1. Fiduciary Duties During Offers and Counteroffers Earnest Money Laws

2. Class Guidelines Turn off cell phones – PDAs, etc Honor break time

3. Objectives 1. Analyze earnest money red flags for collection, deposit and release.
2. Identify “red flags” of offers and counteroffers.
3. Analyze fiduciary duties during offers and counter offers.

4. 1. Is earnest money necessary to create a binding contract
1. Is earnest money necessary to create a binding contract? _____Yes _____No No

5. 2. Does your broker allow you to accept cash for earnest money
2. Does your broker allow you to accept cash for earnest money? _____Yes _____No
Recommended… Don’t accept cash. It could be counterfeit.

6. 3. Ohio law requires earnest money to be deposited within 24 hours of acceptance of the sales contract _____Yes _____No
_____No

7. Upon receipt? Upon execution of an executory contract?
When does your contract say the earnest money must be deposited?
Upon receipt? Upon execution of an executory contract?

8. Agent failed to deposit an earnest money deposit into the brokerage trust account within a reasonable time.

9. Fine - $400 3 hours CE – Core Law class

10. 4. The buyers tell the agent that they are willing to write an earnest money check but “it won’t be good till the end of the month.” What should the agent do?

11. 1301:5-5-08 Handling of trust account funds.
(A) No licensee shall accept any note, nonnegotiable instrument or anything of value not readily negotiable in a real estate transaction without the knowledge and written consent of the owner of the real estate.

12. NSF
If the earnest money check is returned for Non Sufficient Funds NOTIFY the seller immediately!

13. Agent signed the receipt in a purchase agreement for an earnest money deposit, which in fact
had NOT been received.

14. Fine - $500 Completion – 10 Hour Broker Post Licensure Class
Suspended – 10 days
Fine - $500 Completion – 10 Hour Broker Post Licensure Class

15. Agent named a false consideration in a document when she acknowledged receipt of earnest money in the purchase contract, on a particular date, when the money was NOT collected on that date.

16. Suspended – 5 days Fine - $500 10 Post Licensure Sales Class

17. Do whatever your contract stipulates!
5. Which broker is to “hold” the earnest money?
Do whatever your contract stipulates!

18. 6. I am a commercial agent working with a Michigan commercial broker
6. I am a commercial agent working with a Michigan commercial broker If the buyer’s offer is accepted, can the earnest money be placed in the trust account in Michigan?

19. 4735.022 Nonresident commercial brokers and salespersons.
(6) Deposits all escrow funds, security deposits, and other money received by either the out-of-state commercial broker or Ohio broker described in division (A)(1) of this section in trust or special accounts maintained by the Ohio broker;

20. FYI
If the buyer is purchasing a Bank Owned Property the bank may keep the earnest money. Read the contract and disclose to buyer.

21. FYI
If the buyer is purchasing new construction, be sure the buyer understands that the builder may spend the earnest money.

22. ALWAYS Collect earnest money upon acceptance

23. ALWAYS Let the seller or seller’s agent know that the buyer has paid the earnest money upon acceptance.

24. ALWAYS Remit to broker within a reasonable time after it is collected.

25. What are the 4 circumstances where a broker may release money from the trust account?

26. 1. Transaction closes;
2. The parties provide signed, written instructions specifying how to disburse the earnest money; 3. A final court order specifies to whom the earnest money is to be awarded; 4. The earnest money becomes unclaimed funds.

27. 1. Transaction closes;
2. The parties provide signed, written instructions specifying how to disburse the earnest money; 3. A final court order specifies to whom the earnest money is to be awarded; 4. The earnest money becomes unclaimed funds.

28. ORC 4735.24 Earnest Money Update PFD is found at the ODRE website.

29. NEVER Force parties to sign a release which releases the broker from liability in order to get their earnest money back!

30. Proper Legal Form Sales contracts will vary
from broker to broker and Board to Board. Use updated contracts!

31. Be sure to read the contract BEFORE discussing with the buyer/seller.

32. Bank Owned Property Be sure to read carefully!

33. Writing contingencies is a practice of law!
An agent wrote a contract and the contingency read,
“Mother-in-law to inspect.”
Took 3 years to settle the case.

34. Review Your Contract Contingency A contingency means one party or the other MUST do something. The party required to do something must perform the action in a timely manner.

35. Review Your Contract Contingency 1. What is going to happen?
2. When is it going to happen? Timelines in contingencies must be specific.

36. Review Your Contract Contingency 3. What are the possible outcomes?
4. What is the status of the contract and the earnest money based on the outcome?

37. If a contingency is not met,
don’t assume that the contract will be voided and the earnest money returned. The outcome must be included.

38. Suggest that your clients have their attorney review the document before they sign it.

39. Timing Issues
Acceptance of offer Buyer to secure financing Inspections
Contingencies to be fulfilled Closing Possession

40. Make a checklist for each transaction to assure that the contingencies are being met in a timely manner.

41. Are the buyers financially qualified to purchase my property?
Seller wants to know…
Are the buyers financially qualified to purchase my property?

42. Buyer wants to know… Are these parties authorized to sell?

43. An offer is NOT a contract
An offer is NOT a contract! The act of presenting something for acceptance.

44. Offers may be… Withdrawn Countered Assigned Ignored Accepted

45. Offers will terminate upon the death of one of the parties.
Sales contracts are binding upon the death of one of the parties.
If a party in a contract passes, it doesn’t automatically terminate a sales contract. For example, if the buyer dies, the estate may or may not financially qualify to purchase the property. If the buyer’s estate does not qualify to purchase the property, the contract would be terminated by the financing contingency. Advise the administrator to see an attorney.

46. Remember… if the agent dies we send flowers!
Listing Contract is still binding between the brokerage and the owner.

47. Offer and Acceptance Meeting of the Minds Mutual Assent

48. Must Pass the Mirror Test
Buyers
Seller/s
In cartoons there is a bubble above a person’s head to show what they are thinking or saying. The buyers and sellers should be thinking the same things. Their thoughts should mirror the other party’s thoughts.
Must Pass the Mirror Test

49. “I will take $150,000 for my property.”
Seller/s
Buyers
“I will take $150,000 for my property.”
“I will pay $135,000.”
No Deal

50. “The ceiling fans are mine! ” “I am taking the ceiling fans.”
Seller/s
Buyer/s
“The ceiling fans are mine! ”
“I am taking the ceiling fans.”
All terms must be agreed upon.

51. Seller/s
Buyer/s
Especially regarding Fixtures - Personal property Boundary lines – Closing date Possession date – Contingencies to be met

52. The seller/s decide which offer they will review first.
Which offer does the seller have to review first?
Offer 4

53. Does the seller have to accept a full list price offer?
No. A seller is NOT required to accept a full list price offer on the property. The listing agreement may stipulate that a commission is due. The broker would make the decision to pursue the payment of the commission.
Offer 2
Offer 3
Does the seller have to accept a full list price offer?
Offer 4

54. If the seller wants to counteroffer, what steps should he/she take?
1. Put the counteroffer in writing.
2. Have his/her agent deliver it to the buyer
or buyer’s agent in a timely manner.
Offer 2
Offer 3
If the seller wants to counteroffer,
what steps should he/she take?
Offer 4

55. Does the seller have to sign a rejection?
Offer 1
No. A rejection does not have to be in writing.
It is good business practice to ask the seller to sign a rejection.
Offer 2
Offer 3
Does the seller have to sign a rejection?
Offer 4

56. All terms must meet the mirror test!
Buyers
Seller/s
Bought! Exact Terms
Sold! Exact Terms
All terms must meet the mirror test!

57. Seller - I will accept your offer!
Delivery and Acceptance

58. Mr. Buyer’s signature and date Mrs. Buyer’s signature and date
Offer is accepted as soon as the seller/s sign!
Mr. Buyer’s signature and date Mrs. Buyer’s signature and date
Mr. Seller’s signature and date Mrs. Seller’s signature and date

59. Delivery of the acceptance to the buyer What does the contract stipulate?

60. Typically the agent will call the buyer
Typically the agent will call the buyer. “Congratulations your offer has been accepted.”

61. Even if the message is left on a voicemail for the buyer, it constitutes acceptance.

62. ORC
(2) Accept delivery of and present any purchase offer to the seller in a timely manner, even if the property is subject to a contract of sale, lease, or letter of intent to lease;

63. Offers CANNOT… Be accepted over the phone!

64. Acceptance must be in writing!

65. Fannie Mae and other lenders may call the agent and verbally accept an offer. Please inform the buyer that a verbal acceptance doesn’t mean they have a purchase contract. The lender can change their mind.

67. Agent failed to exercise reasonable skill and care in representing her clients, the buyers, when she failed to insert a contingency in the purchase offer that the buyer’s offer was contingent upon the sale of buyers’ current home.

68. She failed to account for or remit money coming into her possession which belonged to the buyers when she
failed to deposit the earnest money into the brokerage trust account upon the seller’s acceptance of the offer.

69. Fine - $300 3 hours CE – Ethics class

70. property management trust account.
Agent failed to provide an accounting to two owners, on a regular basis, for two properties he managed. He also failed to maintain a separate ledger sheet for those two properties. Finally, he failed to maintain a
property management trust account.

71. Fine - $1,000 3 hours CE – Property Mgt. Classes

72. To Buyers During Offers and Counteroffers
Fiduciary Duties
To Sellers
To Buyers During Offers and Counteroffers
As a Dual Agent

73. “Owning a home is a keystone of wealth
“Owning a home is a keystone of wealth.. both financial affluence and emotional security.” Suze Orman

74. Save this template as a presentation (.ppt file) on your computer.
Using this PowerPoint break timer
This PowerPoint slide uses images, custom animation, and timing to provide a countdown timer that you can use in any presentation. When you open the template, you’ll notice that the timer is set at 00:00. However, when you start the slide show, the timer will start at the correct time and count down by 1-minute intervals until it gets to 1 minute. At that point, it will count down in two 30-seconds intervals to 00:00.
To insert this slide into your presentation
Save this template as a presentation (.ppt file) on your computer.
Open the presentation that will contain the timer.
On the Slides tab, place your insertion point after the slide that will precede the timer. (Make sure you don't select a slide. Your insertion point should be between the slides.)
On the Insert menu, click Slides from Files.
In the Slide Finder dialog box, click the Find Presentation tab.
Click Browse, locate and select the timer presentation, and then click Open.
In the Slides from Files dialog box, select the timer slide.
Select the Keep source formatting check box. If you do not select this check box, the copied slide will inherit the design of the slide that precedes it in the presentation.
Click Insert.
Click Close.