreement – Be sure that this form is included and completed, including initiation fees, pending or current special assessments, and amount of dues (annual, quarterly, or monthly)
- Contact info for HOA treasurer or management company – Listing agent should get this info from the seller as early as possible. This is more difficult when the seller is a bank or Fannie Mae, and the agent may need to get the info from neighboring owners.
- Ordering the HOA status letter – This is done by the closing attorney, but many HOA management companies now require the letter to be prepaid by the seller before providing the letter to the attorney. This can be difficult to explain and obtain from many sellers, especially banks and Fannie Mae.
- Receiving the HOA status letter – Many HOA management companies have a billing structure that charges more for “rush” letters, sometimes up to $200. Each company has its own definition of “rush”, some being less than 7 days.
- Approving the figures on the HOA status letter – Most REO sellers require additional time, sometimes up to 72 hours, to review and approve any amounts due from the seller on an HOA letter. This is in addition to the usual 48-72 hours to approve the HUD-1.
- Funding for Condos – Depending on the number of distressed properties in a complex, certain types of funding for a condo purchase may be difficult.
- Condo or Townhouse – Condo refers to ownership NOT style! Please make sure you know the type of ownership of the unit despite if it is one story or two, attached or separate
- Investment Property – Depending on the percentage of owner-occupants in a complex, an owner may be prohibited from renting out a condo. Find this information out during a Buyer’s Due Diligence time frame.
- Special Assessments / Increase in Dues – If the Seller has received the minutes from an HOA meeting that discloses potential or discussed increase in fees, disclose these minutes. If you represent a Buyer, contact the President of the HOA to determine if there are any assessments under consideration.
- HOA Covenents and Restrictions – Always a good idea to include the conveyance of these as part of the contract.
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Binding Agreement Date (7/8/13)
This date is one of the most important dates in your contract! Understand what that date is and how to communicate it to all the involved parties (Buyer, Seller, lender and BOTH agents!) ALL of the other dates in the entire contract are timed from this binding date (unless otherwise specified in writing and agreed-upon in the contract or Amendment or Addendum.) Regardless of the contractual term “Binding Date” in the GAR contracts and “Acceptance Date” in the RE Forms, the concept is the same!
Accepted Terms: The terms of the contract are ACCEPTED once the parties stop negotiating.
Binding Contract : The contract is binding upon the parties once the acceptance of all terms have been communicated to the last party who made the offer/counter offer. This concept is defined as “notice of acceptance.”
Date on the Contract: The contract forms have a place for the party RECEIVING notice of acceptance to fill in this date that the notification was received. Many agents neglect to complete this part of the contract. It is essential that this date is completed and all parties are aware of the actual date the contract went binding. Regardless, there is still a Binding Contract that can be proven (with signatures, email dates, fax transmission dates) even if an agent failed to complete this date… it just makes for potential disagreement when meeting contingency time frames within a contract.
Methods of Communicating the Binding Date: As an agent, when you are negotiating a contract, the appropriate party should fill in this date and then send the contract back to the accepting agent. The GAR forms also have a document “Notice of Binding Agreement Date” that clearly spells out the time frame.
Example: A Buyer writes an offer and submits it to a Seller; the Seller makes the Buyer a Counteroffer, the parties negotiate through the terms with counter offers, they finally come to an agreement (= ACCEPTANCE) then the last party to accept notifies the other party that they have accepted and will not be making any more counter offers (= BINDING.)
- Buyer: Makes offer to Seller
- Seller: Makes Counter offer of price, closing date, closing costs, possession date
- Buyer: Accepts Closing Date but counters price, closing costs and possession date
- Seller: Accepts Closing Date and possession date but counters price and closing costs
- Buyer: Accepts Closing Date, Possession date, closing costs but counters sale price.
- Seller: Accepts all terms but counters sale price.
- At this point, the ball is in the buyer’s court to either accept the Seller’s last counter offer or make another counter on price. The Seller does not know what the Buyers will do.
- Buyer: Agrees to all terms and will not be making any changes to the terms of the negotiations. They have ACCEPTED the last counter offer. (= ACCEPTED contract.) However, the Sellers at this point DO NOT KNOW this information.
- The Buyer must then TELL THE SELLER THAT THEY HAVE ACCEPTED the last changed terms (counter offer they received from Seller.) The Buyer’s agent sends the Seller’s agent the contract (counter offer form) with the Buyer’s signatures thereby notifying them of the acceptance.
- This NOTICE OF ACCEPTANCE = Binding. So the Seller’s agent would complete the Binding Agreement date as the date that the Seller’s agent received this notice (not when they opened their email but the date that the email was sent.) The specific terms of legal notice are specifically spelled out on each contract form (GAR and RE Forms.)
Business Practice: As a matter of professional business practice, the Seller’s agent should then send a copy of the contract with teh Binding Date completed or the Notice of Binding Agreement Date to the Buyer’s agent so that all the parties are on the same page regarding their deadlines to meet their contingencies.
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GAR Conventional Financing Contingency: Identification of Lenders & More (7/1/13)
When you are representing a Buyer who is seeking a conventional loan for a first mortgage and you are writng your contract (or receiving a contract) on a GAR contract form, be aware of the obligations required of the Buyer regarding the selection of a lender and the documents the Buyer s to send to the Seller regarding the chosen lender.
Application: The Buyer must actually initiate the loan application process by the specified number of days in the Exhibit in paragraph #1.
Loan Terms: This section of the Conventional Loan Exhibit is EXTREMELY IMPORTANT! The terms that you complete in this section describe the loan terms upon which the financing contingency is based. This does not necessarily have to be the loan the Buyer ends up securing, but if the Buyer seeks to terminate the contract based on the financing contingency, the Buyer must be denied for the loan AS DESCRIBED IN THIS EXHIBIT and the loan denial letter must reflect that.
GFE: The Buyer must deliver to Seller the Good Faith Estimate or letter from lender upon completion of loan application within the specified number of days in Paragraph #1.
Identification of Lender: Because the Buyer’s contract is contingent upon getting a conventional loan from an institutional lender, the Buyer must identify that lender to the Seller. If the Buyer has already identified a lender with whom they choose to work or with whom think they may work, then that lender is to be identified in Paragraph #2 AND the Good Faith Estimate or Letter of Complete Loan Application must come from one of those identified lenders. IF the Buyer has not yet identified a lender OR chooses a different lender than one previously identified on paragraph #2, then the Buyer is required to deliver to the Seller the name, address and phone number of the loan originator of the new lender.
Loan Denial: If Buyer terminates the contract based on the financing contingency and wishes to protect their earnest money, they must deliver to the Seller the loan denial letter from the institutional lender PRIOR to the end of the specified financing contingency period. To meet the terms of this contingency, the loan denial must:
- Be based on the loan described in paragraph #1
- Be a letter from an institutional lender
- The Lender must not deny the loan based on: 1. Buyer’s lack of sufficient funds, 2. Buyer not having leased/sold property which would have been required to qualify for new loan, 3. Buyer not having provided lender (in a timely fashion) all the documentation required by the lender to process the new loan.
Loan Commitment Letter: Should Buyer be APPROVED for the loan, the Buyer must deliver to Seller the Loan Commitment letter from the lender within the specified time frame or the Seller may terminate the contract. See Paragraph #4.
Authorization to Release Information: When the Buyer signs the Conventional Financing Contingency, the Buyer is authorizing the Seller and Brokers to communicate with the Buyer’s lenders regarding the status of the Buyer’s loan, Buyer’s ability to close, information regarding other loans for which the Buyer has applied, if the Buyer has provided lender with requested required documents, any loan conditions and reasons for loan denial.
Appraisal Contingency: This Exhibit also makes the contract subject to the property appraising for sale price. If the property does not appraise for at least the agreed-upon sale price then Buyer either agrees to buy the property at the higher price and the contract is no longer contingent upon the appraisal value OR Buyer must submit an Amendment to the Seller along with a copy of the appraisal requesting a reduction in sale price. If Seller agrees to sell at reduced price then Buyer is obligated to consummate the purchase; if the Seller does not agree to sell at the reduced price, then the Buyer may terminate the contract and get full refund of earnest money. There are specific time frames within which these Amendments must be completed. Read Paragraph #7. If the Buyer does not send the Amendment requesting reduction in Sale Price within the time frame, Buyer is obligated to purchase property at the contracted price regardless of the appraisal.
Best Business Practice: Every time you have a binding agreement, I strongly suggest that you print a blank calendar for each transaction. Go through your entire contract and note all of the important dates and specific deadlines, requirements and consequences. Within those calendar pages, write on the appropriate date the obligations of the Buyer and Seller. Get your client to sign and date it, keep a copy and give a copy to your client. Make sure and note the distinction between calendar days and “banking days.” Holidays and weekends are NOT considered “banking days” however they ARE counted in “days” if the term “banking” is not specified. If you are writing a contract nearing a holiday (i.e. Independence Day) then specify your dates in the contract accordingly… it may be very difficult for your clients to meet their contractual obligations over holidays. These dates are important for Buyers and Sellers because their are obligations, options and consequences for BOTH parties around each deadline!
For example:
- Binding Agreement Date: July 1
- Close Date: August 27
- Earnest Money Delivery: 2 days after Binding = July 3
- Earnest Money Deposit: 5 BANKING days = July 9 (July 4 is NOT a banking day nor are weekends considered “banking” days)
- Due Diligence: 10 days = July 11
- Loan Application: 3 days = July 4 – THIS IS A HOLIDAY SO PLAN ACCORDINGLY
- GFE to Seller: 3 days = July 4 – THIS IS A HOLIDAY SO PLAN ACCORDINGLY
- Loan Denial: 21 days = July 22
- Loan Commitment Letter: 5 days = 5 days AFTER end of Financing contingency (21 days) = July 27
- Etc.
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Copy of Earnest Money when Negotiating Offers (6/24/13)
When you are negotiating an offer between a Buyer and a Seller and you receive an image of an earnest money check from the Buyer, does that mean that the Buyer’s Agent is actually in possession of that check? NO! A picture of a check is just that….. simply a picture!
The contract itself describes the specifications surrounding the Buyer’s responsibilities and time frames to remit those funds to the Holder, whom actually is the holder and when those funds are to be deposited. Many times, the Buyer is not obligated to even send those funds until many days AFTER binding agreement date.
Do not ASSUME that simply because you see a scanned copy of a check that it means anything other than it is a picture. The true information that is important to the parties is not the check itself but the actual DEPOSIT of those funds! Consider asking the agent who represents the Holder of the trust funds to send you a copy of the proof of deposit of the earnest money. In your own transactions, you may access a copy of this through Paperless Pipeline.
Many listing agents habitually ask for a copy of the earnest money due to the way the contracts used to read. Formerly, the only option for earnest money was for the agent to be in possession of the trust funds when they wrote the offer; therefore a copy of the funds did mean that the agent was actually in possession of the check. In today’s contracts, that is only one of many options for the Buyer to submit earnest money to the brokerage with any contract. Additionally, we are so rarely doing business, regarding writing our contracts, face-to-face. Today’s typical agent, meets Buyers at the beginning of the relationship to show property and many times when it comes time to actually write the contract, the agent is at home and the Buyer is at their home! The writing and signing of the offers typically happens electronically through email! This also means that the Buyer typically writes out a check, scans this check, then sends the image to the Buyer’s agent along with their signed offer.
If you are a Buyer’s agent and you write an offer to send to the Listing agent, when the listing agent requests a copy of the earnest money, consider the following suggestion. When your Buyer sends you the image of the check, write on that piece of paper: “This is a copy only. Neither Buyer’s Agent nor Selling Brokerage are in possession of this check at this time. Earnest Money to be remitted and deposited per the agreed-upon contract.” (Idea courtesy of Angie Mezza-Smith, Managing Broker of Virtual Properties.)
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Read and Understand Your Contracts (6/17/13)
Can a Seller sell the house to TWO different Buyers? Yes! Can a Buyer buy TWO separate houses accidentally? Yes!
Last week, this article explained one scenario in which a Seller sold their house to TWO separate Buyers. (The end result was that the Sellers negotiated through a Settlement agreement with one of the Buyers and is proceeding on the contract with the other Buyer.)
There is ANOTHER situation where a Seller inadvertently sold a House to TWO Separate Buyers:
- Seller receives an offer on the house and accepts the contract. (Buyer #2) The Seller has a Short Sale contingency they must meet; the short sale Exhibit is included in the contract.
- The Seller has previously had the property under contract and the Buyer walked away. (Buyer #1)
- The Seller submits the contract (through Equator) to the Short Sale lender for approval
- Time passes with no word.
- The Buyer sends a message that they are tired of waiting and are going to walk
- No termination paperwork.
- The Seller gets ANOTHER offer on the property (Buyer #3) and ACCEPTS this contract and BINDS it for fear that Buyer #2 will walk.
- Contract #3 has Short Sale Contingency Exhibit as well (thank Goodness!)
- TWO BINDING CONTRACTS ON THE SAME LISTING!!!
- Seller receives word through Equator that Short Sale Lender will NOT accept presented offer (from Buyer #2)
- Seller informs Buyer #2 but does not terminate this contract
- Seller sends New contract (from Buyer #3) to Equator for Short Sale Approval)
- Buyer #2 Sends an Amendment for a Higher Price; Seller ACCEPTS and BINDS Amendment from Buyer #2)
- RESOLUTION: Seller’s Short Sale lender denies Contract from Buyer #3; Seller TERMINATES Contract #3
- Seller sends Amended Sale Price from Buyer #2 to Short Sale Lender & is currently waiting to hear.
- Buyer writes a contract on House #1.
- Seller #1 has to short their SECOND mortgage (not their 1st.)
- Contract has only a special stipulation making this contract contingent upon the “Seller’s second mortgage lender agreeing to take a reduced payoff”
- There is NO Short Sale Exhibit included with any other verbiage regarding time frames, obligations, consequences, options for the parties or rights to terminate based on the second mortgage not being approved to be sold short.
- Buyer initiates an Amendment to not deposit Earnest Money until second mortgage has approved short sale
- Seller NEVER signs this Amendment
- Buyer gets tired of waiting to hear if the Seller can meet this contingency
- Buyer continues to look for a new home
- Buyer finds one and writes a contract (& goes binding) on another house
- Buyer has just BOUGHT TWO HOUSES!
- Buyer wants to use the earnest money from House #1 as Earnest Money on House #2
- Buyer then terminates Contract #1 outside of Due Diligence or Right to Terminate time frames
- Seller wants to retain earnest money because the Buyer terminated with no provisions to terminate.
- Buyer has used earnest money on House #2 due to the Amendment that they initiated (but was never accepted)
- Agents, make sure you completely TERMINATE one contract before legally binding your client to another contract
- Completely disburse the Earnest Money on one contract before using that same money on another contract
- Just because the earnest money has not been remitted or deposited does not mean that it does not exist…. the Buyer is still responsible for that Earnest Money as PART of that CONTRACT (either through consummation or termination) despite time frames for remittance and deposit
- If you do not get an Amendment back from the other party, you may NOT act upon it… it is NOT part of the contract!
- DO NOT WRITE YOUR OWN SPECIAL STIPULATIONS… they tend to not protect you nor your client!!!!
- Use the Exhibits, Amendments, Special Stipulations that LAWYERS have already written for you and are available for you through the contract forms!!!
- Remember that in Short Sales, a Seller’s lender CANNOT SELL A HOUSE any more than your lender can sell yours!
- A Short Sale contingency is exactly that…. a contingency that the Seller must meet.
- USE THE SHORT SALE EXHIBITS in your contract forms (The Short Sale Exhibit in the RE Forms vs. the GAR forms also protects the Buyer’s Right to Terminate period) to adequately protect the Buyer and Seller legally and explain the disposition of the Earnest Money with varying scenarios, rights and obligations of the parties based on the short sale approval, counter or denial
- If you have ANY QUESTIONS…. ask your Broker, Support Group, Mentor, Coach, Attorney for guidance and advice BEFORE you get yourself, your Brokerage and your clients involved in EXPENSIVE mistakes!!!
- TAKE A CONTRACTS CLASS OFTEN!!!!!
- Take a Short Sale class if you are Buying or Selling Short Sales!.
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Seller Has TWO Legally Binding Contracts with TWO Different Buyers (6/10/13)
Can a Seller sell their house to TWO different Buyers? Yes! How can this happen and what do the parties do now? What are the contractual issues involved? What are the legal issues involved?
Here is the scenario:
- Seller receives offer from Buyer #1 (through Agent #1… all contact is through agents) on Monday on a GAR contract.
- Seller writes a Counter Offer on an RE Form and sends to Buyer #1 on Tuesday at 8am with a time limit of Wednesday at 11am.
- Agent #1 sends an email to Seller with Buyer #1 Counter Offer at 10am on Tuesday
- Seller is thinking about this and does not respond
- Seller receives offer from Buyer #2 (through Agent #2) on Tuesday at 6pm
- Seller phones Agent #1 on Tuesday at 6:30pm and informs her that Seller has received another offer & asks if Buyer #1 wants to revise their counter offer.
- At 7:45pm, Seller sends a text message to Agent #1 saying “We are going under contract with another Buyer. Thank you for your hard work!”
- At 8pm, Seller signs offer from Buyer #2 and sends accepted contract to Agent #2 thereby making it binding
- At 8:15pm, Seller receives accepted Counteroffer from Buyer #1 – Acceptance Date completed as 8pm & since sent to Seller at 8:15pm, that would be Binding Date
- Seller now has TWO LEGALLY BINDING CONTRACTS to sell the house to TWO DIFFERENT BUYERS!
Contractual Issues:
- Agent #1 used an email address to communicate with the Seller that was different than the email address printed below her signature on the contract
- Seller should have withdrawn their outstanding counteroffer before negotiating with Buyer #2
- Seller should have used the proper notifications if countering multiple offers simultaneously
- Agent #1 should have used proper Counter Offer form rather than emailing counter offer to Seller.
- Buyer #1 actually Accepted Seller’s counter offer at 5pm but Agent #1 never checked email and never gave Seller notice of acceptance therefore never Binding the contract
- At this point, what notifications / terminations / releases should the Seller give to either or each Buyer?
- Seller is Agent acting as principal – held to a higher standard
- Did Buyer #1’s email Counter offer terminate/void the Seller’s Counter offer?
- Was Buyer #1’s email Counter Offer merely “discussion” and not a true counter offer terminating Seller’s Counter Offer?
- Does the text message count as being “in writing” per Georgia Law for contracts for real property?
- Listing Agent & Buyer Agent #1 have a history of texting information back and forth to each other throughout these negotiations showing a pattern of agreed-upon communication.
- Is the Seller bound to the specific forms of “notice” per the GAR contract because there was no Binding Agreement on the GAR contract? Or are negotiations and notifications in writing sufficient per GA law?
- Was the Seller’s Counter Offer ever a valid enforceable counter offer because it was not sent to the specific place for legal notice as provided on the GAR contract from the offer because Agent #1 did business from an email other than what was printed on her contract?
- Did the Seller give Buyer #1 through Agent #1 Constructive Notice of the Seller’s Withdrawal of Counter Offer?
- Does email and text communication during negotiations count as being “in writing” and is this communication valid and enforceable when contracting for real property in Georgia?
- What will a judge rule regarding the times (as evidenced on fax transmissions and emails) of the sequence of events in determining the validity and enforceability of each of these contracts?
- What would the Buyers sue the Seller for… specific performance? damages? Could either Buyer demonstrate damages? Both agents were notified immediately (by 8:30pm) that there were two binding contracts on the property and asked to tell the Buyers to not incur any expenses related to pursuing the property until this matter is resolved.
- What happens to the Due Diligence time frame on both/either contract?
- Did the Seller give Buyer #1 every possible chance to communicate that they wanted the property (would a judge/jury decide that 12 hours was a reasonable amount of time? 2 hours after receiving notice of Buyer #2)
- Is there any legal recourse of Buyer #1 against Agent #1 for not binding the contract that they had accepted prior to there ever being Buyer #2?
- Buyer #1 wants the property and intends to pursue it.
- Buyer #2 wants the property and intends to pursue it.
- Seller is seeking legal counsel with a lawyer who practices real estate litigation.
- BOTH Buyer #1 and Buyer #2 have remitted earnest money to their respective brokers.
- Seller has not given any notices or terminations to either Buyer #1 or Buyer #2 until receiving legal advice from their attorney.
- Buyer #1 is local and has a home that they do not intend to sell from what the Seller had been told in conversation by Agent #1 & no Lease/Sale Contingency was included in the offer.
- Buyer #2 is out of state and is being relocated to Atlanta; they cut their trip short last weekend and flew back home because they had the Seller’s house under contract.
- Since the Seller was also a real estate agent duly licensed in the State of Georgia, how does that reflect on the situation in a lawsuit for specific performance?
- If this matter is investigated by GREC, will Seller/Agent lose her license? Is this covered by her Errors & Omissions insurance?
- By the way…..
- Buyer #1 Offer: 10% down payment & only 15 year conventional loan.
- Buyer #2 Offer: 5% down payment, 30 year conventional loan and $12,000 higher than Buyer #1’s offer
- How would YOU have handled this situation if you were agent representing Seller? Buyer #1? Buyer #2? What would you do as the agent given the current circumstances?This situation NEVER SHOULD HAVE HAPPENED! Based on the situation and sequence of events and types of communication involved, there are legal merits and acceptable legal arguments supporting both contracts, hence TWO LEGALLY BINDING CONTRACTS. Only a judge can resolve this issue if one of the buyers does not choose to walk away or come to some settlement with the Seller.
ALL of these issues are thoroughly discussed in all of our contract classes so that you can AVOID this situation! At this point, there is no definitive resolution to this situation. Both Buyers intend to pursue the property, Seller is meeting with legal counsel on Monday.
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Agency Agreements: Create a Client Relationship NOT a Fiduciary Relationship (6/3/13)
When a Seller or a Buyer signs a brokerage engagement, we colloquially refer to our client/agent relationship with them as being a “fiduciary” relationship… we are even taught this in many pre-license classes. However, as a real estate professional licensed by the state, we are bound by certain laws and rules which actually PREVENT us from legally having a fiduciary relationship with our Buyer and Seller clients!
A fiduciary relationship is defined as one in which one person places complete trust and confidence in another in regard to a particular transaction or one’s general affairs or business. When we sign a brokerage engagement and create a “client” out of a “customer,” we certainly hope that there is mutual trust and confidence. However, agents are bound by various disclosure laws that are contradictory to a true fiduciary relationship in the legal sense.
For example, a defense attorney absolutely has a fiduciary relationship with their client whether that person is innocent or guilty. If the lawyer’s client confesses to a crime, that lawyer may NOT reveal that information to the court or anyone due to the fiduciary nature of their relationship! In fact, they must to the best of their ability defend their client in a trial!
However…..
If, for example, you, the licensed professional real estate agent, list a house and the Seller shows you the leaking basement and the mold growing up the walls and asks you not to disclose that fact to any other agent or any potential Buyer, what are you to do? The Seller goes so far as to tell you that they will pile really heavy boxes in front of all of the mold and so “no one will ever know!” If you truly had a fiduciary relationship with that Seller, you would be obligated to withhold that material knowledge. Aren’t you held to license law and GREC rules and Ethics codes that dictate otherwise?
The RE Contract Forms Listing Agreement and Buyer Brokerage Engagement specifically spell out that by signing that document, it in fact does NOT create a fiduciary obligation on behalf of the agent or brokerage…. that in fact you are a “limited agent and shall not be deemed to have a fiduciary relationship or fiduciary obligation with you (or any party) …”
Regardless of which contracts you use throughout your business, I encourage you to read through the Listing Agreement and Buyer Agency Agreement in the RE Forms and talk to your affiliated attorney for a better understanding of the legal relationship you create for yourself and for the Broker when you sign an Agency Agreement!
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Financing Contingency: Specific Requirements to Meet this Contingency (5/27/13)
When you represent a Buyer in a contract and there is a Financing Contingency for that Buyer, that does not necessarily mean that the Buyer is entitled to the Earnest Money if the Buyer terminates based on not being able to get a loan. There are specific provisions that make up the specifics to a Buyer actually meeting this contingency and not losing their earnest money… make sure that you advise your client of these specifics so that they may meet their responsibilities regarding seeking their loan.
Time Frame: There is a specific amount of time within which the Buyer must determine if their lender will finance the loan. The number of days that are negotiated between the Buyer and Seller constitute this time frame. I receive many calls from angry Buyers who do not understand why they are being penalized and losing their earnest money simply because a lender will not give them a loan. They fail to realize that there was a negotiated number of days within which to determine this information and protect their earnest money.
Written Notice of Termination: The Buyer must provide written notice of termination along with a copy of the Loan Denial Letter from the lender. This notice must be delivered to the Seller prior to 11:59pm on the date that the financing contingency expires. This fact implies that all parties must have agreement as to the Binding/Accepted Agreement date.
Loan Denial Letter: If a Buyer cannot get financed from a lender, it is not enough to merely notify the Seller; this notification must be accompanied by a loan denial letter from an institutional lender. This letter must deny the loan as outlined in your loan contingency exhibit. This letter must be based on the lender’s customary and standard underwriting criteria.
Buyer Responsibilities for Complying with Loan Process: Regardless if a lender will not loan a Buyer the money to purchase a home, there are specific reasons for the lender’s denial that do NOT meet the terms of the contractual contingency and would NOT protect a Buyer’s earnest money.
- Buyer lacks funds to close (i.e. down payment, closing costs, etc.
- Buyer has not leased or sold their current residence (unless this specific contingency has been agreed upon between the parties)
- Buyer not having providing all of the information and documents as requested by the lender. These documents include but are not limited to: Wood Infestation Report, Flood plain Certification, septic or well letters, and other forms that you as the agent are an integral part of exchanging between the parties
- Buyer alters their financial picture after Accepted Contract and prior to Close
Make sure that your Buyer understands all of the time frames and responsibilities to which they must adhere to terminate a contract based on the financing contingency and protect their earnest money or protect being sued for damages by the Seller. These provisions are consistent among the various loan contingency exhibits in the GAR contracts and the loan contingency as included in the RE Contract for Purchase and Sale.
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Failure to Remit Earnest Money: Differences between the GAR and RE Contract Forms (5/20/13)
When a Buyer deposits “earnest money” with an offer to purchase a home, it is designed to impress upon the Seller the idea that the Buyer “earnestly” intends to purchase the property. In other words, the Buyer is acting in good faith to consummate the transaction. Earnest money is NOT the “consideration” in the contract. Consideration is the legal concept of value in a contract ; anything of value promised to another when making a contract. The consideration of mutual promises is specifically spelled out in both the RE Contracts and the GAR Contracts. When a Buyer fails to remit the earnest money or the earnest money is not honored by the bank, there are different contractual consequences and option available to the parties in each contract form. It is vital to understand these options for both Buyer and Seller based on the contract on which the offer is written.
RE Forms (paragraphs 3.1 and 3.2) – If the Buyer does not timely remit the earnest money or it is not honored by the bank, the remedies are specifically spelled out. The Escrow Agent notifies the parties and the Buyer has three (3) calendar days to make the deposit in certified funds. Should the Buyer fail again to make the deposit, the earnest money is no longer part of the contract but there is no verbiage indicating that this is a Buyer “default.”. At this point, the Seller may unilaterally terminate or proceed and demand full performance of the contract by the Buyer and proceed to closing.
If the Seller proceeds and the Buyer later defaults on the contract, disbursing the earnest money to the Seller as “liquidated damages” is no longer a viable remedy because all parties have assented to the fact that there is no earnest money in the deal.
GAR Forms (paragraph 4) – If the Buyer does not timely remit earnest money or it is not honored by the bank, the holder gives the parties notice and the Buyer has three (3) banking days to “cure the default.” If the Buyer still does not remit the earnest money, the Seller has seven (7) calendar days to unilaterally terminate.
If the Seller proceeds and the Buyer later defaults on the contract, the earnest money may still be disbursed as “liquidated damages” because it is still conceptually part of the contract. The issue becomes the Seller’s ability to obtain the earnest money from the Buyer because the Holder has given notice to all parties that they are not n possession of the funds.
As an agent, it is your responsibility to know the whereabouts of the earnest money involved in a contract regardless if you represent the Buyer or the Seller. With the Maximum One transaction management system (Paperless Pipeline) you have access to the actual deposit receipt and information if it was not honored by the bank. If you do not physically receive the money in person from the Buyer, it is your responsibility to track it down and know where it is… even if it is supposed to be delivered to another brokerage or attorney as the “holder.” Make telephone calls and determine exactly when the Buyer sent it, to what address and when that party received it and deposited it. Demand a copy of the deposit receipt if someone other than Maximum One is holding the funds.
If there is a “copy of the earnest money check” as part of the offer when the parties are negotiating the contract, clearly indicate on that copy if you as the agent are actually in possession of the check or if the Buyer has merely sent you a “picture” of the check. Simply write on the document with the copy of the check, “Copy of earnest money check only. Agent is not actually in possession of the funds.” Better yet, when you take a Buyer out to show property, get the earnest money at that time OR when you write an offer, meet the Buyer and get the funds at that time prior to submitting your offer. If you represent a Seller, determine if the Buyer’s agent is actually in possession of the earnest money or not. Protect your clients and protect yourself when it comes to handling earnest money and know the responsibilities and consequences of not having earnest money based on which set of forms upon which the contract is written!
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Lease Purchase Contracts (5/13/13)
When you write a Lease-Purchase contract, this is a contract for the Buyer to purchase a property at a later date. There are two parts to these contracts: the Purchase & Sale agreement and the lease to describe the relationship between the Buyer & Seller until the extended closing occurs.
There are a couple of issues to keep in mind when writing a Lease-Purchase contract:
- Contingency Time Frames – for Due Diligence/Buyer’s Right to Terminate, financing, appraisal, etc. Are these timed from Binding Agreement Date or from the closing?
- Earnest Money – acts like earnest money in any other purchase and sale
- Security Deposit – acts as security deposit for the lease portion of the Lease Purchase Agreement
- Rent Payments – do any portion of these go towards the Buyer’s cash due at closing or do these payments ONLY cover the lease portion of the contract?
- Commission – Are you getting paid a portion of your commission at the signing of the lease and remainder at the close of the transaction?
- Extensions – This is a HUGE contingency to allow for UP FRONT! If the lease portion gets extended what happens to the contract time frames? Do you get additional commission or another installment towards your commission? What about the interest rates in your financing exhibits?
- Cancellation of Contract by the Parties – You must continually stay in touch with your client throughout the Lease portion of a Purchase & Sale Agreement. If the contract fails to close but the Buyer & Seller wish to extend their lease & close at a later date, are you entitled to commission? Have you extended your agency agreements with the parties? Have you acted as their agent and treated them as your client? Or did you find out that your contract had expired when the other agent sent you a copy of a new lease without your name on it? And your clients won’t return your calls or emails….. a clue that something has gone awry in your relationship!
If the contract does not close as originally scheduled, many times the Buyer & Seller extend the lease and agree to close at a later date in time. If you have not stayed in contact with your clients, they may fail to see the need for your services to close the transaction and be extremely resistant to paying you a commission! The legal issue becomes that of “procuring cause of sale” versus your continual exhibiting of your agency relationship & duties throughout this extended period prior to closing. A judge would have the final answer as to if you were in fact entitled to your commission or not! I urge you to avoid this issue from ever arising by STAYING IN TOUCH with your clients!!! Additionally, never put your Buyer clients in default of the contract by forgetting when this contract is scheduled to close and forgetting to have them meet their financing contingencies or failing to extend their contract prior to expiration.
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NEW RE Contract Forms (5/6/13)
There are 13 new RE Contract Forms added to the library for you to use. If you have not taken the 2013 RE Contract Forms Class and have not checked out these contracts lately, consider taking a look! The NEWEST forms just added include:
RE133 Developed Lots Disclosure
In addition to these above-listed NEW forms, here is a list of all the various forms included in the RE Contracts package:
RE1 [Reserved] (Under Development)
RE2 Terms of Use for RE Forms
RE3 RE Forms Index
RE10 Special Stipulations (Under Development)
RE100 Contract for Purchase and Sale of Residential Real Property
RE101 New Construction Contract (Under Development)
RE102 Multi-Family Contract (Under Development)
RE103 Development Lots Contract (Under Development)
RE104 Undeveloped Land Contract (Under Development)
RE105 Lease for Lease/Purchase Agreement Only Exhibit
RE106 Legal Description Exhibit
RE108 New Construction Exhibit (Under Development)
RE109 Walk-thru/Punch List (Under Development)
RE110 Counteroffer
RE111 Generic Additional Page
RE112 Bill of Sale
RE115 Commission Acknowledgement
RE120 Contract for the Lease of Residential Real Property
RE121 Lease Application
RE122 Rental Property Condition Report
RE123 Lease Special Stipulations, continued
RE124 Option to Purchase Leased Property (Under Development)
RE125 Lease Commission Acknowledgement
RE126 Amendment and Unilateral Notice Under Lease
RE130 Seller’s Property Condition Disclosure Statement
RE131 New Construction Disclosure Statement (Under Development)
RE132 Multi-Family Disclosure Statement (Under Development)
RE133 Developed Lots Disclosure Statement (Under Development)
RE134 Undeveloped Land Disclosure Statement (Under Development)
RE135 Landlord’s Disclosure Statement
RE136 Community Association Exhibit
RE140 Disclosure of Information on Lead-Based Paint
RE141 EPA’s Protect Your Family from Lead in Your Home
RE142 EPA’s A Brief Guide to Mold, Moisture, and Your Home
RE143 DeKalb County Plumbing Disclosure Exhibit
RE144 EPA’s A Citizen’s Guide to Radon
RE150 Exclusive Buyer Brokerage Agreement
RE151 Exclusive Right to Sell Listing Agreement
RE152 Exclusive Right to Sell Listing Agreement Exhibit A
RE153 Exclusive Lease Procurement Listing Agreement
RE154 Lease Management Listing Agreement (Under Development)
RE155 Exclusive Tenant Brokerage Agreement
RE156 Broker Agreement to Pay Referral Commission
RE 157 Prospect’s Acknowledgment and Consent to Referral
RE200 FHA Loan Exhibit
RE201 VA Loan Exhibit
RE202 Seller Financing Exhibit
RE203 Financing Contingency
RE204 Appraisal Contingency
RE210 Additional Trust Funds to be Deposited (Under Development)
RE211 Agreement to Transfer Trust Funds to another Party (Under Development)
RE212 Agreement to Disburse Trust Funds
RE250 Generic Contingency Exhibit
RE251 Sale or Lease Contingency Exhibit
RE252 Back-up Agreement Contingency Exhibit
RE253 Short Sale Exhibit
RE254 Seller’s Right to Continue Marketing Property Exhibit
RE260 Notification
RE261 Amendment to Contract
RE262 Amendment During Buyers Right to Terminate Period
RE263 Notice to Withdraw or Terminate
RE600 Contract for the Purchase and Sale of
Commercial Real Property
RE601 Legal Description Exhibit
RE609 Seller’s No Cure Notice
RE610 Seller’s Warranties and Representations Exhibit
RE611 Survey Requirements Exhibit
RE612 Buyer’s Due Diligence Materials Exhibit
RE613 Contingency for Zoning Exhibit
RE614 Letter of Credit as Earnest Money Exhibit
RE615 Seller’s Right to Remove Existing
Structures Exhibit (Commercial)
RE616 Seller’s Right to Occupy Existing Structures After
Closing Exhibit (Commercial)
RE617 Exchange of Property Exhibit (Under Development)
RE618 Easements Benefitting Seller’s Adjacent Land Exhibit
RE619 Easements Benefitting the Property Exhibit
RE620 Additional Closing Documents Exhibit
RE621 Appraisal Contingency Exhibit
RE630 Financing Contingency Exhibit
RE631 Purchase Money Note and Security Deed Exhibit
______ Residential Lease Agreement
These forms are available through both FMLS & GAMLS. For whatever reason, GAMLS tends to publish the newly released forms before FMLS.
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Real Estate Education, Research & Recovery Fund (4/29/13)
The Real Estate Education, Research, and Recovery Fund refers to money
that is specifically identified and deposited and maintained by the State Treasury.
When applying for a new real estate license in Georgia, $20 of the licensing application fee is deposited in the Real Estate Education Research and Recovery Fund. The Commission must ensure that there is always a minimum balance of $1 million in the fund at all times.
The purpose of the fund is as follows:
- Provide compensation (in accordance with a court order) to someone other than a licensee who is aggrieved by an act, representation, transaction, or conduct of a licensee which is in violation of the rules and regulations of the commission
- Allow the commission to use any and all funds from new licensee payments to the fund or from accrued interest earned on the fund to help underwrite the cost of developing courses, conducting seminars, conducting research projects on matters affecting real estate brokerage, for the benefit of licensees and the public
Courses such as the Common Violations Class, the Online Courses, the Trust Account Workshop, and the 1-Day Broker Workshop are made possible by the insightful and proper use of the Real Estate Education, Research, and Recovery Fund.
See O.C.G.A 43-40-22 for specifics..
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Miscellaneous Tips (4/22/13)
Blanks in Contracts: If there is a blank in a contract, it indicates that some information is to be filled in or a signature or initial is required. Do not leave any blanks in your contracts. If something goes awry, a third party (i.e. a judge) will have no way of know if the parties did not see that part of the contract, if that part of the contract did not apply to them or if that space was intentionally left blank. Avoid any confusion and potential discrepancies by making sure that every blank in your contract has something filled in the space (“NA” if applicable.)
“AND” / “OR” in Contracts: If there are two or more provisions within a certain clause/paragraph/concept in a contract closely read if the operator between those provisions is “AND” or “OR” If the choice is “AND,” then complete all the blanks in BOTH (or ALL) options. If the choice is “OR” then only the provision completed would be part of the agreement.
Checkboxes in Contracts: If the contract form has a checkbox beside the option, the box must be checked (or “X”ed) if it is not checked, it would not apply as part of the binding contract. Even if you have provisions filled in specifying the terms of that provision.
Remember that nothing is an issue until there is a problem! The parties may agree verbally on potential issues at the beginning of a transaction but if things were to fall apart, these same cordial parties will rely upon anything and everything to prove their point especially when earnest money or lawsuits are involved. Write strong and thorough contracts to protect your clients and protect yourself!
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Affiliated Service Providers & Disclosures (4/8/13)
Salesperson Camel was affiliated with XYZ Brokerage Solutions, a firm that has affiliated business relationships with assorted real estate settlement service providers. The joint venture service providers of the firm include mortgage services (Traditional Financial Services), home warranty insurance (Old Home Warranty), We Move U, and ABC Law Firm along with a home owners insurance and a title insurance company.
XYZ Brokerage Solutions receives monthly statements from these joint venture partners to track the funds generated from the affiliates’ use of joint venture service partners. Funds are disbursed to the broker whose clients and customers utilize the services of the firm’s partners.
Unrelated to the activities with joint venture partners, the Commission received a formal complaint alleging that Salesperson Camel failed to timely remit a $2,000 earnest money check to his broker. The investigation determined that the allegation was indeed true. Upon further investigation regarding the activities of Salesperson Camel, additional violations were uncovered.
The licensee was clearly producing transactions, and it was determined that over a period of a year and a half the license was performing real estate activities while his license was on lapsed status. During that time, several transactions took place, including the following:
1. On May 9, 2010, while Salesperson Camel’s license was on lapsed status, Salesperson Camel drafted a contract for 5884 Olson Drive. On June 16, 2010, the transaction closed. The Settlement Statement identifies the lender as Traditional Financial Services. The contract and Settlement Statement state the seller paid for a home warranty with Old Home Warranty. Salesperson Camel failed to disclose that the firm collected a fee from the mortgage and home warranty providers.
2. On March 4, 2011, Salesperson Camel drafted another contract that closed on May 30, 2011. The contract and Settlement Statement state the seller paid for a home warranty with Old Home Warranty. Salesperson Camel failed to disclose that the firm collected a fee from the home warranty provider.
3. Files from several other transactions did not contain any Affiliated Business Disclosures to the buyers.
Not only was the Salesperson practicing real estate with a lapsed license, but the investigation of Salesperson Camel’s activities determined that the managing broker of the brokerage firm overlooked several license law violations of Salesperson Camel for the financial gain of the firm.
In addition to closing transactions and paying monthly office rent, Salesperson Camel generated income for the broker by using the firm’s joint venture partners. Salesperson Camel voluntarily surrendered his license to the GREC and GREC later revoked his license. The managing broker was subsequently investigated for other violations of the License Laws, Rules, and Regulations. The managing broker were required to pay fines, administrative and legal fees in additions to being required to take programs of education on the License Law, Rules, and Regulations.
It is a violation of the License Laws, Rules and Regulations to fail to disclose in writing to a principal in a real estate transaction any of the following:
(A) The receipt of a fee, rebate, or other thing of value on expenditures made on behalf of the principal for which the principal is reimbursing the licensee; (B) The payment to another broker of a commission, fee, or other thing of value for the referral of the principal for brokerage or relocation services; or (C) The receipt of anything of value for the referral of any service or product in a real estate transaction to a principal; 43-40-25(b)(6)
Reprinted from GREC RENews, April 2013
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Timely Receipt of Earnest Money (4/1/13)
When you write a contract or counter an offer, be extremely careful of what you put in the earnest money section regarding receipt and deposit time frames and adhere to the time frames to which the parties agree. If you indicate that you are in receipt of the earnest money at time of offer, then you must actually have the money in hand, not simply a photo copy of the earnest money. If the final contract states that the earnest money is to be received ____ number of days after Binding Agreement (Acceptance) Date, then it is your responsibility as a licensed agent to know the whereabouts of the money. If it has not been received by that specific date, then you must notify the Broker/Managing Broker/Escrow Agent so that we may give the appropriate notice to all the parties in the transaction. If you do not notify the Holder and no notice is given, then you are in violation of license law (GREC fine $600) for mishandling of earnest money. If you have indicated that the Buyer has remitted earnest money and all you have is a photocopy of earnest money and not the actual money, then you have falsified a contract and are also in violation of license law (GREC fine of $200 – $1000 and possible revocation of license.)
If the earnest money is not timely received (or dishonored by the bank) then the Buyer is in default of the contract. If the Buyer does not cure this default by the time frame specified in the contract you are using, then the SELLER MAY TERMINATE. In this market of multiple offers and increasing prices, Sellers are frequently looking for ways to terminate contracts!
GAR Purchase & Sale Agreement: On page 1, there are several options for you to choose regarding the earnest money. Earnest money to be deposited in 5 banking days.
- Paragraph 1J1: $____ as of offer date = money in hand
- Paragraph 1J2: $____ within __ days of Binding Agreement Date = money in hand by midnight of that day or contact Holder to give notice to parties
- Paragraph 1J3: $____________ = special terms upon which Buyer and Seller agree
Earnest Money to be deposited 5 Banking days after Binding Agreement date or whichever option has been chosen above (paragraph 4.)
RE Contract For the Purchase & Sale of Residential Real Property: On page 1, paragraph 3 describes the options for receipt of earnest money. Earnest money to be deposited in 3 Banking days.
- Paragraph 3.1: Buyer has remitted earnest money to Escrow Agent = money in hand
- Paragraph 3.1: Buyer has not remitted earnest money to Escrow agents but will within ____ days of Acceptance date. = Money in hand by midnight on that date or contact Escrow Agent to give notice to the parties.
Calendar: I suggest that you print a blank calendar for every one of your contracts and write out all of the dates on that calendar of all of the deadlines for the terms of your agreement. I further suggest that you write out the responsibilities and consequences and options for your client if those deadlines are not met. Make two copies of this calendar & keep one and give one to your client.
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Termination of Contract & Release of Earnest Money (3/25/13)
These are TWO SEPARATE concepts regarding your purchase & sale agreements in BOTH the GAR contract forms and the RE contract forms. Any party may terminate a contract without the other party’s consent. The termination of a contract is unilateral however there must be agreement regarding the disbursement of earnest money in other words, TWO signatures are required (Buyer and Seller.) “NOTICE” = one (1) signature; “AGREEMENT” = two (2) signatures.
This fact is true regardless if one of the parties is terminating based on an allowed-for contingency in the contract. Both contracts clearly state in the paragraph regarding the disbursement of earnest money, that if it is not applied towards the purchase price, nor disbursed to the Buyer for never entering into a binding agreement, then the earnest money may be disbursed pursuant to a “SEPARATE WRITTEN AGREEMENT SIGNED BY THE PARTIES AGREEING TO THE TERMS OF THE DISBURSEMENT.” If you do not get BOTH signatures on the agreement as to how to disburse the earnest money, it then officially becomes “earnest money in dispute” and it is up to the Holder to decide the disbursement and send out the “10 day letter” to notify the parties.
GAR Contract (F83 – Unilateral Notice to Terminate; Mutual Agreement to Disburse Earnest Money): For some unknown reason, GAR has included these two separate contractual issues on one form making it confusing to explain the differences between these separate legal concepts. Regardless, as an agent, you must get one signature on the top half of this page and state the reason for the termination. An agent must then get BOTH parties signatures on the bottom part of this form with a description of which party is to receive the earnest money.
Additionally, there is no date included on this form and if the party who terminates the contract does not date their signature, it can be problematic in determining if the termination occurred within an allowed-for contingency time frame based on the Binding Agreement Date of the contract… so PLEASE make sure that the terminating party dates their signature!
RE Contract Forms (F263 – Notice to Withdraw or Terminate AND F212 – Agreement to Disburse Trust Funds): There are two separate forms that must be completed with the termination of a purchase and sale where the contract was written on the RE Forms. The fact that there are two separate forms is much easier to understand and explain to the public and reflects the fact that these are two separate legal issues regarding a contract for the transfer of real property where trust funds have been deposited or promised. The party who is initiating the termination must sign the Notice to Withdraw & Terminate and state the reason for the termination.
In addition to this form, the agents must also complete the Agreement to Disburse Trust Funds and have BOTH Buyer and Seller sign this form. This form clearly states who is the holder and how much of the earnest money is to be disbursed to each party (remember that the parties may always agree to divide the earnest money amount.)
Whenever a brokerage (or attorney) is holding someone else’s money in the form of earnest money or security deposit, both parties must agree in writing on the disbursement of these funds.
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Temporary Occupancy for a Seller After Closing (3/18/13)
If you are involved in a transaction in which the Seller will be staying in the property AFTER the closing (for any period of time) you really should have some document disclosing the terms of that privilege. After the transaction closes, that seller no longer owns that property. It is customary in Georgia for a Seller occupant to retain possession of a house for approximately 1 – 3 days after closing. There are many reasons for delays in closings and both Buyers and Sellers agree to this possession arrangement for practical purposes (i.e. arranging for moving trucks for BOTH parties.)
Remember that nothing is a problem until it is a problem! What would happen if those agreed-upon 3 days turns into a Seller that changes their mind and refuses to leave the property even after they have sold it to someone else? Does the NEW owner have the right to evict the old owner… NOT NECESSARILY!!! The legal issue is that of a breached purchase and sale agreement which does NOT contain any landlord/tenant language (i.e. eviction procedures / rights / responsibilities.)
Temporary Occupancy Agreement for Seller After Closing (GAR Form F140): This form spells out all of the terms necessary for a Buyer to lay legal claim to the property they just purchased. It describes the issues and remedies if there is any damage to the property after closing AND it legally states that a Seller that does not vacate as contractually agreed upon becomes a “tenant at sufferance who is unlawfully holding over” in the property. This Exhibit also lists the liabilities of the parties involved for various potentialities including destruction of the property. This form is to be used for any seller occupancy after closing from 1 – 29 days. If the Seller will retain possession for any length of time 30 days or more, write a lease agreement between the parties.
RE Contract Forms: Currently, there is no Exhibit relating to this issue. The Contract for Purchase & Sale for Real Property will be revised in the near future to automatically contain the appropriate legal language in the closing & possession paragraph to address this issue. In the meantime, please consult with your affiliated closing attorney to help you draft a legal and enforceable special stipulation to include in your RE Contract if the Buyer is allowing the Seller to retain possession for 1 – 29 days after closing. If the Seller will stay in the property for 30+ days, draft a Lease Agreement between the parties.
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Unilateral Extension of Contracts (3/11/13)
If you are using the RE Forms, there is NO contractual provision for the unilateral extension of the contract. Any extension must be agreed upon between both parties. If you are using the GAR contracts, there are very specific situations in which the parties may unilaterally extend the contract for 7 days. Once this unilateral extension has been exercised, it may NOT be used again (not once per side of the transaction but once period.) The party giving notice must state the reason for the extension.
Extending the Closing Date (paragraph #5D)
Either Buyer or Seller may extend the closing date for 7 days with written notice to the other party PRIOR to the date of closing. There are only three (3) circumstances under which the contract may be extended unilaterally:
- Valid title objections
- Mortgage lender not able to meet obligations by closing
- Closing attorney not able to meet obligations by closing
#1 – Valid Title Objections
If the Seller cannot satisfy valid title objections prior to closing, either party may extend for 7 days to satisfy these objections. Valid title objections, however, do NOT include title issues that can be satisfied through paying money (or getting a bond.) These objections also do NOT include issues that would prevent the Seller from conveying “good and marketable” title.
- “Good and Marketable Title” = title in which a title insurance company (licensed to do business in Georgia) will insure at its regular rates subject only to the standard exceptions.
#2 – Mortgage Lender Not Able to Meet Obligations
If the mortgage lender is not able to meet their obligations prior to the closing date, either party may unilaterally extend the contract for 7 days to give the lender time to complete their file. However, if the lender is not able to complete their obligations due to the delay being caused by the Buyer (i.e. not timely providing requested documents to the lender) the unilateral extension may NOT be used. Additionally, if the Buyer has already obtained a loan commitment, the the unilateral extension may NOT be used.
#3 – Closing Attorney Not Able to Meet Obligations
If the closing attorney is not able to meet their obligations by closing, either party may unilaterally extend the contract for 7 days.
If one of these above-conditions does not apply, then the contract must be extended by agreement between BOTH parties (using the Amendment to Extend Closing and Possession.) In this instance, if both parties do NOT agree to extend, then the party who is not ready to close as of the closing date would be in default of the contract.
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One of Two Letters Required with the Financing Contingencies in the GAR Contracts (3/4/13)
If you are using the GAR contracts and the Buyer is getting institutional financing, the Buyer MUST provide the Seller with one of two letters from the lender. This verbiage is included in the Conventional Financing Contingency Exhibit, the FHA Loan Exhibit, the VA Loan Exhibit & the USDA-RD Loan Exhibit.
Loan Denial Letter (paragraph #3)
A Buyer has ____ number of days from the Binding Agreement Date to determine if they will qualify for financing from a lender “Financing Contingency Period.” If a Buyer is unable to qualify for the loan described in the Exhibit, then the Buyer must provide a loan denial letter from that lender PRIOR to the end of that contingency time frame that is filled in on the exhibit. This would be the only way that the Buyer would get their earnest money back based on the financing contingency. If a Buyer does not qualify for the proposed loan but does not provide the Seller with this denial letter at all OR discovers this information AFTER the contingency period, then their earnest money is at risk.
Loan Commitment Letter (paragraph #4)
If the Buyer does qualify for the proposed loan, then the Buyer has ____ number of days AFTER the end of the financing contingency period (as discussed above) to inform the Seller “Duty to Deliver Evidence of Ability to Close.” The Buyer is obligated to provide the Seller with a Loan Commitment letter describing the loan type and terms from that lender within that time frame that is specified. If the Buyer fails to provide this letter within this time frame, then the Seller may terminate the contract within seven (7) days after this time frame.
Your Responsibility as an Agent
You must help your clients (Buyers and Sellers) keep up with the appropriate time frames in the contract in order to protect their interest. Buyers have a difficult time understanding how they can lose their earnest money due to no fault of their own if they don’t qualify for a loan. If that Buyer does not find out this information until AFTER the end of the financing contingency period, then they would be in default of the contract and there is a strong chance they will lose that earnest money to the Seller.
On the other hand, the Buyer is FINALLY under contract on a home after writing four unsuccessful offers. There loan is approved and they are picking out furniture and paint colors for their new home! Then all of a sudden, you as the agent receive a notice from the listing agent, that the Seller is terminating the contract (probably in favor of a higher back-up offer.) How are you going to tell that Buyer that they lost the house!?!?! Well, if the Buyer does not provide the Seller with that loan commitment letter within the specified time frame, then the Seller may terminate within 7 days based on the Buyer’s default of not providing that letter!
If you are a listing agent and you are under contract, these time frames are important for you too! In our current climate of multiple offers, the Seller may have a more favorable back-up offer. The Seller would potentially be in a position to accept that better contract if the Buyer does not perform based on the time frames in the financing contingency exhibits.
Keeping up with the time frames in the contract is vital to a successful closing for you and your client! Use this GAR Form: F76 Reminder of Important Dates in the Purchase & Sale Agreement. Complete all the important dates throughout the entire contract, have your client/customer sign this form, you keep a copy and give them a copy.
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Changes to FMLS Rules Regarding Listing Properties: Questions & Answers (2/25/13)
The shortage of available inventory in the FMLS system has prompted our Board of Directors to modify Rule 7.1 (See Below). Effective immediately, ALL listings must be entered in the FMLS system within forty-eight (48) hours after the listing is signed.
Old Rule 7.1 All FMLS listings must be entered into the FMLS computer system within forty-eight (48) hours after the beginning date of the “term” of the listing. No paperwork is required to be sent to FMLS. Exception: FMLS reserves the right to request submission of listing agreement(s) in cases of disputes, dual listings, sign rider verbiage or any other reason to check compliance with FMLS rules. Failure to comply with a request for submission of listing agreement(s) may result in a fine being imposed.
New Rule 7.1 All FMLS listings must be entered into the FMLS computer system within forty-eight (48) hours after the listing is signed by the seller (excepting weekends, federal holidays and postal holidays). No paperwork is required to be sent to FMLS. Exception: FMLS reserves the right to request submission of listing agreement(s) in cases of disputes, dual listings, sign rider verbiage or any other reason to check compliance with FMLS rules. Failure to comply with a request for submission of listing agreement(s) may result in a fine being imposed.
Thank you to MX1 Executives Broker Tina Vliet for clarifying this issue with FMLS:
Tina’s Initial Questions to FMLS:
FMLS Compliance Department-
The rule change mentioned below seems to interfere with the ability to meet at a convenient time for Agent and Owner, to get paperwork completed, and allow the Owner time to prepare the home for sale with a delayed “start date”.
This change seems to impose an additional burden on the parties and promote an environment where Agents will meet with an Owner to determine they are the right candidate to take the listing, then schedule an ADDITIONAL appointment for signing the paperwork closer (within 1-2 days of the term start date) to the date the Owner can make the home “ready” for listing.
Low inventory is a GOOD thing. It helps us to create a sense of urgency with Buyers, and helps prices increase, resulting in improvements in our market.
I’m curious if you have received complaints from Brokers on this rule change? I would love to hear a summary of the feedback you’re getting on this.
Thank you, Tina
FMLS’s Initial Response:
Hello Tina.
Thank you for writing. The change in FMLS rule 7.1 actually does not interfere with the traditional listing process you referred to in your below message. Members may still handle the listing process pretty much as they have in the past. Two appointments are not necessary. The difference now it that, in fairness to other members, as well as for other very valid reasons, the listing must now be entered and appear in the private, members only, FMLS system within 48 hours of the property owner signing the agreement. The below FMLS response should help you better understand the process, how it works and why this should not create an additional burden on anyone:
Many members have pointed out that a seller may sign a listing but request time (longer than 48 hours) for repairs, market preparation or other legitimate purpose, before actually marketing the listing.
If you list a property that is not going to be available for showing within the forty-eight (48) hour deadline, you should: 1) Enter the listing as required by the rule. 2) Go to the “Availability to Receive Offers” field. 3) Select “Conditions Exist – See Private Remarks” (the Private Remarks are available for members only, not available to the public). 4) In Private Remarks explain the reason for the delay and, if
possible, quote a date that the property will be available to be shown.
This practice is consistent with the language in the GAR Exclusive Seller Listing Agreement, which requires a listing to be filed with the MLS within 48 hours of signature.
Please note that if your seller does not wish for the listing to be available publicly on the internet until the property is ready to show, you can choose “No” in the Add/Edit system to the field “Allow Internet Display Y/N”. (Be sure to edit the listing later to be “Yes” when the seller is ready to market).
Yes, a few other members have in-fact voiced similar concerns to yours. However, once the above process has been understood, the concerns have diminished. That said, Many members also welcome this change.
If the above doesn’t sufficiently address your concerns, please feel free to contact me. I will be happy to discuss the matter further with you.
Thank you for being an FMLS member. Jerry
Tina’s Reply:
Thank you for clarifying. I understand and did go back and read the GAR language that is consistent with the rule change. But using the “availability” field to delay showings — isn’t that inconsistent with FMLS rules that say you shouldn’t list with “can’t show” remarks?
FMLS’s Answer:
Hello again Tina.
Thank you for your feedback. In response to your question, FMLS does not believe the use of the Availability field in this manner is inconsistent with current FMLS rules and policies. That said, while the new rule 7.1 is not going to change, our policies and procedures related to this area continue to be examined and to evolve. We also have a group of advisory members already scheduled to meet on the subject to try to help further refine the process if that is possible.
In the case of a new listing being made ready to market, that listing is only “temporarily” unavailable while being prepared to show, and FMLS policies have for many years accommodated a temporarily off-market statement to appear in the remarks of a listing under certain conditions. The below is that policy (recently updated and may not yet be posted to http://www.fmls.com).
The FMLS policies in “off market” situations relating to the listing status of any property are:
1. If a property is not available to be shown and/or sold for any reason, except as (2) below, the listing status must be changed from the Active status to one of the other available and applicable statuses: Contingency-Kickout, Contingency-Other, Contingency-Due Diligence, Pending Lender Approval, Auction Only, Pending Sale, Sold or Withdrawn. The property may not remain in the Active status. There are no exceptions to this policy.
2. If there is a need for a property to “temporarily” be off market due to legitimate reasons such as, as examples: repairs, property damage, a health issue and/or other unusual circumstances, FMLS permits the property to remain in the Active status only under the following circumstances:
a) a statement appropriately describing the temporarily off-market circumstances appears in the Private Remarks section; b) the start and end dates are included; c) the dates do not approach or coincide with the expiration of the listing. A period of up to 14 days is permissible. If it is necessary to exceed that time for any reason, please contact FMLS and, d) the Availability field indicates “Condition Exists – See Private Remarks”.
I hope that addresses your concerns.
Jerry
Jerry Erbesfield Director of Data Services and Compliance E-mail: jerbesfield@fmls.com Direct Phone: 678-420-4438
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Earnest Money Handling (2/18/13)
Earnest money is OTHER PEOPLE’S MONEY that is entrusted to YOU to handle! Please treat it as if it was your own or as if your license was on the line… because it is!
Earnest Money must be received and deposited per the contract in which you are involved. You are responsible for tracking those dates. If you do not have Earnest Money in hand when writing the contract, make specific arrangements to get it (in person is the best way.) If your client (or a co-op client) is to mail it to a brokerage, make sure that the earnest money check references the property and that somewhere in that correspondence, you as the agent are referenced. If an office receives a check for earnest money, with no property address or agent name, we have NO WAY of attributing that money to the proper Buyer/property. If a Buyer emails earnest money to the office and addresses the envelope to you, staff will put this in your mailbox. It is YOUR responsibility to determine the receipt of the earnest money for a contract.
If you turn in earnest money to the office in a “red envelope” for the brokerage to hold until you go under contract, it is YOUR RESPONSIBILITY to let the Branch Manager know when to deposit the earnest money per the contract.
There are contractual consequences to earnest money not being deposited in a timely manner or if earnest money is dishonored by the bank.
GAR Purchase & Sale Paragraph #4: “Deposit of Earnest Money”
- Earnest Money to be deposited within 5 banking days from the later of receipt or Binding Agreement date
- If Earnest Money is dishonored by bank or not timely paid, then the Buyer is in DEFAULT of the contract
- The Holder shall give notice to the parties.
- Buyer has 3 banking days to cure the default
- If no cure, Seller has right to TERMINATE the contract within 7 days.
- Earnest Money to be deposited within 3 banking days of receipt of Accepted contract
- If Earnest Money is not received or not honored by the bank, the Buyer is in DEFAULT of the contract
- The Holder shall give notice to the parties
- Buyer has 3 days to cure default
- If Buyer does not cure, Earnest Money is no longer part of the contract
- Seller may TERMINATE the contract within 3 days OR
- Seller may demand full performance of contract
MX1 Contract Compliance: Paperless Pipeline will track Binding Agreement Date, Receipt of Earnest Money, Deposit of Earnest Money. If the receipt and deposit are not per the contract, your file will not be marked compliant.
Rule 520-1-.14: Citations
(t) Failure of a licensee to deposit trust funds promptly where the deposit was made more than three business days after receipt unless the contract provides otherwise. 43-40-
25(b)(3). Fine of $600.00.
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Never do Your Client’s Due Diligence (2/11/13)
A Real Estate agent was working with prospective buyers who were searching for a residential property for their growing family. The agent showed them several properties before they decided to submit an offer on a home that recently underwent a complete renovation, including a two-room addition.
Problem: The renovation was completed by an unlicensed contractor who failed to obtain the necessary building permits. Moreover, the property was located in a state that did not require the owners to complete a seller’s property disclosure statement, leaving the buyers to determine whether any defective conditions existed through the engagement of experts.
Mistake: Since the buyers were busy with their careers and the school activities of their children, the agent volunteered to do the due diligence for the buyers. This included hiring a home inspector and termite inspector. In accepting the agent’s offer, the buyers assumed that he would also research whether or not the project was “legal.”
Result: Approximately five months after moving into the property, the buyers received a letter from the city informing them that the renovations were completed without the required permits. The ensuing building inspection discovered that the addition did not conform to the building codes since it lacked a load-bearing wall. The buyers then sued the sellers, the listing agent, the home inspector, and their buyers’ agent for failing to either disclose or detect the property’s nonconformance. The parties ultimately resolved the litigation after the defendants agreed to pay for the remediation and obtain the certificate of occupancy.
Prevention: An agent should never volunteer to take on the due diligence for buyers by ordering or attending inspections on their behalf. If there’s any defective condition with the property, the agent will likely be sued for negligently referring the inspectors while putting themselves in the position where a jury could determine that they fraudulently induced the buyers into the purchase. Sound risk management on the part of an agent is to have the buyers select the inspectors and not become actively involved in the conversation between the buyers and the inspector. Although it is best to be present during the inspection should the client seek assistance, an agent should not be interpreting an inspector’s findings or recommendations. The agent may later be held accountable for failing to address something pointed out by the inspector. Lastly, always recommend that the buyers contact the controlling authority for conformance inquiries.
*Article re-printed courtesy of Pearl Errors & Ommissions Insurance http://realestateeo.com
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Emails Could be Binding* (2/4/13)
Imagine you’re negotiating a purchase transaction by e-mail with the real estate agent representing the buyer. The price has been agreed to, and you’re working out the buyer’s financing options. The buyer is able to be preapproved, and you e-mail, “We’re almost there.” A draft purchase offer is written up and e-mailed to the buyer’s agent, but before anything is signed, a better offer comes in. The seller wants to go with that one, so you immediately inform the buyer’s agent of the situation. The buyer is upset and wants to enforce the deal. Much to your horror, the e-mails you exchanged may be enough for the buyer to sue to enforce the deal. This was the case under a ruling last year in Massachusetts.
In that case, Feldberg, et al. v. Coxall, (see link below) attorneys representing the buyer and seller exchanged a series of e-mails about the deal, the last one attaching a revised, but unsigned, offer to purchase. When the seller pulled out of the deal, the buyer sued, claiming the deal had been sealed in the last e-mail.
The seller argued that nothing had been signed, as required under a law called the Statute of Frauds, which varies by state but generally requires certain agreements to be signed, and sought dismissal of the claim. The judge ruled against dismissal, though, saying that, under a state law called the Massachusetts Uniform Electronic Transactions Act (similar laws exist in other states), an e-mail signature block or even the “from” portion of the e-mail may constitute a valid electronic signature in cases where the parties are conducting the transaction electronically, as these parties by all appearances were doing. The judge denied the seller’s motion to dismiss, opening the door for the court to look at whether the e-mails in fact constituted a binding agreement.
As it turned out, the buyer and seller settled out of court a few months later, so the question was never brought before a judge. But by opening the door for the court to look at the issue, the judge was effectively saying an e-mail exchange could very well prove to be binding. Although the ruling was by a lower court judge-so it isn’t binding on other judges-it may provide a model for other judges as they consider similar cases.
There are steps you can take to protect yourself against inadvertently binding your client to a deal. Here are two suggestions:
- Watch what you say in e-mails. If you’re representing the seller, always say that the terms of the deal must be approved by the seller and that negotiations are preliminary until an offer or contract is signed. Conversely, if you are representing the buyer, it’s prudent to push for confirmation that a deal has been reached, to avoid a situation, like the Massachusetts case, in which the seller jumps at a higher offer at the last minute.
- Use a disclaimer. You can insert a disclaimer in your e-mail signature that looks something like this: “E-mails sent or received shall neither constitute acceptance of conducting transactions via electronic means nor create a binding contract until and unless a written contract is signed by the parties.”
This Massachusetts case is a good reminder that e-mails can come back to haunt you. Watch what you say, and remember that your e-mails could ultimately become an exhibit in court.
*Article re-printed courtesy of Realtor Magazine http://realtormag.realtor.org/law-and-ethics/law/article/2013/01/e-mail-could-be-binding
Read the case of Feldberg, et. al. v. Coxall: http://www.scribd.com/doc/98733228/Feldberg-Et-Al-v-Coxall-ORDER-on-Plaintiff-s-Emergency-Motion-for-Endorsement-of-Memorandum-of-Lis-Pendens-01717406
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Short Sale Contracts and Binding Agreement Date (1/28/13)
When is a Short Sale Contract Binding?
A contract is “accepted” when Buyer and Seller agree on the terms of the offer/counteroffer with no changes. A contract is “binding” when the last party to accept the terms with no changes gives notice of that acceptance. A Seller selling their house as a “short sale” is still the party to accept/bind the contract along with the Buyer. The Buyer and Seller are the only two essential parties to the contract who may accept and bind the terms! The short sale lender CANNOT BIND A CONTRACT. Can YOUR mortgage company sign a contract to sell YOUR home!?!?!? Of course not!!
So What Is the Seller’s Short Sale Lender’s Involvement?
The approval of the short sale by the Seller’s 1st mortgage holder and that of all other lien holders being “shorted,” is simply a contingency that the Seller must meet to comply with their responsibilities to meet the terms of the contract. If the short sale is not approved, the Seller has not met that specific contingency; in the same way that if a Buyer is not approved for their loan, the Buyer has not met that specific contingency.
What Happens to the Earnest Money?
It depends on the various provisions that the agents include in the contracts. Many of the contingency provisions in any purchase & sale agreement have specific time frames in which the party must perform and specific consequences (namely disbursement of earnest money) depending upon if the contingencies are met and properly communicated within the contingency provisions.
What if There is a Special Stipulation that States that the Contract in “Not Binding Until Seller’s Lender Approves of Terms of Short Sale?”
Why would you ever let your client/customer sign a contract with this special stipulation? Without a binding contract, neither party is obligated to anything!!! Buyer may go find another house and buy that one instead or decide not to buy! Seller may sell to another Buyer or not sell at all! You may not get a commission for all the time, energy and effort you have put into working with this buyer or helping the Seller negotiate their short sale! Additionally, all of the dates in the purchase and sale agreement are timed off the binding agreement date! We have discussed (in this newsletter… see the blog if you missed it and in all of our contracts classes) verbiage to use to protect the Buyer from spending money, etc. prior to receiving the written approval of the short sale; but this protection does NOT include not binding a contract between the parties!
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Who Can Sign to Bind the Parties to a Contract? (1/21/13)
It Depends!
A contract is only enforceable if the parties signing have the authority to enter the agreement. Therefore it is in the licensee’s best interest to see that the contract is properly prepared. In the case of the seller, the form of ownership in which the title to the property was granted will determine who, or how many, people or entities have authority to enter into a binding agreement. It is important to know how title is actually stated before constructing an offer. A look at the deed will display how title was granted and then the determination can be made.
The same holds true for the buyer. The name in which the property will be purchased will dictate who can actually enter into a binding agreement.
If the party is a couple that owns property jointly, both individuals must sign the agreement. If one party is a partnership, there must be proof that one party can bind the partnership. A General Partnership could have several partners requiring all their signatures or one partner. Perhaps a managing partner may present a document giving him/her authority to sign for the partnership. Generally, the General Partner of a Limited Partnership may sign for the Limited Partnership, but satisfactory documentation should be available. (Divorce decrees and probate documents following a death may have information pertinent to this issue as well.)
If the grantor is a corporation and depending on the structure of the corporation, an officer with a copy of a corporate resolution should be presented to show he/she has authority to bind the corporation.
A quick visit to the Georgia Secretary of State website http://corp.sos.state.ga.us will provide information on the corporation or if it is even a corporation that exists in Georgia. The Secretary of State website will also list the type of entity the corporation is (i.e. non-profit, LLC, profit, etc.) in addition to the names and contact information of the officers and agents of the company.
The real estate licensee is not an expert in how title should be granted. The licensee should suggest that the client or customer use the services of an attorney to determine the correct method of taking title. However, the licensee often prepares the offer and many times an attorney is not consulted until the contract is signed by the parties. Therefore, understanding how the title is currently held or plans to be taken is needed to develop the offer. Typically, a real estate agent gets paid by commission and that commission is only paid upon closing a transaction. If the contract/offer is not prepared properly, there may be no closing and no commission.
Another resource to review recorded real estate documents is the Georgia Superior Court Clerks’ Cooperative Authority at: http://www.gsccca.org . Although there is a nominal fee to use this service, it can prove invaluable considering time spent and access to information used to create a binding agreement that results in successful transaction for the licensee.
Article reprinted courtesy of GREC.
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New Forms in the 2013 GAR Contracts (1/14/13)
Non-Exclusive Leasing Listing Agreement (F17)
- Same as Exclusive Leasing Listing Agreement except that Owner retains Broker on a non-exclusive basis
- There are 2013 changes in BOTH of these Leasing Listing Agreements
- Disclaimer on Credit, Criminal & Reference Checks – specifically states that Owner specifies in writing if Owner desires background check, also warns against id theft & states that decision to rent to tenant solely lies with Owner
- Owner warrants that they are on title and have authority to lease the property
- Specifically lists various “Optional Additional Services” and fees for each service (credit check, background check, reference check, conducting move-in inspection, etc.)
- Commission paid on sale of property to tenant
Services to be Performed by a Manager (F18)
- This form outlines specific services to be performed by a Property Manager and the specific fee for each service
- Marketing & Leasing Services, Assisting with Qualifying Tenants, Move-In Services, Management Services, Financial Management, Legal & Move-Out Services
New Construction Plans & Specifications (F28)
- This form references attached plans and specifications & makes them part of the binding contract.
New Construction Seller Disclosures Exhibit (F60)
- This allows the Seller/Builder to make disclosures specific to new construction.
Notice to Tenant of Changes Affecting the Rental of Property (F145)
- Changes in Management
- Change of Holder of Security Deposit
- Change of Ownership
- Giver of Notice
- This form will potentially get used a lot, if a Seller sells a property with an in-tact lease, if an agent who is managing a property transfers Brokerages, if the Owner changes Property Management companies, etc.
Adverse Action Letter Regarding Rental Application (F146)
- This form is to keep in line with the Fair Credit Reporting Act
- Describes adverse action to be taken based on a rental application that a potential tenant submitted
- Discloses from which credit bureau the person’s credit report was pulled.
Legal Description Exhibit (F147)
- This separate exhibit allows you to fill in the legal description of a property (Landlot, District, Section, Lot, Block, Unit, Phase, Subdivision, Plat Book, Page, County)
- This is information you are used to filling out or information that auto-populated on the Purchase & Sale Agreement.
- This legal description has been removed from the 2013 GAR Purchase & Sale Agreement and if this is how you choose to describe the property, you must now use this exhibit
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“VRC” Variable Rate Commission in FMLS & GAMLS (1/7/13)
- “VRC” in FMLS & GaMLS – “Variable Rate Commission” – GREC requires that agents and brokers identify that the advertised commission may be different than the commission that a Seller pays if the listing agent sells the property with no other agents involved.
- For example, if a listing brokerage has arranged with the Seller to pay 7% commission when two agents are involed in the transaction and 5% if the listing agent procures the Buyer so that no other agent is involved, then the listing MUST be advertised as “YES” to VRC.
- The Listing agent must notify ( by checking Yes to VRC) co-op agents of this arrangement with the Seller so that the co-op knows that the listing agent has an advantage if multiple offers come in & one is the listing agent’s.
- Please advertise your listings in FMLS & GaMLS in compliance with GREC regarding this issue of Variable Rate Commission!
- You can always contact: Support@MyMaximumOne.com for help/advice/suggestions if you are in the middle of this or any other contract issues.
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2013 Contracts (12/31/12)
2013 GAR Purchase & Sale: Wait until you see the new GAR Purchase & Sale Agreement… you’re gong to LOVE it! ALL of the pertinent information is on PAGE 1!!! Other than listing the Exhibits & writing Special Stipulations, the pertinent information regarding the agreement is on the first page AND the Buyer & Seller initial at the bottom!
- Buyer & Seller Names
- Property Address/Tax ID/MLS #
- Sale Price
- Closing Costs
- Earnest Money – Amount & Holder & Delivery Date
- Closing Attorney
- Possession Date
- Due Diligence Period
- Agency Relationships
- Time Limit
Make sure to sign up for our FREE 3 Hour CE Class: 2013 GAR Contract Dissection ! We will be holding these classes throughout the offices in January & February. Check out our online training calendar & sign up: www.registerforREclasses.com
2013 RE Forms: There will not be an entire new revision of the RE Forms as there are of the GAR forms every year. These forms, however, will continually be revised and added to throughout the year. We will be having FREE 3 HR CE classes on these contract forms as well! Please moniter the Training Calendar at: www.registerforREclasses.com
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Utilities & Foreclosure Properties (12/17/12)
Utilities: We have seen an increased number of issues with buyers having REO properties inspected… or TRYING to get them inspected! When you show a buyer a foreclosure (or some short sales too) do yourself & your client a favor and note which utilities are on and which are off. An inspector cannot adequately inspect a home if the utilities are not operational in a property or if the property has been winterized. It makes it even more challenging if HVAC units/Hot Water Heaters are not even present at the property!
Be Aware & Be Proactive:
- Be proactive & responsible and check with the asset manager, listing agent, field service manager about how to get those utilities turned on. For many (not all) of these distressed properties, THE BUYER WILL HAVE TO TEMPORARILY TURN ON THE UTILITIES IN THEIR NAME. For some people, this may require deposits at the utility companies!
- If the Buyer is not willing to do this, they must agree to buy it “AS IS” or TERMINATE the contract and go find them another house!
- If this is going to take some time, consider adding additional time to your due diligence or inspection period. If the Seller WILL have the utilities turned on or a property De-Winterized, consider adding a special stipulation that the Buyer’s inspection period begins upon receiving written notice that property has been de-winterized.
- PLEASE check with one of our affiliated closing attorneys before writing special stipulations to make sure your client is covered properly and their earnest money is protected.
- If this does not happen, talk to your client about terminating the agreement within the allowed-for time frames in your contract if they are not willing to accept the property as is.
The Key is COMMUNICATION!!!! Have these discussions with Buyers BEFORE you go find them a house with which they fall in love but aren’t willing to turn on the utilities or choose to not have it inspected, close, move in & then blame YOU when the furnace doesn’t work! Also, communicate with the listing parties – agent, asset manager, field services manager. Find out IN ADVANCE if they will turn the utilities on, how long it will take to have the property de-winterized, what FEES are involved for the Buyer in having the property RE-Winterized should your Buyer fail to close!
- Do not be caught unaware and make sure you prepare your clients for some of the extra steps & fees involved in purchasing distressed properties! … They are typically a “deal” for a reason!!
- You can always contact: Support@MyMaximumOne.com for help/advice/suggestions if you are in the middle of this or any other contract issues.
- Also, feel free to contact our HUD REO Listing Agents:
- Annamaria Stalker (Annamaria@RealEstateAcrossAtlanta.com )
- Jayne Pearson (Jayne@RealEstateAcrossAtlanta.com )
- Debbie Rash (DRash51@yahoo.com )
- Carla Williams (CDWill12@gmail.com )
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Transfer of Earnest Money (12/10/12)
Earnest Money Handling: There are strict and specific laws and rules regarding the handling of earnest money. Please review License Law 43-40-25 and Rule 520-1-.08.
Frequently Asked Questions:
- How long can I keep the earnest money before I take it to the office?
- Earnest money must be turned over to the broker as soon after receipt as is practically possible. License Law 43-40-25 (a) (23) & Rule 520-8-.01.
- May an agent give earnest money back to a Buyer if he/she is still holding it and has not turned it in?
- No, unless specifically directed to by your broker. Once you receive earnest money in behalf of your broker, the decision as to whom and when the money should be remitted rests solely with the broker. License Law 43-40-25 (a) (3) & (23) & Rule 520-8-.01.
- How should a Broker disburse earnest money when a Seller or Buyer is demanding it?
- In accordance with the terms of the sales contract and the procedures outlined in Rule 520-1-.08.
- Should a Broker hold the earnest money or Attorney or the Builder?
- The party who holds the earnest money is controlled by the negotiation of the parties as expressed in the provisions of the sales contract.
Transferring Earnest Money from One Holder to Another Holder: If throughout the course of a contract, the earnest money is to be transferred from one Holder to another, you MUST have an Amendment signed by the parties agreeing to this. Do not simply ask the office to transfer the money because we cannot.
Transferring Earnest Money from One Property to Another Property: If you have turned in earnest money for a Buyer on one property, the deal falls through and you are transferring the earnest money to another property, the following must occur. You must first have a T&R on the first property if it was under contract. Additionally, you and your Buyer must sign this form: Transfer of Earnest Money.
Read the All the Fines for Citations Here:
http://rules.sos.state.ga.us/docs/520/1/14.pdf
Read the Appropriate Portion of License Law Here:
http://www.lexisnexis.com/hottopics/gacode/Default.asp
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GREC Fines & Citations (12/2/12)
Rule 520-1-.14 Citations: Remember that GREC may impose fines for various violations of the Rules and Laws to which you must adhere. Remember that the maximum fine the Commission may impose is $1,000 per violation or $5,000 for multiple violations in any one citation. A citation issued by the Commission could also include an order to complete a course of study in real estate brokerage or instruction; the filing of periodic reports by an independent accountant on a real estate broker’s designated trust account; and/or the payment of a fine.
A Few Examples of Violations & Associated Fines:
- Failure of a licensee to include financing terms in a sales contract having a financing contingency. 43-40-25.1. Fine of $100.00.
- Failure of a licensee to provide a copy of any document used in a real estate transaction to any individual signing such document. 43-40-25(b)(19), 520-1-.06(1) & (2), & 520-1-.10(2). Fine of $100.00.
- Failure of a licensee to include the correct amount of earnest money, security deposit, or terms in a sales or lease contract. 43-40-25.1. Fine of $200.00.
- Failure of a community association manager, a salesperson, or an associate broker to notify the broker of personal real estate activities. 520-1-.11. Fine of $200.00.
- Failure of a licensee to include a fixed date of expiration in a listing agreement or failure to leave a copy with the principal. 43-40-25(b)(18). Fine of $200.00.
- Failure of a licensee to disclose his or her licensure in a contract requiring such disclosure. 520-1-.11. Fine of $200.00 per contract.
- Failure of a licensee to include the correct amount of earnest money, security deposit, or terms in a sales or lease contract. 43-40-25.1. Fine of $200.00.
Read the All the Fines for Citations Here:
http://rules.sos.state.ga.us/docs/520/1/14.pdf
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Short Sale Contingency Exhibit (11/26/12)
Time Frame for Short Sale Approval Letter: In both the GAR and the RE Forms Short Sale Contingency Exhibits, there is a specified number of days prior to closing to receive the approval letter. This number is negotiated in the GAR form & pre-printed in the RE Form. If the Seller’s lien holders do not provide the specified written approval by that agreed-upon time frame, then either party may terminate the contract with NO PENALTY (i.e. no loss of earnest money.)
Without any other provision/special stipulation in the contract, the Buyer & Seller are locked in to the contract until that time frame is reached. So a longer number of days is more favorable to a Buyer & a shorter number of days is more favorable to a Seller.
For example:
- Closing Date – December 30th
- Short Sale Approval Contingency Time Frame: 15 Days
- Buyer may not terminate contract (based on this contingency) until December 15th & then ONLY if the Seller does not provide the approval letter before then.
GAR Form F94 – Short Sale Contingency Exhibit: “In the event the mortgage lender(s) and if applicable other lien holders, do not agree in writing to the above terms at least _____ days prior to closing, either Buyer or Seller may terminate this Agreement without penalty upon written notice to the other party.”
RE Form 253 – Short Sale Exhibit: “The Seller shall provide written notice of the Short Sale Approval to Buyer at least 20 days prior to the agreed upon closing date which shall be known as the ‘Short Sale Approval Deadline.’ … If this Approval Deadline is not met, either party may terminate without penalty…”
Due Diligence Protection for the Buyer: If you are using the GAR forms, you will have to write a Special Stipulation to preserve the Buyer’s right to terminate the contract based on due diligence for a specified number of days between the Binding Agreement date and the receipt of the short sale approval letter. This issue has been addressed repeatedly in past issues of this newsletter so please refer to the blog for a reminder. If you are using the RE Forms, the Short Sale Exhibit preserves the Buyer’s right to terminate from Binding Agreement date through 10 days after the Seller has delivered written notice of the short sale approval.
Please read the Exhibits and make sure that your Buyer & Seller client is protected when negotiating a Short Sale contract and make sure that the parties understand the time frames of the various contingencies negotiated in the contract.
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Customer Acknowledgement AND New Termination & Release Agreeement for RE Forms (11/19/12)
Customer Acknowledgement: If you work with a Buyer or a Tenant as a Customer, i.e. you do NOT sign a Buyer nor Tenant Brokerage Agreement with them, you must still get something in writing disclosing that you are working with them as a customer for ministerial activities only. If you use the GAR forms, use form F6 Customer Acknowledgement. If you are using the RE Forms, Maximum One has created a similar form, Customer Agreement which can be found on the Extranet and on FMLS in Forms Pro under the “Office/Broker Forms” tab.
- GAR – F6 – Customer Acknowledgement
- RE Forms – MX1 Customer Agreement (Extranet & in Office Forms on FMLS)
Termination & Release – The Termination & Release Agreement for the GAR forms is one form. The “Termination” portion requires one party’s signature & the “Release” portion requires both parties’ signatures. The RE Forms have recently been revised regarding this issue. There is a new form “Notice to Withdraw or Terminate.” This form requires BOTH Buyer & Seller signatures. There is pre-printed verbiage: “Any trust funds held by escrow agent or other party shall be disbursed pursuant to the terms of the above-referenced contract; provided that this notice to withdraw or terminate shall not, by itself, authorize escrow agent to disburse trust funds.”
We have many disputes over the disbursement of earnest money. I strongly suggest that in this notice to terminate that you not only list your “reason for termination” as required, but that you also clearly delineate which party is to receive the earnest money disbursement. The BEST way to do this is to use the RE Form: Agreement to Disburse Trust Funds. On the Termination Notice, simply reference that the earnest money is to be disbursed as outlined on Agreement to Disburse Trust Funds & include that form.
- GAR – F83 – Unilateral Notice to Terminate, Agreement to Disburse Earnest Money
- RE Forms – RE-263 – Notice to Withdraw or Terminate
- RE Forms – RE-212 – Agreement to Disburse Trust Funds
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HOA & Condo Issues (11/12/12)
All condominiums and many other properties have mandatory associations, and there are several additional requirements and considerations in getting these properties ready to close. The HOA information will show up on a title search of the property so consult with your closing attorney after you first make an attempt to discover the following information. Due to the increasing costs of these HOA clearance & transfer letters, you and your clients will be best served by researching all the HOA information during the Buyer’s Due Diligence time frame.
- Community Association Disclosure in Purchase and Sale Agreement– Be sure that this form is included and completed, including initiation fees, pending or current special assessments, and amount of dues (annual, quarterly, or monthly)
- Contact info for HOA treasurer or management company– Listing agent should get this info from the seller as early as possible. This is more difficult when the seller is a bank or Fannie Mae, and the agent may need to get the info from neighboring owners.
- Ordering the HOA status letter– This is done by the closing attorney, but many HOA management companies now require the letter to be prepaid by the seller before providing the letter to the attorney. This can be difficult to explain and obtain from many sellers, especially banks and Fannie Mae.
- Receiving the HOA status letter– Many HOA management companies have a billing structure that charges more for “rush” letters, sometimes up to $200. Each company has its own definition of “rush”, some being less than 7 days.
- Approving the figures on the HOA status letter– Most REO sellers require additional time, sometimes up to 72 hours, to review and approve any amounts due from the seller on an HOA letter. This is in addition to the usual 48-72 hours to approve the HUD-1.
- Funding for Condos– Depending on the number of distressed properties in a complex, certain types of funding for a condo purchase may be difficult.
- Condo or Townhouse– Condo refers to ownership NOT style! Please make sure you know the type of ownership of the unit despite if it is one story or two, attached or separate
- Investment Property – Depending on the percentage of owner-occupants in a complex, an owner may be prohibited from renting out a condo. Find this information out during a Buyer’s Due Diligence time frame.
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Property Tax Terminology (11/5/12)
The Georgia Department of Community Affairs (DCA) publishes snapshots of information for each county and is a useful resource for real estate licensees. The Georgia Department of Revenue publishes a website that includes a general explanation of the property tax laws of Georgia. In addition, there is an index and link for each County that includes local data and direct links. The following are general property tax definitions. For further information on property tax assessment values, contact the Board of Tax Assessor’s office for a specific county.
Assessed Property Value: In Georgia, property is required to be assessed at 40% of the fair market values unless otherwise specified by law. The Board of Tax Assessors assesses values at he county level.
Millage Rate: The tax rate is expressed in mills for property. One mill produces $1 tax for every $1,000 worth of property value. The rates for each county are set annually by the board of county commissioners, or other governing authority of the taxing jurisdiction and by the Board of Education.
- If the millage rate is 32 and the property is assessed at $200,000, the property tax would be 0.032 x $200,000 = $6,400
Board of Equalization: The BOE is a public body charged with the duty of hearing and deciding appeals taken by taxpayers on assessments established by the Board of Tax Assessors (or other body other than the courts.)
Reprinted from GREC RENews June 2012 Volume 8 Issue 6
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Appraisal Contingency (10/29/12)
GAR Contracts – Financing Exhibits & Appraisal Contingency Exhibit:
The Conventional Financing Exhibit (F64) already has the Appraisal Contingency in Paragraph 7, so there is absolutely no need to attach an Appraisal Contingency (F93) since they both have the same verbiage. You would only use the Appraisal Contingency Exhibit if there was no Financing Exhibit. If for some reason you use or receive both the F64 & F93, please make sure that the number of days is the same in both documents! I suggest that you do not use or accept the F93 when there is a Conventional Financing Exhibit!
The FHA Loan Exhibit (F63) and the VA Loan Exhibit (F65) also have an appraisal contingency in Paragraph 7 but it does not obligate the Buyer to complete the purchase of the property if the appraisal comes in below the amount written in the Exhibit, they do not have to ask the Seller to reduce the price and they are entitled to the return of their earnest money! Be aware that even if you attach the Appraisal Contingency Exhibit (F93) it will not change the fact that the Buyer still does not have to purchase the property or ask for a reduction if the appraisal comes in low! They are protected under the HUD/FHA requirements as stated in Paragraph 7. Also, Paragraph 17 in the F63 FHA Exhibit and Paragraph 13 in the F65 VA Exhibit states “This exhibit shall control over a conflicting or inconsistent provision set forth in any other Exhibit to this Agreement.” I suggest that you do not use or accept the F93 Appraisal Contingency Exhibit on FHA or VA Loan Exhibits!
RE Forms: In the RE Contracts, the appraisal contingency is pre-printed in paragraph 6.2 of the Contract for the Purchase & Sale of Real Property in Georgia (RE-100.) If the property does not appraise for the sale price, the Buyer may terminate the contract at the Buyer’s sole discretion. However, the Buyer OR the Seller may initiate an amendment to the other party to agree to consummate the sale at the appraised price.
FHA (RE-200) & VA Loan (RE – 201) Exhibits have similar verbiage as theos exhibits in the GAR contract forms. Regarding a low appraisal (or “reasonable value” for a VA loan) the Buyer is not obligated to purchase the property and their earnest money is to be returned.
Generally speaking, if you are addressing the same issue in more than one form, make sure that all of your times frames are consistent.
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When May a Seller Terminate a Contract? (10/22/12)
When May a Seller Terminate a Contract?: ONLY in response to a Buyer default or per the short sale exhibit. We have had TWO separate instances this week when a Seller initiated a T&R simply because they “changed their mind” and didn’t want to sell! Before a Seller signs a binding contract to agree to sell their house, inform them of the serious & potentially costly consequences of “changing their mind.”
What are the Possible Consequences to a Seller-initiated Termination?: There are many possible consequences only one of which is ideal:
- Buyer may accept that Seller doesn’t want to sell, keep their earnest money and move on.
- Buyer may sue the Seller for non-specific performance of the contract (i.e. sale price) PLUS damages PLUS legal fees
- Buyer’s Broker may sue the Seller for commission
- Listing Broker may sue the Seller for commission
- Buyer and Seller may negotiate an amount to mutually terminate the contract
What are the Contractual Provisions for a Seller-Initiated Termination: There are certain contractual provisions allowing for a Seller-initiated termination. Please read your specific contract for the time-frames of each of these provisions. These include:
- When the earnest money is dishonored by the bank, the Holder gives notice to the parties; the Buyer has the right to cure the default. If the Buyer does not cure the default, the Seller has the right to terminate.
- In a financing contingency, if the Buyer does not deliver “evidence of ability to close,” the Seller may terminate.
- In the Short Sale Contingency Exhibit, if the Seller’s lien holders do not agree to the terms of the short sale in writing by the specified number of days prior to closing, the Seller (or Buyer) may terminate the contract.
- In the Appraisal Contingency Exhibit, the Seller has the option of terminating should the property not appraise for sale price.
- If the title to the property is not marketable nor insurable with “standard exceptions”
- If there are any special stipulations in the contract that allow for the Seller to terminate a contract, then a Seller may initiate a termination.
- Note: Some of these contractual termination clauses are specific to the GAR vs. RE Forms contract – PLEASE READ YOUR CONTRACT.
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Presenting Offers in the State of Georgia (10/15/12)
(Thank you Angie Mezza-Smith!)
The #1 Complaint Received by GREC: Currently, the number one type of complaint received by GREC is related to agents not presenting offers or agents presenting offers directly to short sale lenders rather than to the Sellers.
GREC Rule: 520-1-.10 Handling Real Estate Transactions / Presenting Offers: A licensee shall promptly tender to any customer or client any signed offer to purchase, sell, lease, or exchange property made to such client or customer. In a transaction in which the offerer is not a client or customer of the licensee, the licensee receiving an offer must provide a copy of the offer to the licensee working with or representing the offeree. However, a licensee who obtains an offer may negotiate a sale, exchange, or lease directly with an owner, a lessor, a purchaser, or a tenant if the licensee who obtains the offer knows that such offeree has a written outstanding agreement in connection with such property that expressly provides the other licensee will not provide negotiation services to the offeree.”
License Law O.C.G.A. 43-40-25. Violations by licensees, schools, and instructors; sanctions; unfair trade practices: Paragraph (19) “Failing to deliver, within a reasonable time, a completed copy of any purchase agreement or offer to buy or sell real estate to the purchaser and to the seller. ”
Brokerage Relationships in Real Estate Transactions Act (BRRETA) O.C.G.A 10-6A:
- 10-6A-5. Duties & responsibilities of Broker engaged by Seller: (B) Timely presenting ALL OFFERS to and from the Seller even when the property is subject to a contract of sale.
- 10-6A-6. Duties & responsibilities of Broker engaged by Landlord: (B) Timely presenting ALL OFFERS to and from the Landlord, even when the property is subject to a lease or letter of intent to lease.
- 10-6A-7. Duties of Broker engaged by Buyer: (B) Timely presenting ALL OFFERS to and from the buyer, even when buyer is a party to a contract to purchase property.
- 10-6A-8. Duties of Broker engaged by Tenant: (B) Timely presenting ALL OFFERS to and from the tenant, even when the tenant is a party to a lease or letter of intent to lease.
- 10-6A-14. Ministerial Acts (required actions of a transaction Broker:) (b) A broker acting as a transaction Broker shall do the following: (1) Timely present all offers to and from the parties involving the sale, lease and exchange of property.
Important Note Regarding Short Sales: Remember in a “Short Sale” transaction the Seller’s Lender is not a party to the Contract.
- The Seller still owns the home, and while the Seller’s Lender may have the right to say yes or no to allowing the Short Sale to move forward, they are not the Seller or our Client/Customer.
- The Purchase and Sale Agreement becomes Binding when Buyer(s) and Seller(s) Sign (see paragraph 18. H. of F20) and not when the Seller’s Lender/Bank approves the Short Sale.
- All offers must be presented to the Seller, and then when the Seller engages in a Binding Contract with a Buyer, the Binding Contract is presented to the Seller’s Lender/Bank.
- In all cases you must continue to present all offers to a Seller regardless of whether there is already a Binding Contract on the property. If the Seller decides to negotiate a Back up Contract then Contract must include a Back up Contingency Exhibit in addition to any other necessary Contingency Exhibits like the Short Sale Contingency Exhibit.
- While the Seller is under no obligation to engage in or accept a Back up Contract on the property, if they do engage in a Back Up Contract (signed by Buyer & Seller), and the property is a Short Sale Transaction, then the Back Up Contract should also be presented to the Seller’s Lender/Bank. See 18. U.S.C.A. 1014.
- The Lender/Bank is not a party to the Contract and cannot kick out Buyer #1, but what they can control is what their Short Sale Approval looks like and the information that someone is under contract with a Back Up Contingency may influence their approval decision and cannot be withheld from them.
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“Clean Copy” of a Contract (10/8/12)
Writing a “Clean” or “Conforming” Copy of a Contract: After lengthy & sometimes messy negotiations, it may be difficult to make sense of the paper to understand the complete terms of the final agreement. To make sure that all parties involved in closing this transaction understand the final terms, you may have to write a “clean” or “conforming” copy of the contract.
Make Sure of the Following:
- Do not omit any items.
- Double & Triple check all of the terms.
- Do not change any of the items as agreed upon even if they have already been accomplished
- i.e. there was a special stipulation requesting the Seller send a Seller’s Disclosure form and the Seller complied with that stipulation prior to signing the “clean copy” – do not take that stip out of the clean copy.
- Use GAR Special Stipulation 622
- “Buyer and Seller acknowledge that the above Agreement is a conformed copy of an Agreement between the parties dated _____________________. In the event of any conflict between this conformed Agreement and the original thereof, all parties agree that the original Agreement shall control.”
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Conflicting Terms in a Contract (10/1/12)
Which Documents Take Precedence: Thank you to both Shawn Horan of Harrison & Horan and Lon Thomas of Thomas & Brown for clarifying the following information. The pre-printed paragraph in the GAR contract introducing the Special Stipulations of a contract states: “The following special stipulations, if conflicting with any exhibit, addendum or preceding paragraph (including any changes made thereto by the parties) shall control:” Does this mean that the special stips override any Bank Addendum? No… this means that the special stips supersede an ATTACHED addendum to the package as presented.
What if There are Conflicting Terms Within the Same Contract: We have had many instances where the Buyer’s agent writing an offer on a short sale listing wrote a special stip regarding the time frame required for the Buyer to receive written short sale approval AND attached a Short Sale Exhibit regarding the Buyer’s receipt of the short sale approval letter but the time frame was DIFFERENT from that of the Special Stip! Which time frame controls?
Which Terms Supersede Which?: In increasing order of control
- Pre-printed verbiage
- Exhibits/Addenda that are attached with initial offer package
- Special Stipulations
- Hand-written verbiage
- If conflicting terms within the same package: the Exhibit that is lettered later control
- If conflicting terms in a final contract: the Exhibit/Addendum which is dated later
- Amendments supersede the contract
- All of this also depends on the verbiage written in the documents themselves to the effect of “This ___ shall control and supersede terms to the contrary.”
Be sure to DATE all of your documents and be sure to LABEL all of your documents properly in sequential order and reference any attachments/exhibits in the purchase & sale agreement.
Please contact the following attorneys for more specific information or any type of contract assistance:
- Shawn Horan – Harrison & Horan – SHoran@WestGALaw.com 770-942-4758
- Lon Thomas – Thomas & Brown – LonThomas@ProClosers.com 678-337-3223
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Commission Agreements (9/24/12)
Commission Agreements between Listing & Buying Brokerage: Lately we have had several issues with co-oping agents NOT signing commission agreements. What protection do Buyer’s agents have of getting paid, if a listing agent will not sign this agreement. The only contracted agreement for payment is in the listing agreement between the Seller and the Listing Brokerage. The Listing Brokerage then agrees to “cooperate” with the Buying Brokerage to share some of the commission that the Seller is paying them to sell the property. How are you protected if you do not get a commission agreement signed? What role does the advertised co-op commission in FMLS play? How can you be sure that you are going to get paid and get paid what you expect?
Please see attorney Amee Davis’ legal point of view on this issue and what you can do. Click here for video link on commission agreements.
A couple of suggestions:
- Include the amount of the Buyer side commission as a special stipulation in the contract.
- Attach a copy of the FMLS printout showing the co-op fee as an Exhibit to the contract.
Amee Davis, Davis & Associates ADavis@DavisLawGA.com
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Licensee Acting as Principal in a Real Estate Transaction (9/17/12)
Licensee as Expert: Understanding the value and durability of real estate as an asset is part of the real estate brokerage business. Many Licensees take advantage of their knowledge and training in order to invest in real property themselves. A Licensee is considered an expert in the field of real estate and is held to a higher standard than the average consumer when dealing in real estate transactions. For example, a Licensee is prohibited from acting “in the dual capacity of agent and undisclosed principal in any transaction” OCGA 43-40-25 (b)(9) Therefore, the licensee must fully disclose his/her licensure and must fully comply with all License Laws and rules when dealing in their own real estate.
Checklist When Acting as Principal when Property IS under a Brokerage Engagement (i.e. Listing Agreement):
- Advertisements cannot be in the Licensee’s name
- Advertisements must be in the name of the Broker/Firm holding the Licensee’s license
- Licensure must be disclosed in any contract or other document
Checklist When Property IS or IS NOT Under Brokerage Engagement:
- The Licensee’s broker must be advised in writing of the specific property to be advertised.
- The Licensee’s broker must give
- The advertising must be clear that the party advertising holds a real estate license 520-1-.11
- Monies coming into Licensee’s possession (earnest money, deposits, etc.) must be placed in the Broker’s Trust account or one approved by the Broker & registered with GREC.
Violations Related to Agent Acting as Principal (from Unfair Trade Practices OCGA 43-40-25) Include:
- Commingling money of the Licensee’s principals with the Licensee’s own money (b)(4)
- Failing to account for and remit any money coming into the Licensee’s posession which belongs to others (b)(3)
- Compliance with License Law is imperative
- It is in the Licensee’s best interest to address the handling of trust funds & disclosure issues in order to deal with the public ethically & fairly
To Whom Do These Rules Apply:
- Active AND Inactive Licensees
- Licensee acting as Principal
- Licensee acting as Officer, Employee or Member of an entity acting as a principal in a real estate transaction
- OCGA 43-40-25 43(d)
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Verbal Negotiations: Don’t Get “COLIC” (9/10/12)
Verbal Negotiations: You wrote an offer on behalf of your buyer; the listing agent receives the offer and presents it to the Seller. The next day, you get a phone call from the listing agent, “The Seller is out of town so he is just going to VERBALLY make a counteroffer.” The listing agent continues to tell you all the terms that the Seller agrees to and counters. You present this information to the Buyer who agrees with everything and is thrilled to death to be buying this home! The listing agent tells you that the Seller will be back in town in 3 days and you can take care of the paperwork then. 5 days later, you call the listing agent to find out where your contract is because you haven’t heard anything. The listing agent apologizes and tells you, “Oh, I’m sorry… I guess I forgot to tell you, we got another offer and the Seller decided to accept that one! We have a binding contract with another Buyer. Good luck!” Now YOU are the one that has to go tell the Buyer that they actually DIDN’T get the house of their dreams!
Implied Contracts: In Real Estate, there are NO IMPLIED contracts! All contracts must be in WRITING to be enforceable (along with other elements!)
- This holds true for negotiating terms as well as getting a binding contract. Protect your client and get all terms in writing and signed by both Seller and Buyer!
- If one party is out of town, there are many electronic ways of getting signatures… hotels have business centers with faxes and computers, most cities have some sort of business where a person can receive and send a fax, there are several ways to get electronic signatures on computers, smart phones and ipads!
“Colic”: To prevent “colic,” it’s easy to remember the
Elements of a VALID and ENFORCEABLE Real Estate Contract
- C – Competent Parties
- O – Offer and Acceptance (“Meeting of the Minds”)
- L – Legal Purpose
- I – In Writing & Signed
- C – Consideration – (Valuable or Good)
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Counteroffers and Exhibits (9/3/12)
Counteroffers and Exhibits: A Buyer writes an offer on a listing including exhibits, the Seller counters (on a separate counteroffer form) the terms of the offer including part of one of the exhibits, the negotiations continue until a final agreement is reached… does the Seller need to go back and sign the original Exhibits?
GAR Counteroffer Form: GAR calls this form: F22 – Counteroffer To or Modification of the Unaccepted Original Offer. “The original offer is hereby incorporated in its entirety into this Counteroffer by reference.” In the GAR form as in the RE Forms, the final agreed-upon contract includes the Original Offer (exhibits & addenda) and only ONE FINAL counteroffer.
RE Forms Counteroffer Form: The verbiage of this form, as in the GAR Counteroffer form, specifically INCLUDES all the terms from the original offer with the exception of the terms that are countered on this form: “The original offer, executed by the party making such offer, as amended only by this final counteroffer, executed by all parties, shall constitute the full and entire agreement. Other counteroffers are not part of this contract.” Click here for a copy of the RE-110 Counteroffer
Conclusion: The original offer references the included Exhibits, therefore, the Seller does NOT need to sign the original exhibits (especially if parts of the exhibit were negotiated differently… i.e. amount of repairs to be paid for by Seller on FHA Loan Exhibit) because they are referenced in the counteroffer.
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Financing Contingencies (8/27/12)
Financing Contingencies: Make sure you thoroughly read the terms of the the Financing Contingency you use to protect your Buyer in your contracts. There are certain documents from the lender that you need to send to the listing agent or receive from the Buyer’s agent depending if the Buyer terminates based on financing or meets this contingency in both the GAR Contracts & RE Forms. Did you know that a SELLER may also terminate a contract based on a Buyer’s financing contingency?
Buyer Terminating within the Financing Contingency: If a Buyer terminates a contract because they cannot meet this contingency, there are specific documents you must receive from the lender & send he listing agent within the time frame specified in the Exhibit. An email from a lender or an email summarizing a phone call will not suffice to terminate a contract and protect the Buyer’s earnest money. You must get a “Loan Denial Letter” from an underwriter and it must be based on lender’s “customary & standard underwriting criteria.” A Buyer does NOT meet this denial if a Buyer does not have sufficient funds to close, has not leased or sold other real property, has provided lender with the requested documentation. There are many times a Buyer cannot get a loan but if they do not send the specific documentation to the listing agent, they WILL LOSE THEIR EARNEST MONEY. Additionally, if the loan denial letter is received from a lender who is NOT listed in the exhibit (or a subsequent amendment) this loan denial letter will NOT protect the Buyer’s Earnest Money. If a Buyer switches lenders, consider amending your contract to this fact to be a fiduciary to your client.
Seller Terminating within the Financing Contingency (GAR): If a Buyer meet this contingency and wishes to continue with the contract, the Buyer is obligated to send to the Seller “Evidence of Ability to Close” within the time frame specified in the exhibit. If the Buyer does NOT send this Loan Commitment Letter to the Seller within the time frame, the Seller MAY TERMINATE THE CONTRACT.
FHA & VA Loan Contingencies: There are additional stipulations and requirements of both Buyer & Seller regarding the termination of a contract and the disposition of the earnest money with the Buyer seeking one of these government-insured loans.
Protect Your Client’s Rights: Make sure you THOROUGHLY read through all of the obligations (Buyer & Seller) to protect your client’s rights to a contract and to earnest money when they are seeking a loan from an institution. Make sure your Buyer & Seller understand their financing obligations thoroughly as well!
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Earnest Money Disputes (8/20/12)
Termination of Contracts: When a contract terminates and the parties do not sign the ‘release’ portion of the T&R, then the earnest money is officially in dispute. At this point, the “holder” of the earnest money is to be notified.
Information the Holder Needs: The holder needs specific information in order to make an accurate interpretation of the contract and circumstances surrounding the termination.
- Buyer & Seller mailing addresses (holder has to mail the letter to the parties)
- Email & mailing address of co-op agent & co-op Broker
- Copy of the contract, exhibits, amendments, termination, release
- Copies of email communications ( the dates on those emails are EXTREMELY important) that are pertinent to the dispute or fax confirmations
- Any explanation of the sequences of events & circumstances leading up to the termination of the contract
Key Issues: There are many issues that factor in to the holder’s decision. Some of these include:
- Binding Agreement Date completed on the contract
- Dates/time frames of contingencies
- Dates that contingencies are met
- Date on the Termination
- PROOF (email dates or fax confirmations) of when parties are notified of contingencies being met
- If there is an issue that is addressed in a contract by multiple documents (i.e. short sale contingency being addressed in a special stipulation, exhibit, MULTIPLE exhibits, addenda or amendments) the LATEST document would take precedence. – If Exhibit A then B then C all signed the same date with differing time frames regarding a specific issue, Exhibit C would control.
- VERBAL agreements would not typically hold-up in court – no way of proving
Example: Short Sale listing goes under contract. Buyer terminates under “due diligence.” Here are the issues:
- No Binding Agreement Date completed on the contract
- An email with a date showing where Listing agent sent the accepted contract to Buyer’s agent (2/28/12)
- A later amendment referencing a Binding date as different from the date of the email notification of acceptance (2/29/12)
- No dates referenced anywhere regarding when Seller must provide Short Sale Approval Letter
- Financing Contingency 21 days from Binding
- FHA Loan Exhibit used
- There IS in the contract that the Buyer’s due diligence period goes for “10 days after short sale approval”
- Short Sale Approval Letter – Letter dated 7/17/12 but emailed to Buyer’s agent 7/18/12
- Approval Letter from states that “terms of contract accepted” but they must receive the Final HUD-1 for final approval
- Buyer Termination & Release Agreement – Buyer terminating stating “repairs are FHA code violation & lender won’t issue loan”
- No Loan Denial Letter presented to Seller
- No date on T&R but fax stamp – 8/10/12
Questions:
- Even though Buyer terminated based on one reason, could they still terminate if they are in their due diligence time frame?
- Does this Short Sale Approval Letter start the clock ticking for the Buyer’s Due Diligence?
- What is the Binding Agreement Date?
- What date does the Due Diligence begin – Date on letter or date of agent’s email NOTIFYING the other agent of short sale approval?
- Can the Buyer terminate the contract with no penalty due to FHA issues?
These are just some of the many types of questions that the “Holder” of the earnest money must sort out when interpreting the contract and emails and circumstances and sequence of events surrounding a termination of a contract and deciding to whom to disburse the earnest money!
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Terminating Contracts with Short Sale Contingencies (8/13/12)
Termination of Contracts with Short Sale Contingencies: There are Seller contingencies & Buyer in a Short Sale contract. Watch Amee’s video to learn about terminating these contracts and which party has rights to the earnest money.
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Earnest Money Disputes (8/6/12)
Upon Termination of a Contract: The contract terminates and BOTH the Buyer AND the Seller believe that they are entitled to the earnest money. The termination of a contract is unilateral (only one party’s signature is required) but the release of the earnest money is bilateral. If both parties do NOT sign the release agreeing who gets the earnest money, then the earnest money is in dispute and if no special stipulations are written to the contrary, then the “holder” decides who gets the money.
Send a copy of the contract, exhibits, amendments, termination & release, explanation of the circumstances surrounding the termination to the broker who is holding the earnest money. The Broker will also need the mailing address of the Buyer (& Seller if it is not the same as the property address) and the contact information of the co-op agent and Broker.
The Broker of the company holding the earnest money will then read through the contract and supporting information, make a “reasonable interpretation” and decide how to disburse the funds. The party who is NOT awarded the earnest money may make a written objection. The “Holder” may stay with the original decision or change his/her mind. Additionally, if the Holder cannot make the decision, the earnest money may be released to the registry of the court for a judge to decide (entailing legal costs to both parties.)
If the contract is written on a GAR Form, after the Broker writes the letter outlining the interpretation and decision, the money will be disbursed 15 days from the date of that letter. If the other party objects but the Holder does not change his/her mind, then the 15 day time frame stays in tact from the date of the original letter. If the Holder changes his/her mind, then a new letter is written and the 15 day time frame begins anew.
If the contract is written on a RE Form, the same process as above is followed but there is no specific time frame (i.e. no 15 days.) Maximum One’s policy, however, is to disburse the earnest money within ten (10) days of the initial letter in this situation.
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Appraisal Contingency (7/30/12)
GAR Appraisal Contingency Exhibit (Form F93:) This Exhibit outlines a Buyer’s rights in the contract should a property NOT appraise for sale price.
- From ___ number of days from Binding Date, request Seller to reduce to the appraised price – therefore the appraisal must be completed and turned in (& reviewed if necessary) before these number of days have passed
- If Buyer does NOT make this request of the Seller to reduce the sale price, this right is WAIVED and this contingency is no longer part of the contract… Earnest Money is at risk
- Seller has ____ days or day of closing (whichever comes sooner) to respond
- If Seller AGREES to reduce the price, the BUYER MUST CLOSE
- If the Seller DECLINES to reduce the price, the Buyer may terminate & get Earnest Money returned
- If Buyer does not make timely request of Seller, Buyer is obligated to purchase the property at the Sale Price regardless of the appraisal (or would be in breach of the contract)
RE Forms Appraisal Contingency (Paragraph 6b of GA Contract for the Purchase & Sale of Real Property): This paragraph outlines what happens if the property does not appraise for the contracted sale price.
- This contingency is in effect ____ number of days (from Acceptance Date.)
- Buyer has SOLE DISCRETION to terminate the contract should the price not equal or exceed the sale price
- Buyer would receive full refund of earnest money but must notify Seller of the intent to terminate & provide the Seller with a copy of the appraisal
- Should property not appraise, either Buyer OR Seller may initiate an Amendment offering to complete the sale at the lower appraisal price but NEITHER party is obligated to accept
- The proposed amendment from either party must be initiated prior to the time limit of the appraisal contingency
- If the Buyer does not propose an amendment to reduce, then this contingency is waived
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Deeds (7/23/12)
What is a Deed? A deed is a written instrument whereby a property owner will convey their ownership of that property to another. A deed must contain:
- A Grantor
- A Grantee
- Conveyance Language
- Property Description
- Grantor’s Signature
- Delivery & Acceptance
The definitions of these and more information can be found in the attached documents & in the video:
- What Kinds of Deeds Are There?
- What Should a Buyer Do If Seller Only Executes a Limited Warranty Deed?
- Under What Circumstances Should a Quit-Claim Deed be used?
- The Bowers Law Firm, LLC – Handout Page1 and Handout Page 2 on Deeds
Jeff Bowers – Bowers Law Firm – JBowers@BowersLawFirm.com – 770-289-8967
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Getting Fired From a Buyer Agency Agreement (7/16/12)
- A Client Fires You from Representing Them as a Buyer… Are You Entitled to Compensation?: You have an Exclusive Buyer Brokerage Agreement signed, you show your Buyer property & perhaps even write up a few offers, your Buyer “fires you” and buys a house without your assistance… under what circumstances are you entitled to compensation?
- HUD Foreclosures – Amee’s comments on agents & agents’ families purchasing them: Her comments on HUD REO’s begin at 22 minutes into the YouTube video.
- Amee Davis, Davis & Associates, Amee@DavisLawGA.com
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Buyer Agency Compensation if a Buyer Fires You Amee Davis of Davis & Associates 7 10 12
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Open Offers & Counteroffers (7/9/12)
- An Offer or Counteroffer is Open for Acceptance
Until: one of the following happens. Do not leave open offers out there for your clients because you do not want to legally obligate them to BUY more than one house or SELL their house to more than one person:
- The time limit on the offer/counteroffer expires
- The other party makes a counteroffer
- The initiating party withdraws their offer/counteroffer
- Time Limit– The offer is only open for acceptance through this time; therefore a contract MUST be accepted WITHIN this time frame. This is NOT the time for the other agent to respond to you.
- Counteroffer – If the receiving party makes a counteroffer, they should also put a new time limit on that counter or the same as above is in effect
- Withdraw of Offer/Counteroffer – Both sets of contract forms (GAR & RE Forms) have a “Withdrawal of Offer” form. A party may unilaterally withdraw their offer
- Examplewhere a Seller sold his house to TWO people:
- Seller is selling his house as a short sale and received an offer. The Seller made a counteroffer to that Buyer – no time limit on the counteroffer.
- Seller received another offer in that was $7,000 MORE that the previous offer
- Listing agent send an email to the Buyer’s agents representing the two different buyers letting them know that there are multiple offers on the table and to come back with “highest & best.” The Buyers’ agents email the listing agent that neither Buyer is changing their offer.
- The Seller signs & accepts the offer from Buyer #2 (the one that’s $7,000 higher)
- Buyer #1 signs & accepts the counteroffer from the Seller (which was sent before Seller received offer from Buyer #2)
- The Seller has now just legally SOLD his house to TWO different Buyers!
- This just happened to one of our agents last week!!!
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Earnest Money Disbursement When it Has Not Yet Been Collected (7/2/12)
- Earnest Money is PART of your contract– whether or not it has been received per the terms of the contract.
- T&R prior to receiving Earnest Money– Since earnest money is part of the contract, regardless if it has been received by the Holder, it MUST BE DISBURSED per the contract based on why the contract failed to close. There can still be defaults in a contract prior to the Holder receiving the earnest money and resulting disputes in which party gets the earnest money.
- Agents must completea Termination & Release Agreement (GAR form #F83 and RE forms #RE260 -Notification (to terminate) AND #RE 212 Agreement to Disburse Trust Funds (to disburse earnest money)
- The TERMINATIONof a contract is unilateral
- The RELEASE/DISBURSEMENT of a contract is bilateral and ALWAYS requires both parties signatures
- Exampleswhere Earnest Money was jeopardized:
- A Buyer wrote an ALL CASH offer on a short sale. It was the second offer on the property and the Seller had a valid short sale approval letter to the Seller was ready, willing and able to close.
- The Buyer’s agent wrote NO contingencies in the contract to protect the Buyer (no due diligence, no financing nor appraisal contingencies, etc.)
- The Seller made one counteroffer to the Buyer’s original offer… providing the short sale approval letter. The Buyer accepted the counteroffer and the Seller bound the offer.
- The contract called for the Earnest Money to be received within 2 days after receiving short sale approval letter (i.e. Binding Agreement Date in this situation.)
- The Buyer changes his mind and backs out of the transaction 24 hours after Binding Agreement Date. The Buyer’s agent informs the Seller’s agent of this through an email.
- Another day passes (we are now 2 days after Binding Agreement Date) and the Seller asks the Buyer to provide a T&R.
- The Buyer’s agent informs the Seller that she has been unable to contact her client and cannot get a T&R signed.
- Additionally, the Buyer’s Broker on this day also informs the Seller’s agent that they did NOT receive the earnest money.
- The Seller’s agent says that the Seller is entitled to the earnest money per the Buyer’s breach and wants to initiate a “15 day disputed earnest money disbursement letter” per the contract.
- The Buyer’s Broker says she cannot disburse what has not been collected. Also, the Buyer’s Broker replies that per the contract, they informed the Seller of the lack of these funds being deposited and per the contract the Seller should terminate.
- The Seller answers that he cannot terminate a terminated contract!
- Result: A BIG MESS!
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Time Frames in Contracts (6/25/12)
- Binding Agreement Date / Acceptance Date – Make sure this is filled in. ALL dates are timed off this date unless otherwise stipulated.
- Time Limit– The offer is only open for acceptance through this time; therefore a contract MUST be accepted WITHIN this time frame. This is NOT the time for the other agent to respond to you.
- Due Diligence Period / Buyer’s Right to Terminate – this time frame is key for protecting a Buyer’s earnest money.
- Finance Contingency / Appraisal Contingency– The appraisal contingency in the RE Forms goes right to the day of closing.
- Earnest Money Receipt Dates– Make sure that you have the earnest money per the time specified in the contract.
- Short Sale Exhibit– days prior to close to receive short sale approval letter
- Examples where Earnest Money was jeopardized:
- #1 – Appraisal Contingency & Contract Extension: Contract terminated due to low appraisal – Buyer sent to Seller copy of appraisal & loan denial letter from lender based on this
- Seller contends that Buyer was outside of finance contingency & there was no appraisal contingency – but Buyer used the RE Forms & the appraisal contingency is pre-printed in the purchase & sale
- Agents had been in touch with each other throughout the entire transaction
- After receiving notice of low appraisal & learning that Buyer’s current lender could not lend due to appraisal amount (under $50k) Seller sent contact information of two additional lenders to try & help the Buyer get a loan
- ISSUE: Buyer sent notification & documentation of low appraisal 2 days AFTER the scheduled closing date with no signed contract extension
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- #2 – Binding Agreement Date: Agents negotiating throughout the evening & the Buyer finally accepts last counteroffer; talks to Seller’s agent on the phone to inform the agent & sends an email notifying Seller at 11:30pm
- The Seller’s agent, last party to make a counteroffer, never filled in the binding agreement date but sent an email the next day confirming the content of their conversation the night before.
- Buyer sends a T&R on “Day 10” after “Binding Agreement Date & terminates based on due diligence… BOTH parties feel they have a claim to the earnest money
- Seller contends that the Binding Agreement Date was the date when the emails & phone calls occurred; Buyer contends that the Binding Agreement Date was the following day when the agent actually received an email confirmation from the Seller’s agent (& sent the T&R on Day 10 from this following day.)
- Broker Transaction Checklist & Contract Review (GAR Forms) – Use this form (under the folder: Company Operations – CO5) or create your own to protect your client
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Verbal Negotiations & Elements of a Valid & Enforeceable Contract (6/18/12)
- VERBAL NEGOTIATIONS– You wrote an offer on behalf of your buyer; the listing agent receives the offer and presents it to the Seller. The next day, you get a phone call from the listing agent, “The Seller is out of town so he is just going to VERBALLY make a counteroffer.” The listing agent continues to tell you all the terms that the Seller agrees to and counters. You present this information to the Buyer who agrees with everything and is thrilled to death to be buying this home! The listing agent tells you that the Seller will be back in town in 3 days and you can take care of the paperwork then. 5 days later, you call the listing agent to find out where your contract is because you haven’t heard anything. The listing agent apologizes and tells you, “Oh, I’m sorry… I guess I forgot to tell you, we got another offer and the Seller decided to accept that one! We have a binding contract with another Buyer. Good luck!” Now YOU are the one that has to go tell the Buyer that they actually DIDN’T get the house of their dreams!
- In Real Estate, there are NO IMPLIED contracts! All contracts must be in WRITING to be enforceable (along with other elements!)
- This holds true for negotiating terms as well as getting a binding contract. Protect your client and get all terms in writing and signed by both Seller and Buyer!
- If one party is out of town, there are many electronic ways of getting signatures… hotels have business centers with faxes and computers, most cities have some sort of business where a person can receive and send a fax, there are several ways to get electronic signatures on computers, smart phones and ipads!
- To prevent “colic,” it’s easy to remember the Elements of a VALID and ENFORCEABLEReal Estate Contract
- C– Competent Parties
- O– Offer and Acceptance (“Meeting of the Minds”)
- L– Legal Purpose
- I– In Writing & Signed
- C – Consideration – (Valuable or Good)
- Earnest Money is NOT the consideration in a real estate contract
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Counteroffers (6/11/12)
- Very few transactions become binding without counteroffers. There are many ways to counter an offer but the easiest and most concise way s to use the counteroffer form in whichever contract package you are using.
- Anything can be countered from sale price to an appliance to remain with the property. Remember, however, that when a counteroffer is made, the previous offer becomes null and void and the receiving party can ignore it. In other words, let’s say that a buyer makes an offer on a “hot” property asking for the refrigerator to remain with the house; the Seller counters the price and fridge; the Buyer is fine with the price & would be okay without the fridge but wants to try one more time. If the Buyer makes another counter, the Seller may receive another offer in the interim and accept that one. The first Buyer would be back in your car looking for another home to purchase!
- Every new counteroffer voids the previous counteroffer as well.
- The FINAL agreement consists of: the last counteroffer that was signed by ALL parties PLUS the terms of the Original offer that were not changed.
- Once a counteroffer has been signed by all parties, the parties do NOT go back and sign the original offer.
- The counteroffer references the Original offer and all of its exhibits but the original does NOT reference the counter; so if the counteroffer is signed, any reasonable party realizes there is more to the contract but not vice-versa.
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Buyer Rebates (6/4/12)
- Many agents are offering a Buyer Rebate. Maximum One Realty has a program on Buyer Rebates that Dave Kubat will be teaching in various locations throughout the month (check the training calendar.)
- These rebates must be properly presented and disclosed. See O.C.G.A. Sections 43-40-9 (e)(3) and 43-40-25(a)(12)(17)(35) and Substantive Regulations 520-1-.10 Regarding the disclosure of commissions, fees, REBATES or any other valuable consideration, terms must be pre-established and set forth in a brokerage engagement or other signed document.
- Additionally, this rebate must be disclosed on the HUD-1 Settlement statement
- Before a Buyer accepts your offer of a rebate, the Buyer MUST check with their lender to make sure that the terms of their loan allow for this rebate from you as the agent.
- Consider taking Dave’s Buyer Rebate class for specifics on what is included, how to present this to a Buyer and how to disclose it properly to all parties involved!
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Multiple Offers (5/21/12)
- Many Sellers are receiving multiple offers. This is extremely beneficial to a Seller and nerve-wracking to a Buyer! Whichever side you represent, you will be well-served to prepare your client appropriately and set the proper expectations.
- Buyers need to know that the “deal” has already been made prior to the house going on the market. Many Sellers are intentionally pricing their properties BELOW market value to create a bidding war and drive the price up! Additionally, Sellers are NOT required to counter-back for a “highest and best” revised Buyer offer. A Seller may accept any offer they choose regardless of price or terms. Buyers also need to know in advance that a Seller is not required to respond to offers in the order they were received.
- A Buyer would be best served to make every offer they submit their “highest and best.”
- Sellers should be advised of the market statistics and price their property as competitively as possible to solicit more than one offer so that they can drive up the price!
- If you are a Listing Agent, you receive multiple offers and the Seller chooses to request a “highest & best” from the Buyers, this must be disclosed to all the Buyers. Here is a Multiple Offer Disclosure form for your convenience. Allow the Buyers time to get their revised offer back to you. Please be professional and courteous and respond back to the agents representing the offers the Seller does not accept.
- If the client decides to submit (or accept) a “Back-Up” contract, use the “Back-Up Exhibit” and get the offer as a binding back-up contract. Without a binding contract, the Seller is NOT obligated to go back to any original offers should the first contract fall through.
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Legal Descriptions (5/13/12)
- In Georgia, a contract for real property (Listing, Sale, Lease) is NOT VALID without a properly written legal description.
- A Legal description describes the property being listed or conveyed or leased. It is contained in the deed where the Grantor obtained title to the property.
- When consulting Tax Records, make sure you reference the most accurate deed (i.e. deed book and page)
- When writing a contract or listing a property that was obtained by foreclosure, ensure that you are referencing the foreclosure deed and not any other prior deeds.
- In Georgia, when describing a property, according to GREC, the Land Lot & District must be identified. The State was divided into Landlots & Districts in the 1800’s. Districts are typically squares and do not follow boundary lines. Sections go anywhere from 40 acres to 490 acres (the smaller sections originally described property for the gold lotteries in the 1830’s.)
- If you do not write out the full legal description, you may reference the deed book and page of the most current conveyance of the property to the current Grantor.
- A property address is NOT a legal description
- There are many places that you can access this information: tax records, maps, title companies and each county has its own Property Appraiser/Tax Assessor’s office where there are records of this information. Many counties have online access to these records.
- The Georgia Superior Court has an online database of most of the counties deed records, liens, recorded plats, etc. through: www.gsccca.org
- Reference Georgia Real Estate Guide to License Law and Brokerage and Related Topics, 1995 edition, published by GREC, Pg. 27.1, Section 27.03
- The GAR contracts and new Georgia RE Forms have places on their Listing Agreements and Purchase & Sale Agreements to complete this information or to include a copy of the complete legal description from the Warranty Deed as an attachment.
- Consult one of your Brokers if you need assistance in finding the legal description for a property.
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Property Deeds in Georgia (5/7/12)
- There are many types of deeds that can be used in Georgia as evidence of the transfer of title of property. Each contract describes the type of property deed that will be used to convey the title from the Seller to the Buyer in a real estate transaction. Read through your contract to determine which type of deed the closing attorney will prepare and explain the differences to your clients. Typically, the deed used in the majority of our contracts is either a General Warranty Deed or a Limited Warranty Deed. We are, however, seeing an increasing number of properties conveyed through a Quitclaim Deed.
- General Warranty Deed: In general, a warranty deed typically conveys property between unrelated people. A warranty deed offers a measure of security to the grantee since the Seller warrants that the property has clear, unencumbered title. A warranty deed gives the grantee legal grounds for redress if the Seller falsely warranted the property. Under a General Warranty deed, the seller bears the responsibility for any defects in title even if those occurred prior to the Seller’s ownership. This deed grants the Buyer the broadest form of protection.
- Limited Warranty Deed:A Limited Warranty Deed is also called a Special Warranty Deed. This deed limits the Seller’s obligations regarding defects in title to the time of their ownership. In other words, this deed alleviates the Seller from responsibility for defects in title prior to the time they owned the property.
- Quitclaim Deed: A Quitclaim deed literally means that the grantor quits or abandons his claim on the title and bestows all property rights to the grantee. This deed is most commonly seen between parties who know each other; i.e. in a divorce, estate settlement, etc. It is also used quite frequently when one spouse wants to add a spouse to the title (you’ll see the property conveyed by quitclaim from the owner to the owner and the spouse as a couple. A Quitclaim deed is also the most commonly used deed when the Seller is a county, city or other government entity. A Quitclaim deed does not absolve the grantee from liens or other encumbrances that were on the property at the time the deed was conveyed.
- Please check with the closing attorney regarding the type of deed used to convey property, the title search that was performed and the title insurance being offered.
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Client or Customer (4/30/12)
- Any time you engage in a transaction with someone, you must have the person’s acknowledgement that they know the status of their relationship with you. They have the option of being a client or a customer. Here are the “ABCs of Agency” as a reference for you.
- Agency: Someone may become your “client” by signing an agency agreement with you. If they are a Seller/Landlord, they sign a “Listing Agreement;” if they are a Buyer/Tenant, they sign a “Buyer/Tenant Brokerage Agreement.” By signing, this agency agreement, you are charged with the legal obligation of representing their fiduciary responsibility in the transaction. The client has placed their trust and confidence to manage and protect their property and money and YOU have the legal obligation to act for their benefit.
- Customer Acknowledgement: Someone may become your “customer” by signing a customer acknowledgement with you. This agreement lets the person know your legal obligations to them regarding the transaction. You still are open and honest with the customer and may perform ministerial acts. A Buyer signs a “Customer Acknowledgement” (GAR forms.) If you are using the RE Forms, please contact me. A Seller signs an “Authorization to Show Unlisted Property Agreement” (GAR forms.)
- When interacting with the public (Seller or Buyer) one of these two forms must be signed.
- Dual Agency: When you as the agent have an agency agreement with BOTH the Buyer & the Seller. (Not permitted by Maximum One.)
- Designated Agency: When the BROKERAGE has an agency agreement with both the Buyer and the Seller but there are two different agents working with each party
- Getting “Both Sides” of a transaction: You may absolutely still close a transaction with no other agent involved; simply do not sign a Buyer Brokerage agreement with the Buyer (to have both sides, I am assuming that you already have the listing by virtue of a listing agreement.)
- If you happen upon a dual agency situation, contact someone you know to represent one of the parties and negotiate a small fee for them to handle the deal for you.
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Earnest Money (4/23/12)
- EARNEST MONEY- When you are dealing with Earnest Money, you are dealing with someone else’s money! You must strictly adhere to the instructions in the contract which your client signed. The contract tells you when you must receive it & when Maximum One (or you remotely) must deposit the earnest money. If you have a client or co-op client who is sending Maximum One Earnest money to hold, please make sure that the property name is written on the check & that the agent’s name is referenced somewhere in the correspondence.
- TERMINATION & RELEASE– You must execute a T&R when a contract terminates…. REGARDLESS of the reason! If there is Earnest Money in the deal (even if you have not yet collected it) you must “Release” the Earnest Money contractually!
- EARNEST MONEY ON HOLD – If we are holding Earnest Money (if you have submitted Earnest Money in a RED envelope) you must inform Robin (Robin@MyMaximumOne.com) when it is time to DEPOSIT that Earnest Money! You do not want to go to closing and have the Buyer’s Earnest Money still sitting in a red envelope!
- Earnest Money Receipt by “Holder” – As an agent of Maximum One, you are considered the “holder” per the real estate contract regarding being in receipt of the earnest money. When you are negotiating a transaction and you receive a copy of the earnest money check from the Buyer, that is not actual receipt if the Buyer is paying earnest money to Maximum One.
- You will turn in a copy of the check into TMS along with your other forms for compliance. You will probably get a “BP OK” on your TMS file as well. However, it is your responsibility to check with the office to make sure that we have actually RECEIVED and DEPOSITED the check!
- The Compliance Broker checks the contract – she does not handle the bank accounts!
- This is money that is going to YOUR COMMISSION so please follow-up and make sure we have it! If the Buyer simply mails the check to Maximum One, here are a couple of possible scenarios:
- YOUR NAME is on the envelope mailed by the Buyer, so it gets filed in your mailbox & sits there until you come in & check your box – we do not open your mail
- A check comes to the office made payable to Maximum One Realty and a signature with NO OTHER identifiable information – no property address, no agent name, no closing date, etc.. Remember that TMS is not ordered by Buyer nor Seller name so we have absolutely NO WAY of knowing which contract that earnest money check goes to unless you contact us!
- If you go to closing, the closing attorney goes by the contract & will give Maximum One credit for the earnest money that has either never been received or never been deposited…. that means your commission will be short by the amount of earnest money! The Buyer will have received a credit for the earnest money from the lender & has a legal document as a receipt (on the HUD-1) for the earnest money!
- It will then be your responsibility (after the closing) to try & recover the earnest money from the Buyer. If you can get the Buyer to pay it & if the Buyer incurs any fees from their bank related to issuing a new earnest money check, those fees will be taken out of your commission.
- So, if you are expecting to receive earnest money for a transaction (either from your Buyer client or from the co-op agent’s Buyer client) PLEASE MAKE SURE THAT WE RECEIVE THAT MONEY & THAT IT GETS DEPOSITED!!!
- Remember that it is Maximum One’s policy to hold checks for 10 days before making use of the funds!
- Contact either Robin or Whitney who both handle earnest money:
- Robin Wilhite – Robin@MyMaximumOne.com 770-919-8825 ext. 304
- Whitney Price – MaximumOne.Whitney@gmail.com 770-919-8825 ext. 311
- SEND TO TMS – Whenever you get anything signed by a client/customer, send it to TMS so that we may keep a record of it also!
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Miscellaneous Contract Tips
- KEEPING RECORDS- License Law requires that you keep records of anything regarding your real estate transactions/listings for 3 years. Whether these are on paper or in a digital format, any and all of these records must be made immediately available to the Georgia Real Estate Commission (GREC) if asked. You, as an agent are responsible for keeping all of your records. Basically ANYTHING that you get signed by anyone and any communication regarding any transactions must be stored and made available. If you upload all of the Maximum One-required documentation to TMS, you can consider that a back-up for your own record-keeping!
- GREC ADVERTISING REGULATIONS– If As a licensed real estate agent, you must adhere to the GREC advertising rules to avoid fines and censures. There are regulations for ALL advertising, advertising properties and advertising agent-owned properties. Here are the GREC Advertising Guidelines. Please have your Broker review your advertising.
- REFERRALS– Referral agreements must be in writing. Per license law, it is an unfair trade practice if as an agent you:
- Fail to inform the person being referred that there may be some compensation or “Valuable Consideration” for giving the referral.
- Fail to get a written agreement the agreement to refer that person to another broker for brokerage or relocation services.
- In 2011, the Georgia Real Estate License Law was amended to remove the requirement that an estimate of the referral fee had to be given to take into consideration the difficulty in giving an accurate estimate of the fee to be received. You must still obtain a signed Referral Authorization however. O.C.G.A. 43-40-25 (b) (36)
- Refresh yourself of Georgia Real Estate License Law & related laws.
- MULTIPLE OFFERS – If your listing gets multiple offers, you must notify all the Buyers that they are in a multiple offer situation. Here is a Multiple Offer Disclosure form for your use! Please notify all of the Buyers of the Seller’s choice after the Seller chooses one!
- SELLER’S DISCLOSURE – RE FORMS – Here is the Seller’s Disclosure for those of you using the RE Forms!
- SEND TO TMS – Whenever you get anything signed by a client/customer, send it to TMS so that we may keep a record of it also!
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Get it in Writing
- GET IT IN WRITING!!!- Nothing is a problem … until it’s a problem! You may have the nicest most wonderful clients in the world!…. until they conveniently get “amnesia” about a vital in-depth conversation you had about reducing the price of their listing or the importance of getting an inspection or the end of the due diligence time frame! Protect yourself and protect your clients and get it in writing! Remember that YOU are the real estate professional and you are held to a higher standard of care than your clients… in other words, you have specialized knowledge that your clients do not and you practice real estate on a regular basis whereas your clients buy/sell a house once every 5 – 10 of years.
- PRICE REDUCTIONS ON LISTINGS – If you are reducing the price of your listing, please get it in writing! Write in post-dated price reductions as a special stipulation in your Listing Agreement, then send your client an email or telephone reminder of the new “adjusted price” of their listing to which they already agreed! Or, complete an Amendment to Brokerage Engagement (GAR) or Amendment (RE Forms) with the new price, and have the Seller sign this.
- EXTENSION OF A LISTING AGREEMENT or BUYER BROKERAGE: Complete an Amendment to Brokerage Engagement (GAR) or Amendment (RE Forms) and get the client’s signature.
- KEY TIME FRAMES IN YOUR CONTRACT – Do not jeopardize your client’s earnest money by missing a specific deadline in your contract!! Let them know the key deadline dates in the contract so that they too are responsible! Consider using the “Reminder of Important Dates in the Purchase & Sale Agreement” form (GAR – under the “Financing” folder) or creating your own similar form for each transaction you do! We have created a form that you are free to use or modify… click this link for Key Dates in Contract.
- INSPECTIONS, SURVEYS, TITLE INSURANCE – These are also important issues of which to make your clients aware! Remind them and protect yourself by getting it in writing if they choose to not get an inspection, survey, etc. Feel free to use this form, Service Recommendations, or make your own!
- SEND TO TMS – Whenever you get anything signed by a client/customer, send it to TMS so that we may keep a record of it also!
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Selling Commission as Advertised in the Multiple Listing Services
- IS A LISTING BROKER OBLIGATED TO HONOR THE SELLING COMMISSION OFFERED IN FMLS / GaMLS?- This issue unfortunately comes up more often than not! If your run into this issue, consider doing the following:
1. Print out a copy of the FMLS printout showing the Selling commission (& the date on the bottom of your printout)2. Since you brought it to the listing broker’s attention, check 48 hours from that notification to see if they “corrected” the selling commission3. Cross-reference the property in GaMLS and see what the Listing Broker has for selling commission in that listing service4. Repeat #1 & #2 for GaMLS :
- Here is more information regarding the amount of Selling Commission as advertised in the listing service. By virtue of membership in FMLS, member brokers engage in a contractual obligation to one another.A Selling Broker does not have access to the Listing Agreement signed between the Seller and the Listing Broker; therefore, an offer of compensation in a multiple listing service normally creates an enforceable commission agreement between brokers, but only if the cooperating broker is a member of the same MLS (or an MLS with reciprocal privileges) and accepted the offer of compensation relying on the MLS listing.
- The FMLS “Policies & Procedures” documents specifically address “Selling Commission” “There is a field on every listing – “Selling Commission” – which notifies the selling broker/agent what to expect if they participate in a sale of that listing. The selling commission can be entered as a percentage of the sales price or a specific dollar amount.
- ·If there is a possibility that the selling commission might be different than what is listed in the selling commission field, for any reason, an asterisk (*) must be entered following the commission amount/percent in the selling commission field. A corresponding asterisk must appear in the Private Remarks, accompanied by an explanation of how and why the commission might be a different amount. (See Public and Private Remarks).
- The “VRC” (Variable Rate Commission) field may also be used to indicate “Y” in cases where the commission can vary, but the asterisk and explanation requirements in Private Remarks still apply.
- Any other comments relating to commission or compensation may only appear in the Private Remarks and must include “to selling broker” and not “to selling agent”.
- If the Listing Broker made a “mistake” in the FMLS entry, then according to FMLS Rules & Regulations, “11.8 Correction of Errors – If a Member discloses the listing of another Member by any means, whether traditional means, automated means, or IDX, and the disclosing Member supplements the FMLS Content in the disclosure with data or material from other sources, the disclosing Member must be available via the communications methods and addresses on file with FMLS (in the FMLS roster) to receive comments from the listing broker regarding the accuracy of the supplemental material and correct any factual error relating to any specific property within 48 hours of learning of it.”
- According to GREC, “The amount of commission to be distributed to each agent is usually a function of the agreement between the two brokers/licensees and should be clearly defined in their co-op agreement. Most transactions involve at least two agents so it is commonplace to have a written understanding of the commission split, bonuses, procurement fees, etc. that is signed by the licensees and sometimes the landlord or seller.”
- This “written understanding” is described when filling out the commission instructions through the contract forms and the information the Selling agent derives to complete this form is from the listing service (FMLS or GaMLS.)
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Binding Agreement Date
- BINDING AGREEMENT DATE (in the GAR forms)- We have had several issues lately over the misunderstanding and/or miscommunication of the Binding Agreement Date of a contract. Unless otherwise specified in the contract, all other dates are timed off of this date so it is paramount that all parties involved agree on the specific binding agreement date! This is the terminology used in the GAR forms. The “Binding Agreement Date” is defined in the GAR contract as:
- “The date when the party who is making the last offer, or the Broker (except in a designated agency transaction) or affiliated licensee of Broker representing that party as a client, receives notice that the offer has been accepted.”
- “This party (or the affiliated licensee representing this party as a client) shall fill in the Binding Agreement date below and promptly give notice of this date to the other party. Filling in this Binding Agreement Date shall not be deemed as a counteroffer.”
- EXAMPLE: Buyer writes Offer to Seller. Seller accepts on Friday with no changes but the Buyer still has NO CLUE if the Seller has accepted or is going to make a counteroffer. Seller informs Buyer on Sunday that the offer was accepted. The BINDING AGREEMENT DATE is …. Sunday! (The Buyer’s agent would fill in the Binding Agreement date on the contract.)
- In the GAR forms, there is a Binding Agreement Date Notification (form F-124 under Miscellaneous that you may wish to use.)
- ACCEPTANCE DATE (in the RE Forms) – This date reflects the same process as outlined above. This is the date of which all the other time frames in the contract are timed! The “Acceptance” is defined in the RE Contract as:
- “Prior to an offer being withdrawn, revoked or terminated, in writing and in accordance with any provision in this Contract,”
- “If the receiver of an offer accepts it exactly as presented, without modification,”
- “provided Acceptance is communicated, in writing, to the party making the offer.”
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RESPA
- RESPA = Real Estate Settlement Procedures Act – This act was passed by Congress in 1974 to ensure that consumers are provided with information about the costs of closing & protected from unnecessarily high settlement charges. As of 2011, RESPA is administered & enforced by the Consumer Financial Protection Bureau. It was created because many entities associated with real estate sales (lenders, agents, construction companies, closing attorneys, title companies, home warranty companies, etc.) were often providing undisclosed kickbacks to each other thereby inflating the cost of real estate transactions and & obscuring price competition.
- RESPA requires that consumers receive certain disclosures at various times in the transaction & prohibits kickbacks that increase the cost of settlement services. RESPA regulates the marketing relationships among real estate companies, agents, lenders, closing attorneys, title companies, home warranty providers, etc..
- Prior to the enactment of RESPA, there was rampant abuse of the consumer which raised costs due to kickbacks paid for referring closing services, business arrangements that resulted in sham services of no value and marketing arrangements between affiliated business services. RESPA provided very clear rules regarding the proper disclosure among affiliated businesses involved in a real estate transaction and accurate charges and fees related to services involved in closing a transaction.
- The most recent RESPA rule makes it cheaper and more clear for a consumer to get mortgage financing. The new rule requires a standardized Good Faith Estimate (GFE) to facilitate a consumer’s ability to compare lenders’ fees and rates and to improve the disclosure of settlement costs & interest rates.
- Real Estate Companies are allowed to have Affiliated Business Arrangements with other Service Providers, reciprocal ownership and refer business to each other as long as these relationships are fully disclosed. These relationships and disclosures are regulated by RESPA.
- To comply with RESPA, Maximum One provides the appropriate disclosures of our Affiliated Business Relationships.
- Use this Affiliated Business Arrangement Disclosure when using a GAR contract
- Use this Maximum One Exhibit and Disclosure Statement when using the RE Forms
- If you are representing a Buyer who is buying a foreclosure property and the Seller will not sign, simply have your Buyer sign the disclosure and turn it into to TMS although it is not part of your contract.
- For more information on RESPA, please consult the HUD website at www.HUD.gov
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