The Entire Agreement
An “entire agreement clause” (AKA a “merger clause”) establishes that the final written agreement between the parties represents the entire agreement of the parties and that the parties are only relying on what is written in the contract. Sometimes referred to as the “4 Corners Rule,” the merger clause bars a buyer from relying on alleged misrepresentations not contained in the written agreement. Alleged false representation issues commonly arise through the Seller’s Property Disclosure (SPD). Because of the Entire Agreement clause, the SPD must be incorporated into the PSA to be effective. (Also referred to as “attached” to the contract.). The SPD offers enormous protection to the seller. If a defect is disclosed in the SPD, the buyer is on notice of it and must perform its own due diligence to investigate the defect. Reliance on a seller’s repair receipts or representations can be dangerous. If a repair issue is important to the buyer, it is much better to investigate further before closing. The entire agreement clause would also control, if there is a conflict between the multiple listing and the contract. For example, if the MLS says the refrigerator stays, but the contract says it does not, the entire agreement clause or four corners of the contract prevail. In the 2023 GAR Purchase and Sale Agreement (PSA), it is at 4(e). Page 6 Entire Agreement, Modification and Assignment: This Agreement constitutes the sole and entire agreement between all of the parties, supersedes all of their prior written and verbal agreements and shall be binding upon the parties and their successors, heirs and permitted assigns. No representation, promise or inducement not included in this Agreement shall be binding upon any party hereto. Disclaimer Protection for Brokers in the GAR Purchase and Sale Agreement The GAR Purchase and Sale Agreement protects brokers and agents by requiring the seller and buyer to acknowledge that they have not relied on any representations of brokers related to certain information concerning the property. The disclaimer explicitly states that the broker has no duty to advise the buyer or seller on any matter relating to the property that could have been revealed, among other things, through a survey, title search, report on termites in the property (Official Georgia Wood Infestation Report), inspection by a professional home inspector or construction expert, utility bill review, an appraisal, inspection by an environmental engineering inspector, consulting governmental officials, or a review of the purchase and sale agreement and transaction by an attorney, financial planner, mortgage consultant, or tax planner. The GAR New Construction Purchase and Sale Agreement offers similar broker and agent protections. It contains a disclaimer that states that the broker is not responsible to advise the parties on any matter including, but not limited to the following: building products and construction techniques; the necessity or cost of any repairs to the property; views from the property; mold; hazardous or toxic materials or substances; termites and other wood-destroying organisms; the tax or legal consequences of the contract and transaction; the availability and cost of utilities or community amenities; the appraised or future value of the property; any conditions existing off property that may affect the property; the terms, conditions, and availability of financing; and the uses and zoning of the property, whether permitted or proposed. Claims Against the Broker for False Statements In Georgia, a buyer has no claim against the seller’s broker for false statements made by the seller in the seller’s disclosure statement unless the seller’s broker knows the representations to be false. Neither can the buyer sue the seller’s agent for fraud when the seller fails to disclose concealed defects in the property. When sellers’ agents are asked questions regarding the condition of the property, it is always a good idea to answer them in reference to the Seller’s Property Disclosure Statement Exhibit. So, for example, let’s say that a buyer asks if the roof on a particular property has leaks. The Seller’s Property Disclosure Statement Exhibit provides that the roof does not leak. To avoid any claim against the seller’s broker, it is always better to say, “The seller indicates in his Seller’s Property Disclosure Statement Exhibit that the roof does not leak,” rather than, “The roof does not leak.” Although a Seller’s Property Disclosure is not a requirement, it is clearly best for the protection of all parties, that an SPD be incorporated into the contract. Ethical Responsibility of Brokers If a seller makes a misrepresentation on a Seller Property Disclosure and refuses to correct it, the REALTORS® ethical obligation of honesty to the public requires that the broker/agent terminate representation of the seller. Reference: Weissman, Seth. The Red Book on Real Estate Contracts in Georgia (pp. 762-767). BookBaby. Kindle Edition. September 6, 2023
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We often see contracts using the acronym TBD or “To Be Determined.” TBD may work for some situations, but it definitely does not work in a contract. The reason is simple, to create an enforceable contract in Georgia, there must be a present agreement of the parties on all material terms.
Financing Contingency If you write TBD on a material term, such as an interest rate in a financing contingency, then the parties have merely agreed to agree in the future and the contract would be unenforceable in Georgia. The parties have not presently agreed to all relevant terms. What does work in the financing contingency example for interest rate is “prevailing rate” or “market rate.” The “prevailing rate” and “market rate” can be determined, so there is an enforceable agreement. Closing Attorney The same legal reasoning applies to the choice of a closing attorney. If the closing attorney is TBD, it simply means the parties have agreed to agree. That doesn’t work. Instead, the language “TBD by the buyer (or seller)” works. Only one of the parties needs to decide who the closing attorney will be. “TBD by the Buyer (or Seller)” is enforceable. Closing Date A closing date should never be TBD by itself, but it can be tied to an event or date that can be determined. For example, if a buyer needs to get a permit or needs to rezone a property, the closing date can be tied to the date that the permit is received or the rezoning is completed. For example, this works: “Closing date shall be 30 days from the date of issuance of the permit to build.” If there are material terms in a contract that remain, it is always best to try to work them out before finalizing the contract. Otherwise, see above! Broker Corner 8/30/23 You’ve worked hard and written 6 offers to purchase your listing. The seller has rejected them all. Now the seller has decided to terminate the listing. What are your rights?
First, look to the listing to see your options. In Georgia, if there is not an express early termination provision or a material breach of the terms of the listing, clients cannot unilaterally terminate listing agreements or brokerage engagement agreements without consequences. That is, sellers do not have an automatic contractual right to terminate without consequences and are in breach of the listing contract if they do terminate. If you’ve used the GAR Exclusive Seller Brokerage Engagement Agreement (F101), you won’t find an express early termination provision (unless you added it yourself). That is, the GAR listing agreement does not give the seller the right to terminate. What you will see is a provision in the “Protected Period” section of the agreement that lays out the consequences if the seller does unilaterally terminate. Bad stuff happens. The Seller sends you something in writing that says “You’re fired!” or “I am terminating this agreement.” However, you do not have to agree or consent. Your rights are far different with a unilateral termination versus a mutual termination to which you agree. The Protected Period Section Includes Seller Consequences for a Unilateral Termination Section 5 in the GAR listing agreement lays out the consequences if a seller unilaterally terminates and the listing agent does not agree. The Protected Period is the period of time commencing upon the unilateral termination of this Agreement by Seller in writing during which Broker shall be protected for its Commission.
Scenario You have an exclusive listing on a property, but the Seller sends you an email firing you. The seller does not have the express right to terminate you in the listing agreement without consequences. You do not agree to the termination. The Seller then lists the property with another agent and enters into a Contract to Sell* the Property during your protection period. What are your rights: The Seller owes you a commission per the original listing agreement for a sale to ANY buyer that was shown the property, either in person or virtually, or was provided specific information about or inquired about the Property either directly or through a broker working with the buyer during your protection period. What are the Rights of the 2nd Listing Agent? The Seller may also owe a commission to the 2nd listing agent. Though that is not your concern, it is likely that a closing would take place without your commission paid. You can send an invoice to the seller for your commission, but if the seller declines to pay you, you may have to resort to litigation for your commission. The threat of litigation often results in either a negotiated commission or a full commission. Commission rights and obligations in the GAR listing agreement survive termination. Do You Have to Provide Termination Paperwork to The Seller? You are not required to provide termination paperwork to the seller. However, the GAR Unilateral Termination of Brokerage Engagement Agreement (F155) clearly notes that the termination is unilateral, not mutual, and that the broker’s commission rights are not limited, waived or terminated. It also includes that the client must pay the cost to remove the listing from FMLS. Seeing in writing that your right to commission is not limited, waived or terminated, if the seller unilaterally terminates, may cause the seller to think twice before proceeding. This is the language in the Unilateral Termination In terminating the Agreement, Broker is directed by Client not to perform real estate brokerage services on behalf of the Client after the Termination Date of this notice to terminate. Nothing herein shall be construed as an agreement between the Client and Broker to mutually terminate the Agreement or to limit, waive or terminate Broker’s rights to a commission or the reimbursement of fees and costs resulting from the unilateral termination of the Agreement by Client. Unilateral Termination of this Agreement by Client does not eliminate the Client’s legal obligation to Broker for commission and/or fees due to Broker as specified in the Brokerage Engagement Agreement. If the Brokerage Engagement Agreement is a listing agreement, the cost to remove early the listing from any multiple listing service in which the property is listed shall be paid by the Client. Exception to Protected Period Commission Obligation Does Not Apply If a seller hires another exclusive listing agent following a normal expiration of a listing agreement, but during a protected period, the first listing agent’s commission rights during the protected period are ended. However, this exception does not apply in the case of a seller’s unilateral termination of a listing. *Contract to sell includes a lease, lease purchase or lease with an option to purchase. References: GAR Exclusive Seller Brokerage Engagement Agreement (F101) Weissman, Seth. The Red Book on Real Estate Contracts in Georgia (p. 1435). BookBaby. Kindle Edition. Broker Corner 8/22/23 Questions often come up regarding Loan Contingencies. Here’s a quick review of issues we often see.
Interest Rate as TBD Inserting TBD into the interest rate section of a loan contingency can make the contract void and unenforceable as too vague and indefinite if it is challenged. However, completing the section with “current prevailing rate” or “market rate” is generally enforceable. Similarly, if the loan contingency omits an interest rate altogether, the contract can be held to be unenforceable as too vague and indefinite. Remember, the entire contract would be unenforceable, not just the loan contingency. Late Appraisals and Denial Letters If an appraisal has not been completed prior to the end of the appraisal & finance contingency, the buyer cannot terminate the contract with a loan denial letter, based solely upon the reason "insufficient property data." Use of Approved Lender and Loan Denial Letter was expanded in the 1/1/2022 printing to include new sections (e) and (f), reasons upon which a loan denial letter may not be solely based: (e) the Property not appraising for at least the purchase price unless this Agreement is subject to an appraisal contingency and an appraisal meeting the requirements of this Agreement has been performed; or (f) the lender not having completed underwriting the loan request. Therefore, an appraisal not being completed is not a valid reason for a denial letter during the finance or appraisal contingency. So, if an appraiser hasn’t met a loan deadline, the buyer cannot use that as a sole basis for a loan denial letter. It is not considered “insufficient property data.” Use of an Appraisal by a Non-Approved Lender Where there is an “Approved Lender” included in §2 and the buyer chooses to use a non-approved lender, a buyer can still ask the seller for a price reduction or terminate the contract per the Appraisal Contingency, even if a non-approved lender did the appraisal. The forms committee intended that a buyer can ask for a reduction based on a low appraisal from an appraiser selected by any Lender, not just an “Approved Lender.” However, the buyer loses the ability to use a loan denial letter from a non-approved lender, but the buyer’s right to ask for a reduction in price or termination for a low appraisal stands – even if it is from the non-approved lender’s appraiser. Notice of Intent to Proceed with Loan Application in order for a buyer to terminate without penalty (get their earnest money back) based on a loan denial, the buyer must have fulfilled all the requirements in the exhibit. That includes having promptly sent the Notice of Intent to Proceed with Loan Application. Put another way, if the Notice of Intent to Proceed with Loan Application was not sent to the seller, the seller can legally keep the buyer’s earnest money even when the buyer was legitimately denied a loan and supplied the denial letter to the seller within the allowed time period. This is the relevant language in the loan contingency: Buyer to Notify Seller of Intent to Proceed. When it is known, Buyer shall promptly notify seller of any mortgage lender to whom Buyer has sent a notice of intent to proceed with loan application and the name and contact information for the loan originator. Use of Approved Mortgage Lender and Loan Denial Letter. Buyer may terminate this Agreement without penalty based upon an inability to obtain the Loan(s) only if Buyer fulfills all of the applicable requirements set forth in this Exhibit. (at the bottom of the section) Approved Mortgage Lenders and Pre-Approval Letters Including the name of an Approved Mortgage Lender and including a pre-approval letter from a lender are NOT substitutes for the notice. In fact, including the name of an approved lender in the financing contingency may not be to your buyer’s advantage because then a denial letter must come from that particular approved lender. Add the Notice to Proceed to Your Contract to Close Process You should add “Send Notice of Intent to Proceed with Loan Application” to your process. Yes, this is another step, but it is also another way to demonstrate your value to your client by managing the time limits and requirements to make sure clients are protected. The “Intent to Proceed” is a step in the loan process which takes place between the Borrower and the Lender. It is not the same thing as the NOTICE of Intent to Proceed with Loan Application that is sent to the seller. The Buyer’s Agent needs to tell both Buyer and Lender to alert the agent once this is done so the NOTICE can be sent. Notice Form GAR 816 The general notice form from GAR should be used to send the notice. The language is simple: “The Buyer hereby notifies the Seller that Buyer has communicated their Intent to Proceed with Loan Application with (Lender) _______________, Loan Officer, ____________ at (contact information) _____________________.” Loan Denial Letters GAR financing contingencies, including Conventional, FHA, VA and USDA-RD, include a very specific, time limited provision regarding Loan Denial Letters. If your buyer is denied a loan and the buyer can legitimately use the denial to terminate and get their earnest money back, don’t forget to timely send the Loan Denial Letter or the earnest money might go to the seller instead. These are the steps to be taken and the rules to follow.
August 11, 2023 EPA Fines Have Increased to $21,018 Per Violation! Why do we require the Lead Based Paint Disclosure (LBP)? The LBP is required by a federal law written in 1992 to protect purchasers and renters against exposure to lead based paint. The act is called the Residential Lead-Based Paint Hazard Reduction Act of 1992, also known as Title X (“Act”). What housing is required to have an LBP? Housing that was built prior to 1978, whether it is for sale or for rent. There are 2 different GAR disclosures tailored for each situation. For sales, it is GAR F316. For rentals, it is GAR F918. If you are using RE forms, the LBP disclosure form is RE 140 and the LBP pamphlet is RE 141. Do fixtures manufactured or painted prior to 1978 require an LBP? Yes, the Act includes lead-based paint hazards. A “LBP hazard” includes fixtures that may have been manufactured or painted prior to 1978, even if the property itself was built in 1978 or later. Consider antique doors, antique light fixtures or any other elements in the property that may have been created prior to 1978. If in doubt, disclose. When must LBP disclosures be made? The LBP disclosure of known information on lead-based paint and lead-based paint hazards before the binding date of contracts and leases. What if a LBP disclosure is not in compliance with the federal law? The Act carries huge fines for violations. Each violation currently carries a fine of $21,018.00! Each disclosure has multiple sections that need completion. Assume that investigators from the EPA are here in Georgia, spot checking for violations. Because they ARE here. What is Required and When? Before a Purchase Agreement or a Lease becomes binding, federal law requires the following:
Compliance is Easy If you represent the Seller of a property that falls into the Lead Based Paint disclosure requirement, the GAR Seller Representation (listing) forms now include a section for the disclosure. In item 7 of the listing, the Seller discloses to their Broker whether the dwelling, or any part of the dwelling, was constructed prior to 1978. The Seller also agrees to complete and provide the Broker with a signed Lead Based Paint Disclosure when the listing is signed. The listing agent should also sign the disclosure at (f). It should be attached to the listing as an exhibit. The Listing Agent can distribute it 2 ways: The best way is to upload it to FMLS /and GAMLS. The Exhibit can then be downloaded by the Buyer’s agent to sign before an offer is made. This method satisfies the requirement is that the LBP Exhibit be executed by both parties prior to a binding agreement. Of course, copies of the disclosure can also be placed in the property for agents and prospects to take. If you represent the Buyer, make it a habit to include "Protect Your Family From Lead In Your Home" GAR CB 04, along with Protect Yourself When Buying a House, with every Brokerage Agreement. Be sure to mark the box that it has been provided to the buyer in the Brochures section of the Buyer Brokerage Agreement, so you can prove that it was delivered. (And avoid a big fine.) Buyers often miss marking item (d) and an alternative at (e) on the LBP Disclosure. Item (d) confirms that the buyer has received the pamphlet and item (e) either waives an inspection or allows a 10 day period for an inspection. If these sections are not marked, the disclosure has not been completed; it will get kicked back and open to the fine by the Environmental Protection Agency. It’s the Law Sellers sometimes don’t want to sign the disclosure and push back. The LBT disclosure is mandatory. To confirm the seller’s and buyer’s responsibilities (and help you out with your sellers), this language is embedded at the top of the LBP Disclosure. UNDER FEDERAL LAW, THIS EXHIBIT MUST BE SIGNED BY THE SELLER AND BUYER, AND THE BUYER PROVIDED WITH A COPY OF THE LEAD-BASED PAINT BROCHURE PRIOR TO THE BUYER AND SELLER ENTERING INTO A BINDING AGREEMENT. THIS AGREEMENT MUST BE FILLED OUT FOR ALL HOUSING BUILT PRIOR TO 1978. August 4, 2023 Advertising includes ANY form of Media
The Broker MUST approve ALL advertising before it is posted. These are the Do’s! 1. Obtain written permission from the owner to advertise. 2. Obtain your Broker’s written approval on every advertisement before advertising. 3. Include the name of the Brokerage Firm that has the listing. 4. Include the Firm main telephone number of the Brokerage Firm of the listing. 5. Verify that no other name and phone number is larger in size than the name and phone number of the Firm. 6. Remove any expired listing from any Internet or social media posting within 30 days of listing expiration 7. Remove physical signage within 10 days of the expired listing. 8. Comply with local zoning regarding signage. 9. If an advertisement is published in error, take steps to correct it immediately. 10. Register a firm trade name(s), dba, with the Commission in order to advertise under a trade name, this includes trade names that are part of a logo. 11. To advertise another Firm’s listing, first obtain written permission from the listing Firm. 12. State the listing Firm’s name next to the property being advertised unless agreed otherwise by the listing Firm’s Broker. 13. For Internet advertising, include the name and telephone number of the Licensee's Firm on every viewable web page of a website, except when advertising in electronic messages of limited information or characters, a Licensee shall provide a direct link to a display that is in complies with the advertising Rule. 14. If any specific properties are advertised on the personal web sites of individual Licensees, the Brokerage Firm name and Firm phone number must be stated and displayed in a size greater or equal than that of the Licensee. 15. The Firm name and phone number must be on every viewable web page of a web site unless space limitations apply requiring the use of a direct Internet link to another web page displaying the required information. 16. To advertise multiple properties, state the Firm’s name adjacent to any specific properties being advertised. (It is only necessary to state the name of the Firm and its phone number one time in a block advertisement that includes several listings.) 17. Follow the direct supervision of the Broker holding your license (Associate Brokers, Salespersons, and Community Association Managers) for all advertising of real estate. These are the Don’ts 1. Do not state any other name or phone number more frequently or more prominently than the Brokerage Firm name and phone number. 2. Do not discriminate in advertising property, services, terms, conditions, etc. 3. Do not place a sign on a property without written permission. 4. Do not advertise on terms other than agreed upon in the listing agreement. 5. Do not mislead or misrepresent any property, terms, values, services, policies, etc. 6. Do not state the Licensee’s name more times than the Firm name. 7. Do not state the Licensee’s contact info in any size print larger than the Firm’s name and phone number. 8. Do not state only the direct dial phone number or mobile number of a Licensee. 9. Do not state the trade names or names of Licensees or groups of Licensees more frequently or prominently than that of the Firm name. This includes logos. 10. Do not post or publish any advertisement without first obtaining the Broker’s written approval. This article is only intended to be a summary and helpful guideline for Licensees regarding advertising real estate. The Licensee should always get approval from the Broker holding his/her license and can also reference Advertising Rule 520- 1-.09.and 43-40-25 Unfair Trade Practices for more specific details and guidance. Source: GREC Newsletter October 2022 Different rules apply in commercial sales and residential sales. If you are representing either the buyer or the seller of commercial property, you need to know these differences.
No Duty To Disclose Latent Defects The most important difference in residential and commercial sales and leases is that in commercial sales and lease agreements, there is no duty for the seller to disclose latent defects. As we all know, residential sellers do have a duty to disclose latent defects. If you are representing a buyer or a tenant of a commercial property, it is Buyer Beware! There may be structural problems, mold, termites, and HVAC issues, it doesn’t matter. The seller does not have to disclose. Even if the seller is directly asked whether the property has any latent defects, the seller does not have to answer. It is up to the buyer to fully inspect any item that is of concern to that buyer and that’s often the seller’s answer. The seller cannot lie. If the seller lies, that would be fraud in the inducement of a sale. The due diligence period in a commercial contract if generally much longer than in a residential contract. It is often a period of months to get all of the needed inspections. Of course, a seller may decide to disclose defects, even though not required to do so. Buyer beware! Get inspections throughout! A REALTOR® Has a Greater Duty to Disclose than the Seller of Commercial Property As REALTORS®, we owe a duty to disclose latent defects of which we have knowledge. Our duty is to disclose “All material adverse facts pertaining to the property that could not have been discovered by the buyer in a reasonable inspection.” Knowledge is the key. If a REALTOR® does not have knowledge of a latent defect, they cannot disclose what they do not know. That’s why listing agents of commercial properties often do not ask sellers whether there are any defects in the property. The Buyer Has the Duty to Discover. Caveat emptor fully applies in a commercial transaction. Buyers of commercial properties are assumed to be sophisticated and to know how to protect themselves. If the buyer intends to build, zoning, soils testing and environmental testing are important. If the buyer intends to operate a retail store, HVAC, utilities, electrical, mold, structure and more are important. Every buyer is unique and have unique needs to know. GAR Commercial Forms Package You have probably noticed that there is not a commercial disclosure form in the GAR Commercial Forms package. Of course, that is because there is no duty to disclose. There is also not a financing contingency. Normally, the buyer figures out their financing during due diligence. That isn’t to say there cannot be a financing contingency. In addition to the GAR forms, many commercial brokers use the Atlanta Commercial Board Forms. Seller Representations and Warranties A form of buyer protection often found in commercial contracts is the exhibit “Seller Representations and Warranties (GAR CF22).” To protect a buyer, it should be added to a commercial buyer’s offer and written to survive the closing of the transaction. The GAR contract includes the representations as surviving the closing. Using this form, the buyer can pick those representations that are important to that buyer. The issues most negotiated in commercial contracts are the representations and warranties and how long they last. Earnest Money In a commercial transaction, the closing attorney, a title company, seller’s agency or the buyer’s agency can hold earnest money just like in a residential transaction. The GAR Commercial Purchase and Sale Agreement allows disbursement of the earnest money in a disputed situation to be either by a reasonable interpretation by the Holder or by arbitration. On most larger deals, the parties generally will not want an agency making a reasonable interpretation of a dispute, so most will name title companies or closing attorneys as the Holder. If a resolution to an earnest money dispute in a large transaction can be reached, both attorneys and title companies will often interplead the funds into a court and step away. Other items of note:
A change was made to the Temporary Occupancy Agreement (TOA) in the June 1, 2023 contract forms. The change adds language in P.11 that attorney’s fees would be owed by the seller if the seller fails to vacate the premises as agreed and the new owner has additional costs or loses a tenant or a new sale. This is in addition to the right to attorney’s fees in P.12 if the situation goes to litigation. It gives the new owner a better bargaining position with the holdover seller without going to litigation.
Buyer Access to the Property The TOA allows the new owner to enter the premises to “inspect, repair and maintain” (P.9) as well as to “inspect, examine, survey, meet contractors and prepare for Buyer occupancy of Property.” (P.10) Some new owners do abuse these rights. To protect seller clients against abuse, consider adding the following language in the Special Stipulations on the TOA:
Holdover Daily Rent The Seller sometimes needs to be encouraged to vacate the property on time. If the buyer has to file for an eviction, it takes time. Therefore, we recommend a daily holdover rent cost that gets the Seller to leave. Depending on the situation, a daily fee of $300, $500 or even $1,000 is not unreasonable. You don’t want to have a cost that is cheaper than a hotel and storage. Rent for the Agreed Period of Occupancy. Note that there is not a place in the GAR TOA for a rental fee during the agreed period of occupancy. If a fee is negotiated, be certain that its timing and method of payment is consistent with the terms of the buyer’s mortgage. An alternative way for a seller to pay a negotiated fee is to lower the price of the property to the buyer. It is common for the seller to remain in the property for no charge at all as a negotiated term of the sale. RE/MAX Agent Responsibilities
Please review the following agent responsibilities for rental and property management situations. Additional detail can be found in the RMAA Policy and Procedures Manual. Property Management Responsibilities Any Associate dealing in property management shall:
Property Management CE Courses
Properties Owned and Managed by a RMAA agent or associate broker.
Rental Applications
Move-In, Move-Out Inspection Form
Security Deposits Security Deposits should be held by the landlord unless the Company is under a Property Management Agreement with the Landlord. The appropriate GAR form should be used in any lease where the Company is the Holder of the security deposit. In the rare situations where the Company is to be identified as the Holder of the Security Deposit while NOT managing the property, the Associate must:
Lease Purchase Agreements Not Recommended Broker advises against the use of Lease Purchases in relation to a real estate transaction. In situations where a tenant wants to establish a right to purchase rented property, it is best to execute a Residential Lease and an Option Agreement. Broker Corner July 14, 2023 We often see special stipulations submitted by a buyer regarding low appraisals . A typical special stipulation sets a high price that a buyer will pay, but not a low price that the seller will accept. Listing agents can protect their seller against being forced to sell based on a very low appraisal. Consider the following scenario.
A property is under contract for $735,000 with the following special stipulation: “Buyer agrees to pay $5,000 over the appraised price if the property does not appraise for the offer price.” The property does not appraise for the offer price and instead appraises at $660,000. Does the Seller have to sell the property and at what price? Because a special stipulation controls over previous inconsistent content in a contract, the special stipulation changes the price that the buyer pays. The appraised price is $660,000, so the seller has to sell at $665,000, $70,000 less than the original contract price. If the seller refuses to sell at $665,000 and goes to court, a court would likely agree with $665,000. To protect your seller, a better special stipulation should include both a low price a seller will accept and a high price that a buyer will pay. If you are representing the seller, counter with this language to set a low price: Buyer agrees to purchase the property for $5,000 over the appraised price. Notwithstanding the above, the purchase price shall not be more than $____________ nor less than $_____________. Source: Weissman Academy, Seth Weissman, Secrets of Safeguarding You and Your Seller. |
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