Legal Update and Contract Addenda

Comprehensive Addenda

Pre and Post Occupancy If a buyer is taking possession of the property before closing, be sure to have the Pre Closing Occupancy by Buyer Rider completed.   The lease must state that the Paragraph 11 and Paragraph 12 no longer applicable and the Buyer accepts property in existing condition…..  A lease must be prepared within 10 days of effective date.  Even if the Buyer is going to be in the home for 1 week prior to closing, a lease is still required.  This lease should be prepared by an attorney so that these considerations are included and the seller is protected.  CR-5 – Pre-Closing Occupancy by Buyer Rider T (Rev 09_15) If a seller is remaining in the property after closing, a Post closing Occupancy by Seller Rider must be completed.  This rider states that the lease shall provide that Seller’s maintenance obligation under Paragraph 11 shall continue after closing until possession is delivered to the buyer, HOWEVER Seller’s repair, replacement and treatment and remedy in paragraph 12 shall not be extend beyond closing.  A lease must be executed within 10 days prior to closing and accepted by all parties.  A lease governing the occupancy must be executed even if the Seller is going to be in the home for a short period of time.  Once again this lease should be prepared by an attorney so that these special conditions are included and all parties are protected.  CR-5 – Post-Closing Occupancy by Seller Rider U (Rev 09_15) For either occupancy, the Rider must be included and noted in the contract as such.   It is not acceptable to write in any occupancy terms on the sales contract.   In both Riders, there is an area where the cost of lease preparation is identified.  Be sure to use the Property Management attorney lease. Paperwork is the only way we can protect our clients and ourselves.  Verbal agreements, and assumptions in these occupancy situations are far to precarious.  Get it in writing and get it done by a professional to protect all of us.

Appraisal Contingency Is the Finance Contingency Enough?

Escrow Dispute When a transaction falls through a Release and Cancellation is signed by all parties The allocation of Escrow funds is on the document and agreed to by all parties If all parties are not in agreement, then we have an Escrow Dispute It is irrelevant if the party not in agreement is incorrect based on your interpretation of the terms of the contract Read that last bullet again

Escrow Dispute It is irrelevant if the party not in agreement is incorrect based on your interpretation of the terms of the contract A Seller CAN put their home back on the market if there is an escrow dispute If there is nothing in writing that the Purchaser has requested to cancel the contract, there could be ramifications for the Seller The current Title Company may not be willing to close the new transaction however that doesn’t mean that another title company will not

Notice to DBPR that there is Conflicting Demands w/in 15 days Escrow Dispute Broker Holding Escrow Notice to DBPR that there is Conflicting Demands w/in 15 days Governed by DBPR: Broker Escrow Disbursement Order Requested OR Parties Mediate OR Parties Arbitrate w/ in 30 days If the method above is not successful, a different settlement procedure must be chosen and DBPR notified Other Options not Governed by DBPR: Lawsuit, Interpleader

Interpleader to be filed with the Clerk of Courts Escrow Dispute Title Holding Escrow Interpleader to be filed with the Clerk of Courts Once title has been notified that there is a dispute over the earnest money deposit, they have the right to interplead the funds with the Clerk of the Courts for Circuit Court in your jurisdiction. Most Title Companies will send out a letter to all parties involved, putting them on notice that if the dispute is not resolved on their own within 14-days, we will turn the matter over to our outside counsel to file the interpleader action. Of course if the parties need more than 14-days to resolve the dispute, we will hold off filing suit for a reasonable period. The costs of filing suit ($451), service of process (approximately $200) and our attorney’s reasonable fees ($250-$500) are deducted from the disputed funds.  As you can see, the costs involved can easily exceed $1000. After the interpleader action is filed, the Title Company is dismissed from the litigation and the Buyer and Seller may continue to litigate over the funds.  Depending on how busy the court’s docket is, the litigation can take as long as 6 months to resolve.

Loan Commitment Deadline and Loan Types We are seeing a lot of contracts where the closing date has been extended, however there were other contingency time periods that were not extended.  This has caused issues for our clients and put escrow at jeopardy. Whenever you need to extend a closing date, be sure to consider the other contingency due dates, particularly the financing commitment due date.  Just because you amend a contract to extend the closing date, the finance commitment is still at the original due date.  If the loan commitment time frame needs extended BE SURE to do this at the same time.   The last thing we want to do is put the Buyer’s escrow at risk. This also goes for revising the type of loan. Whenever a loan type changes an amendment needs to be completed because the loan type is a term of the contract.  At that point, consider that you may also need to extend the time for closing and the finance commitment due date.   If you are moving from conventional to FHA or VA to FHA, etc be sure to include VA / FHA Amendment as well. Florida Realtors has a Contract Extension Addendum that spells out most of the contingencies.   This may be a form you want to consider using because it reminds you of all of the potential consistency time periods that may need to be extended.  Extension Addendum to Contract (EA-2)

Extension Addendum

As/Is Any repairs negotiated - add inspection language In the addendum for agreed upon repairs in an as is transaction be sure to include the following: Specify the exact repair To be done by who (licensed repair contractor, etc) Contract contingent on repair completed by ____ date and satisfactory re-inspection by _______ date Receipts Required

Rentals Several offices locally are enduring lawsuits related to rentals There are HUD employee ( plants ) all over looking for errors and potential issues When listing Rentals be sure to use or rental procedures – which will be updated again this week Mandatory Class for Rentals – August 13th

Extensions are not the right of either party Extensions are not a given and must be agreed upon by both parties - This is a point of negotiation If you are working with a Seller and the Buyer wishes to extend, it is the right of the Seller to request additional deposit, and can even make it non refundable Regardless of who you are working with, do not set the expectation that any extension of any term is a given. Neither party have to agree to any change in the contract terms. Unless it is a trid situation

Multiple Offers When representing a Seller and multiple offers are received, life is good.  It is a great moment for our seller as well as for us.  The way multiple offers are handled can vary greatly and it is up to the Agent representing the Seller to follow their instructions.  How you handle the multiple offer situation is dictated by the Seller. In most cases, however the seller will look to us for guidance as to how to handle the situation.  This is a moment when many agents can be perceived as playing dirty.  How multiple offers are handled is specific to that Seller. That being said, I like to be as high-minded as possible, and  my preferred method is to offer notice to all of the Buyers’ agents simultaneously as follows: “Seller is in receipt of multiple offers on this property and hereby extends the following offer to Buyer:  Buyer’s offer will stand as presented unless written notification is received before _____________, that Buyer wishes to modify any terms of said offer.  This modification may take the form of a new contract superseding the original submission or a written or electronically transmitted notification of modified terms from the Buyer or Buyer’s agent.”  

Escalation Clause When making offers on a home, you can not be sure how the Seller’s agent will handle a multiple offer situation.  There may be times that the Seller will just pick the best offer that is presented and not ask for highest and best. It is important that you advise your Buyers that this can happen. You should not assume that every Seller will ask for highest and best. If the Seller does ask for Highest and Best you are going to want to consult with your buyer.  If the buyer is willing to go to a maximum offer of X, but doesn’t want to overbid if not necessary, consider this as a counter: “In the event that seller receives multiple offers, Buyer hereby agrees to increase price offered in this contract to $_____ over the highest offer otherwise acceptable to seller with a maximum price not to exceed $_____.  Seller agrees to provide documentation of competing offers with names and addresses redacted.”

IDX Display on Facebook You can put a link to an IDX search on your social media You can not put a link to the Flex search that you create for buyers on your social media All links on social media for searches must use IDX so that all of the IDX wording and disclosures are included Be sure that no matter what you post you full name and Brokerage name is in the post If you post on your Business page and share to personal page you are fine

Facebook posts Sharing another agent’s listing. Retweeting or sharing another agent’s listing on your own social media timeline could constitute an improper advertisement of their listing.   Straight up pressing the Share Button is a violation.   Citing ” listing courtesy of ” is not permission to advertise the listing.  This also commonly happens when agents visit an open house or broker open and, after leaving, post about it on their feed… not allowed without permission.  It is also unacceptable for an agent to share an IDX search on their site.  It is imperative that you have permission to do any of this advertising.   You cannot engage in any practice that is inconsistent with exclusive- representation agreements that practitioners have with their clients, states Article 16. Get permission — before sharing anything about their listing online. In our RE/MAX Solutions Social Media policy, it is stated that all of our agents have permission to share our RE/MAX Solutions Brokerage listings.  Feel free to share those and bring buyers to our office listings.  You do not need specific permission per our policy.

Withdrawn Listings What does it mean when a listing is  showing withdrawn in MLS? What it means is that there is still an open Listing Agreement with a Brokerage, however the seller has requested that the home be removed from the MLS for a certain period of time.  In this situation you may not solicit a listing on this property. What should you do if someone approaches you and says that they cancelled their listing and want you to re-list it? Get a fully executed copy of the cancelled listing agreement.  Send it to the board so that the status is changed in MLS.     The client may think they cancelled the agreement via a phone call to the agent or broker, however if they did not sign a cancellation addendum and have it counter signed by Broker it is not technically cancelled.  If they were to sign a listing agreement with you (thinking it is cancelled), they have just obligated themselves to pay two commissions on the sale of their home.