The GAR Contract provides that the contract shall be for the benefit of and binding upon the parties and their heirs, successors, legal representatives, and assigns. Dying does not extinguish the obligation to perform a real estate contract.
In most cases, if it is the seller who passes away, the contract signed is still valid. While the deceased seller cannot sign the closing documents, their estate is responsible for the seller’s obligations and the buyer has the right to take ownership of the property at closing, according to the terms of the contract. Property rights must be determined before the contract can be fulfilled, and upon death, the estate of the deceased must be administered. If a probate process is necessary, the closing could be delayed, especially if it involves tracking down heirs and giving notice. If the buyer is not willing to wait for the probate to finish, which could take weeks or even months, the contract can, in most cases, be terminated and the earnest money will be returned to the buyer. If it is the buyer who dies before closing, the contract they signed is also binding. The buyer’s estate is responsible for contractual duties entered into before their death. Many contracts state that the seller’s only remedy is to keep the earnest money deposit so the seller may not be able to easily enforce the contract against the buyer’s estate. Although it is possible for the seller to file a claim against the buyer’s estate for lost profits, it is rare that a seller is successful in winning a case against the buyer’s estate. Every situation is different so it is recommended that the parties consult with their attorney so they know the best course of action and how they should proceed.
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In Georgia, here are the most common ways in which you can hold title to property:
Sole Ownership: owned entirely by one person, even if the owner is married. If the person becomes incapacitated due to injury or illness, a spouse or family member typically would need to conduct business with regards to the property. The family member would not be able to do business transactions and they would be unable to act until a court appoints someone to act on behalf of the sole owner. Many people assume if there is a will, it will address the problem, yet a will does not go into effect until after a death and is not in effect if the owner becomes incapacitated. Tenants in Common: allows for two or more people to hold title to real estate with equal rights during their lifetime to enjoy the property. A tenant in common title creates shares of ownership, and those shares will be distributed as directed in a will upon an owner’s death. Upon death, the decedent’s interest passes to his or her heirs named in the will who then become new tenants in common with the other tenants in common. In the absence of a will, the property goes to the heirs of the owner. As a tenant in common, the individual holds title for a respective part of the property and they are at liberty to dispose of said owned property or encumber it at will. The owners of their respective shares are permitted to use their portion of their property as collateral or in financial transactions. They may also have creditors place liens on only their portion of the property. Joint Tenancy: a form of co-ownership where property is owned by two or more persons at the same time in equal shares. Each joint owner has an undivided right to possess the whole property and a proportionate right of equal ownership interest. When one joint tenant dies, his/her interest automatically passes on to the surviving joint tenant(s). This type of title is widespread among but not exclusive to married couples. Unmarried couples may also hold joint tenant title as can parents and their adult children. In the case of a couple, the death of one automatically transfers full ownership to the surviving owner without probate. In the event the surviving owner dies without adding another owner, or if both owners die at the same time, probate is almost certain to occur before the property can go to the heirs. Being a co-owner means that to sell, refinance, or take any action to the property, both owners must agree to the business action. If there is disagreement or in the event your co-owner becomes incapacitated, the court will become involved to resolve the disagreement or to protect the interest of the one who has become incapacitated. Court involvement will occur even in the event the incapacitated owner is your spouse. Joint tenants also expose the property to both co-owners’ obligations and debts. If a creditor successfully sues your co-owner, you could lose your home. A will does not control any jointly owned assets, and you may mistakenly disinherit your family when your co-owner inherits your share, particularly in the case of second marriages with children from a previous union. Trusts: While not technically a form of ownership, you may own real property through a Living Trust. Upon your passing, your interest would pass to successor trustees and/or beneficiaries you have designated in your trust. State laws determine methods of holding and owning title to real estate property. Research should be done to determine the best method to acquire and hold title to real estate in the state you live. Assessing the best way to hold title to property may require the advice of a real estate, legal and/or tax professional. In a transaction in which the buyer is getting a mortgage, the closing attorney is representing the lender. If there is a dispute between the parties, the closing attorney, acting as Holder, has the same rights and duties of any other holder and holder may disburse the earnest money after 10-day letters and upon a reasonable interpretation of the Agreement.
It gets a bit more complicated when the transaction is all cash. In that event, there is no lender to represent, so the lender is representing either the buyer or the seller. If the transaction is written on GAR forms, the Purchase and Sale Agreement states that the closing attorney in an all-cash transaction represents the buyer. Fiduciary Duty. Unlike Realtors®, who do not own fiduciary duties to clients, attorneys in Georgia do owe fiduciary duties to their clients. Therefore, attorneys must protect the best interest of their client and cannot act against their best interests. If there is a dispute, the closing attorney therefore has a potential conflict of interest. Per the GAR F510, Closing Attorney Acting as Holder of Earnest Money, the closing attorney’s only remedy is to interplead the funds into a court of competent jurisdiction. (GAR F510 p.8). Things happen. The cash buyer could default and the parties can’t come to an agreement regarding the earnest money. The closing attorney is blocked from disbursing funds to the seller because of fiduciary duty. So, the attorney must interplead the funds. Then the parties wait, pay the costs of filing and litigation, possibly lose the interpleader and then pay the other parties costs of litigation. A waste of both client funds and everybody’s time. Here’s the takeaway. If you want to avoid an interpleader in an all-cash transaction, consider NOT naming the closing attorney as the holder of earnest money. Your clients will thank you. When and how to use Dual Brokerage can be confusing. Let’s break it down.
RMAA Policy Does Not Allow Dual Brokerage First, RMAA policy does not allow dual agency where one Agent represents both parties in a real estate transaction without prior written approval by the Broker. Potential Dual Agency situations can occur when (1) a buyer comes to the listing Agent’s open house, (2) an agent is an on-site builder representative, (3) the listing agent receives a direct solicitation from a potential buyer from a sign-call, ad-call, or other similar contact, or (4) a buyer is interested in a for sale by owner. In situations like 1, 2, and 3, the Associate involved will represent the seller as a client, and in situations like 4, the Associate involved will represent the buyer as a client. The other party in these situations would be treated as a customer, and no dual agency should occur. Should the other party insist on client representation, RMAA’s preferred policy is to assign another agent from our office to work with that party. Any compensation sharing between agents should be agreed upon in writing in advance and a copy should be given to the office. With this preferred policy, different agents affiliated with our office act as Designated Agents to exclusively represent different clients in the same transaction. The office has the right to assign such agents in order to have a designated agency situation rather than dual agency situation. Each agent so assigned shall ensure that they each represent their respective clients in accordance with BRETTA, as well as the respective brokerage agreement. Regarding designated agency, the Company has adopted a policy that the Associate identified in the listing agreement is automatically assigned to represent the seller as a client and that the Associate identified in the Buyer Brokerage Agreement is automatically assigned to represent the buyer as a client. Exceptions for Unique Situations Sometimes the preferred method of Designated Agency is not appropriate. An example would be if the agent has executed client relationships with both the buyer and the seller. That is, a buyer that is looking wants to make an offer on a property listed by the same agent. In that case, an exception can be made so long as one of the Broker Team approves the Dual Agency and both the Buyer and the Seller consent to the Dual Brokerage. Consent to Dual Brokerage is generally not included at the time Brokerage Agreements are entered because it is not an allowed type of agency allowed by RMAA. Therefore, both the Buyer and Listing Brokerage Agreements would have to be amended for the clients to give informed consent to Dual Brokerage. Do It Right NAR’s Code of Ethics and Standards of Practice offers guidance for conducting a lawful and ethical dual agent transaction. Articles 1-12 and 1-13 state that agents should discuss with clients even the potential of circumstances for a dual agency situation to arise, well before it ever does. Because the RMAA policy is not to use dual representation, it should be discussed as a unique situation that requires additional permission from the RMAA Broker Team and marked on the Brokerage Agreement as an agency that RMAA does not offer. However, if it is required in those limited circumstances, the Brokerage Agreements can be amended to include it. Disclose, Disclose, Disclose. Disclose everything you can, to both sides, so they know exactly what you can and cannot do in a Dual Agency. The GAR Brokerage Agreements include specific language that should be discussed with the client: Dual Agency Language in the GAR Agreements The GAR language includes that the client is aware that Broker is acting as a dual agent in this transaction and hereby consents to the same. The client must be advised that: (1) In serving as a dual agent, Broker is representing two parties, the seller and the buyer, as clients whose interests are or at times could be different or even adverse; (2) Broker will disclose all adverse, material facts relevant to the transaction and actually known to the dual agent to all parties in the transaction except for information made confidential by request or instructions from either party which is not otherwise required to be disclosed by law; (3) The client does not have to consent to dual agency. The consent of the Client to dual agency has been given voluntarily and the client has read and understands the agreement. (4) Notwithstanding any provision to the contrary contained herein, the client hereby directs Broker, while acting as a dual agent, to keep confidential and not reveal to the other party any information which could materially and adversely affect their negotiating position except as required by law. (5) Broker or Broker’s affiliated licensees will timely disclose to each party the nature of any material relationship with other party other than that incidental to the transaction. A material relationship shall mean any actually known personal, familial, or business relationship between Broker and a party which would impair the ability of Broker to exercise fair and independent judgment relative to another client. The other party whom Broker may represent in the event of dual agency may not be identified at the time the client enters into this agreement. If any party is identified after the agreement and has a material relationship with Broker, then Broker shall timely provide to the client a disclosure of the nature of such relationship. (6) Upon signing this brokerage engagement with the dual agency disclosures contained herein, Seller’s consent to dual agency is conclusively deemed to have been given and informed in accordance with state law, provided that the client has consented to Broker acting in a dual agency capacity. Confidentiality Must Be Maintained The RMAA Policy on Confidentiality follows BRETTA. As required by the Brokerage Relationships in Real Estate Transactions Act (BRETTA), Associates must maintain confidentiality of all personal and financial information and other matters identified as confidential by the client unless otherwise required by law or if the buyer permits disclosure of the information by subsequent word or conduct. An Associate should treat as confidential any information provided by the client that may reasonably be expected to have a negative impact on the client’s real estate activity. Licensees should pay attention not to make unauthorized or offhand comments about a client's situation or property in a way which could be considered a violation of the duty of confidentiality. Four areas considered of importance are:
Publicly Available Information is Not Confidential Agents can still counsel their clients based on publicly available information. If information is in a public record, or it’s anything that the buyer or seller says can be shared, then that information is not confidential. Confidentiality Can Be Hard! Buyers and Sellers can be relentless! They’ll beg you to reveal the other side’s position. If the information is confidential, you can’t do it!
Reference: Georgia Association of Realtors “Staying Safe on the Job” October 26, 2023 Georgia Law requires that the Broker review all advertising for sale, rent, lease or exchange prior to placement. The RE/MAX Around Atlanta Policy Manual reflects and emphasizes this requirement. Lack of a Broker review is one of the biggest violations of Georgia License Law and can result in an enforcement penalty imposed by GREC.
“ADVERTISING Associates must comply with any state laws and Georgia Real Estate Commission rules regarding advertising of property, real estate yard signs and personal promotion. All advertising must include the main office phone number and the number of the brokerage firm. The office name and main office phone number must appear at least as many times and in a font at least as large as the Associate’s name and phone number. All advertising must be submitted to the broker and approved in writing prior to being placed. Any advertising, personal promotion or listing promotion on social networking and other internet sites must comply with state laws and Georgia Real Estate Commission rules. Any profile or business page on any internet site must include the Company name and main phone number per GREC rules.” Internet Advertising A question often asked is how to handle internet advertising that has limited space. The answer is provided in the GREC Rules and Regulations 520-1-.09. You should include a link in the advertisement to a display that is in compliance with the rule, such as you own website’s Home Page or the RMAA website. “When advertising in electronic messages of limited information or characters, a license shall provide a direct link to a display that is in compliance with this Rule.” Help Us Help You! Always have a member of the Broker Team review all advertising, including signs, social media, flyers, newsletters, web sites and anything else that can be interpreted as advertising. We’ll review and return it ASAP! References: RE/MAX Around Atlanta Policy Manual (page 10) GA Code 43-40-18(c)(1) Advertising GREC Rule 520-1-.09 Unfair Trade Practices O.C.G.A. § 43-40-25(b)(1),(2),(11),(12) and (21) Georgia Realtor Fall 2023, CE, License Law and Ensuring Compliance October 19, 2023 Situation:
Questions:
Findings: These facts are an actual Georgia case decided in 2022, Starks v. Carver, 360 Ga. App. 366, 861 S.E.2d 193 (2021). The Georgia Court of Appeals found the following:
According to Seth Weissman, General Counsel of Georgia Association of Realtors, this case helps answer the question many brokers have asked about whether a broker can be found to be a de facto client of a party through the broker’s actions, even when there is no written agreement establishing a client relationship. The answer to that question, based on this decision by the Georgia Court of Appeals, appears to be no. Source: Georgia REALTOR® Magazine. Judicial Update 2022 Seth Weissman, author. https://garealtor.com/wp-content/uploads/Judicial-Update-2022.pdf Situation:
Broker A's Exclusive Seller Listing Agreement expires. Broker B lists the property under Exclusive Seller Listing Agreement the day following Broker A's expiration. Three days after Broker A's listing agreement expires, Broker A's agent takes an offer directly to the seller with knowledge of Broker B's Active Exclusive Listing Agreement. Broker A's agent tells seller to have Broker B's agent "hold off," even though Broker B's listing has been published in listing services for three days. Broker A's agent verbally tells seller that Broker A's listing has to be extended in order to present the offer. The seller then signs a counteroffer. The seller has no experience in real estate and is fearful of losing the offer. What are the legal and ethical issues regarding these actions? ANSWER: Wow! This licensee needs a lesson in both Georgia license law and ethics. License Law First, once a property is listed with a new broker, the previous listing broker cannot do anything to interfere with the new listing agreement. Going to the seller and telling her to hold off on the existing listing agreement (which is already in effect) and to instead extend the previous listing agreement with the first broker is the same thing as telling the seller to cancel the new listing (even though it is only been a short period of time) and reinstate and extend the term of the original listing agreement. Such behavior violates OCGA 43-40 25(b) (13), (14) and (26). The first code section provides that a licensee can be sanctioned for “Inducing any party to a …brokerage agreement…to break such…brokerage agreement for the purpose of substituting in lieu thereof any other …brokerage agreement with another principal”. The second code section prohibits the first broker from negotiating the terms of the offer directly with the seller when the first broker knows that the property is now listed with a new broker. This code section provides that a licensee can be sanctioned for “Negotiating the sale …of real estate directly with an owner…if the licensee knows that such owner …has a written outstanding listing contract in connection with such property granting an exclusive agency or an exclusive right to sell to another broker…” The third code section prohibits a licensee from “Obtaining a brokerage agreement…while knowing or having reason to believe that another broker has an exclusive brokerage agreement with such owner…” Code of Ethics The Code of Ethics violations appear just as significant with possible violations of Standard of Practice 16-4, 16-9 and 16-13. The original broker should have contacted the new listing broker and worked through the new listing broker in presenting the offer. Source: Georgia Association of Realtors Legal Helpline Q&A, Seth Weissman, General Counsel, GAR Link to Source: https://garealtor.com/wp-content/uploads/Legal-FAQs-for-web-9.28.pdf October 4, 2023 What is the Disparate Impact? Disparate impact allows people to challenge housing discrimination without having to prove “discriminatory intent” in the mind of the discriminator. In other words, it’s the outcome that matters, even if it’s impossible to demonstrate (as it usually is) what a landlord, developer or an insurance company’s intention was when they took the discriminatory action. Take for example a landlord that institutes a new rule that any tenant that calls 911 for emergency services more than twice in 6 months can be evicted; as a result, several women and their children are evicted from their homes after calling the police or an ambulance as a result of domestic violence. This policy has had a “disparate impact” on women, since 95% of domestic violence victims are women—although anyone can be a victim of domestic violence. While the landlord’s policy doesn’t explicitly state they will evict women, the impact of the policy puts up barriers to women renting. That’s the basis of disparate impact: it’s not what you say or intend, it’s what are the results of your actions. Why is the Disparate Impact Standard So Important?The Fair Housing Act says that no one can discriminate in the terms, conditions or privileges of sale or rental of housing to people based on their race, color, religion, sex, disability, familial status, or national origin. Even in an era where white supremacy is crawling out from the shadows into mainstream society, it’s still pretty rare to find big banks, developers, corporate landlords and insurance companies that will put in writing something that says, “let’s design this policy to make it harder for people of color to move into our building.” But, far too often, that’s what their policies do. The Fair Housing Act and its disparate impact standard allows the public—and HUD as the agency tasked with enforcing the law—to hold those accountable whose policies drive unequal outcomes. Disparate Impact Examples Scenario: Full-Time Employment Required Situation: A 50 unit apartment building has opened up and is accepting new applications. The application states that every tenant must be employed full-time. Outcome: The landlord says he wants to be sure the applicants can afford their rent. But the full-time employment requirement means that disabled, senior, and potentially veteran applicants who may have enough income to afford the apartment but aren’t working full-time are barred from becoming tenants. Resolution: By restricting access to seniors and disabled renters, the disparate impact standard would apply. The landlord would be required to rework the application to allow anyone who can afford the rent to get an apartment. Scenario: One Bedroom, Two PeopleSituation: A new apartment building is planned for the neighborhood and the developer has decided that they will all be one bedroom units. The developer and manager have instituted a rule that no more than two people can live in each unit. Outcome: This policy would discriminate against a couple with a child that could safely sleep in the single bedroom; it would have a disparate impact on families with children by denying them access to a unit they could afford and thrive in. Resolution: Even if the policy appears to be neutral, it has a discriminatory impact—a disparate impact on families with children and would need to change. Scenario: Refusal to InsureSituation: A homeowners insurance company refuses to insure apartment buildings if an owner plans to rent out the units to people with a Section 8 housing assistance voucher. Outcome: In order to buy the building, the owner has to have insurance, so the insurance company’s policy forces them to not accept Section 8 voucher holders. Since people of color suffer from higher rates of poverty than white people, more people of color would be affected by this insurance company’s rule and their access to housing diminished. Resolution: The insurance company’s policy will have a big impact on the availability of subsidized housing to people of color. That policy will have a “disparate impact,” or a more severe impact, on people of color and would not be permissible. The insurance company has to strip the source of income discrimination to not violate the law. Scenario: Zoning LawsSituation: A high-income, all-white suburb draws up new zoning laws that state they will not allow the construction of any affordable housing in their city. Outcome: The suburb is surrounded by a large, racially diverse city where people of color are more likely to be lower income. The zoning policy appears—on paper—to be ‘race-neutral;’ but in practice, it keeps people of color from accessing housing in the opportunity-rich suburb. Resolution: The zoning policy appears—on paper—to be ‘race-neutral;’ but in practice, it disproportionately keeps people of color from accessing housing in the opportunity-rich suburb. The zoning law has a disparate impact on people of color and their ability to access housing and in violation of the Fair Housing Act. Conclusion: Be very, very careful in representing landlords. A landlord may not intend to discriminate, but if the impact of the landlord’s guidelines affects a protected class more than the general population, a claim for violation of Fair Housing could result. Remember, it is the policy of RMAA that Associates should never make rental decisions on behalf of the landlord. Those decisions should fall solely on the owner and must not violate any Fair Housing Laws. Source: Alliance for Housing Justice, allianceforhousingjustice.org, A letter of intent, often used in commercial transactions, is simply a letter in which a buyer expresses to the seller interest in buying property and sets out the basic terms of the transaction. Since the preparation of an offer to purchase commercial property can often be time-consuming, the purpose of a letter of intent is to see if the parties are in general agreement on the basic terms of the transaction. If they are, the parties can then proceed to have a purchase and sale agreement prepared based upon the terms of the letter of intent.
A few suggestions are worth considering in drafting letters of intent. First, the parties to an LOI should include as many of the significant business points as possible in an effort to limit disputes and negotiations later. This should include a legal description of the property, the price of the property, the length of any due diligence period, the amount of earnest money, when the earnest money goes “hard” or becomes nonrefundable, the closing date, any major conditions to closing (such as a rezoning contingency), and who will pay certain costs (such as obtaining a survey, title insurance, and transfer taxes). One risk of a letter of intent is that it will be so specific and detailed that it is misconstrued as an offer to purchase property that, if accepted, will create an enforceable purchase and sale agreement. The more the parties agree to in a letter of intent, the greater the risk that one of the parties may claim that the letter of intent was actually an offer, and that by signing it the other party entered into an enforceable contract. The best way to mitigate this risk is to state in the LOI that it is not intended to be a contract and that only a subsequently signed contract will bind the parties. In response to this and similar contracting issues, the Georgia Court of Appeals has stated that “the failure to agree to even one essential term means that there is no agreement to be enforced.”31 In other words, as long as the parties fail to include at least one essential term in a letter of intent, it is unlikely that a court would find the LOI to be an offer capable of becoming a binding contract. However, the same court stated that “a deferral of agreement on a nonessential term does not invalidate an otherwise valid contract.”32 It can be difficult to determine what terms are “essential” since this designation is highly dependent upon the facts and circumstances of the specific sale in question. For example, in the particular case cited above, the letter of intent was clear on the identification of the property involved, the purchase price, earnest money, and certain conditions of closing. However, the letter of intent clearly contemplated a deed restriction regarding use of the property, the exact terms to which the parties had not yet agreed. The court, in this case, held that the deed restriction was an essential term, that the parties had never reached a meeting of the minds on that issue, and that the letter of intent could therefore not be enforced as a binding contract. In a different case, however, the Georgia Supreme Court upheld a letter of intent as an enforceable contract.33 In that case, Beller & Gould (a partnership) executed a letter of intent to acquire the Lisenbys’ property. The letter of intent gave Beller & Gould the option to purchase the property by November 15, but when Beller & Gould tried to exercise the option and enter into a formal agreement, the Lisenbys refused. Beller & Gould then sued for specific performance to enforce the agreement of the parties. The court found that the letter of intent was sufficient to support the creation of a binding agreement because the letter (1) identified the parties and their assent to the terms of the agreement, (2) described the subject matter of the contract, and (3) set forth the terms of the consideration.34 The court went further and stated that even if the parties discussed other terms that were not included in the letter of intent, the absence of such terms did not render the letter of intent unenforceable.35 The court determined that all of the material terms of the agreement had been established in the letter of intent.36 To help avoid the risk of having a letter of intent being considered an enforceable contract, most letters of intent contain specific language stating that they are only intended as a letter of intent and not as a real estate purchase and sale agreement. An example of such a provision is included below: Letter of Intent Notwithstanding any provision to the contrary contained herein, all parties acknowledge that this Letter of Intent is not intended to be and shall not be construed to be an offer to purchase real property that, if accepted, shall create an enforceable purchase and sale agreement between the parties. This Letter of Intent is intended as nothing more than an expression of interest in the real property discussed herein and no binding agreement of sale shall be formed until and unless the parties agree to a separate written purchase and sale agreement subsequent to the Letter of Intent being accepted. Parties should not underestimate the value of a well-written letter of intent. While letters of intent are generally not legally binding,37 they establish the basis of what will eventually be included in the purchase and sale agreement between the parties. If there has been an agreement on a particular point in the letter of intent, few parties will agree to alter that term in the purchase and sale agreement. Therefore, deal points that are particularly important to a party should be included in a letter of intent to avoid disputes on those points at a later time. §2.1.2Time Limit of Offer Weissman, Seth. The Red Book on Real Estate Contracts in Georgia (pp. 90-93). BookBaby. Kindle Edition. |
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