Monday, July 20, 2009

Respond in Haste, Repent at Leisure: Don't Hastily Return the Cincinnati Area Board of Realtors, Inc.'s Contract to Purchase































































(c) 2009 F. Bruce Abel



Don't try this on the buyer's offer on your home!


Don't counteroffer without clicking on the above pages and inserting the wording that you want set forth below.












You've been waiting and waiting for an offer on your home. You finally get one. It comes on the Cincinnati Area Board of Realtors, Inc. form -- a "standard contract" form.










Are you ready with a similar "form" of a counter-offer? Of course not.






The Good:


First thing though, you have the beginnings of a deal in writing! So, no matter what, you have something important in hand. With a signature!




Now you must quickly cross-out and initial and submit amendments on your own page. You must prepare a counter-offer.




Your realtor is pressuring you to respond quickly using the existing form.




Your resulting counter-offer is crucial. If done right, following your counter-offer, the final contract assures that your deal will go through to closing without grief and anxiety. If not done right the wait until closing will seem like an eternity.







Your realtor is short as an adviser on the counter-offer.

But, because already you anticipate a 6% commission, you feel you have no more money to waste on a lawyer.





As another Ohio attorney has written on his firm's blog:



* * *



"[T]he [residential] real estate attorney ... [is] a clothing store tailor. If the ["]off the rack ["] suit (contract form) does not fit, [he] alter[s] it.



Inapplicable clauses can be crossed out and initialed by the parties on the form. Small insertions can be written in and initialed, and





large insertions can be added by way of addendum." Stephen D. Richman, Esq., Columbus, Ohio




Having recently gone through the process of selling our older Victorian home and dealing with the Cincinnati Area Board of Realtors, Inc. “Contract to Purchase,”







I, (a lawyer),

opine

you will find yourself, in your rush to do a "counter-offer," misperceiving the nature of the contract, unnecessarily lowering your sales price and giving the buyer a free option for the duration of the contract period.

The reason for the problem: The Cincinnati Area Board of Realtors, Inc. Contract to Purchase's has two related failures, which you have to make a slight jump of logic and explanation, to understand:


(1) a failure to define “material defect,”(in Par.14 of the Contract to Purchase) giving the buyer, (under that Par.14), when you read it carefully, a free option to "walk away" on the deal using the "inspection" as the excuse, and










(2) a concommitant flaw in the “earnest money” provision (Par.4)failing to release the deposit to the seller when the buyer just walks away, giving him the "option" described above.



Your realization of the problem I describe will allow you to bargain effectively to save thousands of dollars. In othere words if you are reading this blog you already will save yourself thousands of dollars in the selling of an older home.

Readers who do not read this blog most likely will (unknowingly) accept the status quo and give away the free option to the buyer: will immediately start negotiating against themselves by lowering their asking price, thinking they are working with two-way contracts that are valid.

One thing you must do is:

Read your offer at leisure.




How do this? Get the form from your realtor now, before the offer comes in. Or, for the one in effect in 2008, click on the pages copied at the beginning of this blog and print them out.




Then do not negotiate the sales price down on the same Cincinnati Area Board of Realtors, Inc Contract to Purchase until you have submitted your strikeouts and separate Addendum Sheet, pursuant to advice from an attorney.

Your realtor views the Standard Form Contract as a ticket to a sale! He will not/cannot explain the flaws I describe until the buyer wants to walk away. Then he will say, "Oh yeah, I forgot to tell you, he can walk away under the wording of the contract."



So what if most deals go through with the flawed "contract" described, unaltered, just like 1/2 the time the roulette wheel comes up red when you've bet on red.

If the written offer comes, as is likely, during the peak showing season, and you have not adjusted the Cincinnati Area Board of Realtors, Inc. Contract to Purchase contract,



















you will have wasted that period without getting paid for the option by the buyer if the deal does not close.

Under the Cincinnati Area Board of Realtors, Inc. "Contract to Purchase" deposits of the buyer made when his offer comes in will only be paid to the seller by joint agreement of the buyer and seller, usually after litigation, and it is too expensive to litigate.

Having said the above, it is true that in many cases ignorance is bliss and the involvement of a lawyer itself could be a hinderance, or a waste of money in the 20% of cases where a flawed contract process is neutral (i.e. you have an unsophisticated buyer who does not see that he has a free option whether to buy the property or not) which exists at the encouragement of your realtor. And the cost of a lawyer will range from $300 to $600.





By the way a rising market masks the problems I describe above, so your prior experience of successfully closing on a sale of your home in the used-to-be-normal rising market does not apply.

If you are a buyer in this market, thank the Cincinnati Area Board of Realtors, Inc. and take advantage of the free option given to you by the Cincinnati Area Board of Realtors, Inc.’s Contract to Purchase!

Timewise, when you get your first offer, is it realistic or even possible to send the offer immediately to your attorney? No, especially if you have no lawyer on call to begin with. Even then, is it realistic in light of the short deadline contained or implicit in most offers? No.

Other offers could come in but in fact realtors stay away from them.

Here's one of my early stabs at "correcting" the real estate inspection contingency which is better but does not really do the job (remember I am not disclosing in this blog my best solution):






You may certainly cut and paste this into your counter-offer:





14. REAL ESTATE INSPECTION CONTINGENCY: For purposes of this clause, time is of the essence. Buyer has the option to have the Real Estate inspected at Buyer’s expense. If the buyer obtains an inspection of the Real Estate, on or before twelve (12) calendar days (Inspection Period) following written Contract acceptance, and if the inspection reveals a material defect(s) and Buyer wants to request corrections, Buyer shall deliver written notification of the material defect(s) along with the relevant portion(s) of the inspection report(s) and the corrections desired, to Seller within the Inspection Period. Upon delivery of the notice, Buyer and Seller shall have five (5) calendar days (Settlement Period) to negotiate to reach a written agreement in settlement of the condition of the Real Estate. If settlement is not reached within the Settlement Period, then this Contract shall be null and void. For purposes of this paragraph, "material defects" do not include minor, routine maintenance items nor functions unique to houses of such an age.
















Another thing that could be tried for an older home is "as is" language for Par. 14 and Par. 16, rather than "material defect." Par. 14 merely could be rewritten to say "This property is being bought "as is" as it is an old Victorian house.















Another draft, better than the Cincinnati Area Board of Realtors, Inc. provision:






STANDARD SELLER’S ADDENDUM










This Seller’s Addendum is attached to and is a part of the Offer. The Seller’s Addendum will supercede the Sales Contract where inconsistent. The following terms and conditions are accepted and incorporated into the Sales Contract, subject to the following: Paragraphs in the Sales Contract (offer) which require initials by all parties, but are not initialed by all parties, are excluded from the final agreement.In ¶14 the Buyer’s Inspection Report must be the report in full, with pictures, signature page of the expert, and vitae of the expert. It must include the address and telephone number of the expert and his company, including zip code.In ¶16 the Buyer’s Inspection Report must be the report in full, with pictures, signature page of the expert, and vitae of the expert. It must include the address and telephone number of the expert and his company, including zip code.Any radon test must be done on the first floor of the house since the basement is not finished and is uninhabitable.Delivery of notice to the buyer must be direct, not through the Realtor, and can be by email or fax (babel2@fuse.net or 513 772 7991).In ¶ 16 if the buyer and seller cannot agree regarding the radon issue the parties will split the cost to remediate rather than the entire contract made void.









Thursday, July 10, 2008







Posted by f bruce abel at 9:33 AM 0 comments Links to this post
Labels:
Friday, June 6, 2008






















































Excellent Site for Those Selling a Home
http://mauilaw.com/links.html1129 Lower Main StWailuku, HI 96793(808) 242-7222Contact This AttorneyWriting The Sale ContractBy Poelman & Langa, AttorneysSo you have successfully marketed your home on your own. You have a buyer at your price.What now?First thing, put the deal in writing and get his signature on the contract. That contract is crucial. It fixes your rights and obligations and if done right, it assures that your deal will go through to closing without grief and anxiety. "Whoa there," you say, "I'm not that expert in writing contracts."Never fear, that's what your lawyer is for. His job is to guide you through the thickets of contract law, statutory disclosure requirements, and other arcane things that no normal person wants to be familiar with.Most attorneys prepare real estate contracts on an hourly or a flat fee basis. You should avoid an attorney who expects a real estate commission, if you are the one who actually markets the property.Often, the quickest and easiest way to get your contract in writing is to take your buyer by the hand and take him to your lawyer's office, where you can get help in the writing and signing. Many of our clients find this the most efficient and convenient way to nail down a sale. Sometimes, though, it's not possible, or you're not conveniently near your lawyer's office.For those occasions it is useful to have some blank forms on hand. That's what the realtors do, but their forms, unfortunately, are an abomination. They call their form the DROA, but might better call it the Quagmire.The realtors' form was written by their lawyers to protect the realtors, not their clients. Many years ago the realtors had a fairly good form that was two sides of a single page. It was handy and did work pretty well for buyers and sellers. Some lawyers still maintain a supply of those old forms for use by their clients, and if you can get copies of that form you may find it adequate, with some obvious modifications.There are also forms available at stores like Office Max that may do the job with some minor modifications, and most lawyers have developed forms of their own that they can give their clients for signing up buyers. A copy of a real estate contract form that is legal in Hawaii can be found on this web site. Like all other forms, this one, too, will normally need modifications to fit the transaction.But filling in the blanks is not always as easy as it sounds. Your lawyer is always going to be more comfortable with a process in which he can see what you are going to sign before you sign it.In our next article we will discuss the statutory disclosure requirements that sometimes are a trap for the unwary.Of course, the information in this article is general only. If you have more questions, we suggest you consult an attorney that practices real estate law.©Poelman & Langa (808) 242-7222, 1129 E. Lower Main Street, #104, Wailuku, Maui, HI 96793Sanford J. Langa, born in Puunene, Maui, graduated cum laude from Harvard and from the University of California at Berkeley law school. He has maintained his law practice in Wailuku since 1959.Lloyd A. Poelman, born in Richland, Washington, graduated magna cum laude from the University of Utah and from Brigham Young University law school. He has been practicing in Hawaii since 1991.Writing the Sale ContractReal Estate Contract FormTake My Hand A Helping Hand in Escrow Do You Need a Survey?The Problem of DisclosureAppraisalsBack to Real Property Page(more to come)- Back to our Home Page- About the Firm- About Members of the Firm- Links to Legal Briefs, and other interesting things
Posted by f bruce abel at 12:52 PM 0 comments Links to this post









Another excellent blog site on this topic:











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IF THE FORM DOES NOT FIT, YOU MUST ALTER IT- #1 (Watch Your Language with "Off the Rack" Purchase and Sale Agreements) Posted by Stephen D. Richman, Esq. 6:44 PM , 0 comments »
Monday, April 7, 2008
The purchase/sale agreement is probably the most misunderstood, but most important document utilized in a real estate transaction. Some of the unwary mistakenly refer to the agreement as merely an offer, not understanding that if signed by (accepted by) the seller, it becomes a binding contract. Others, usually to justify not obtaining legal advice, fool themselves into believing that they only signed a standard form with unenforceable “boilerplate” (one-sided, protective) language. Whether the agreement is contained on a “standard,” printed form, is replete with boilerplate, or is entitled “offer to buy real estate and acceptance,” once signed by both parties, it will be held to be a binding, enforceable agreement to purchase/sell real estate with rights and obligations of the parties arising thereto (absent contract law-type defenses – i.e. no offer, acceptance, consideration; illegal; contrary to public policy).It is true that title to a property cannot transfer without a deed and a closing. The closing however, merely carries out the provisions of the agreement. The agreement is of paramount importance as it defines the interest to be conveyed by deed, and determines the rights of the parties.There are many different types of purchase/sale agreement forms is use. Real estate broker or legal stationary company “standard” forms are used in most residential and simple commercial deals. The inherent problem is that there is little that is standard about a real estate transaction. Every purchase/sale is unique since there are different types of property, different buyers and sellers (with different levels of motivation and sophistication) and different potential liability in each transaction. This author, however, is not advocating abolishment of standard forms. Obviously, the attorney looking to change custom, and prepare ten page contracts for small, “brokered” single family house deals will not generate a lot of business.The real estate attorney’s optimal role can be analogized to that of a clothing store tailor. If the off the rack suit (contract form) does not fit, you must alter it. Inapplicable clauses can be crossed out and initialed by the parties on the form. Small insertions can be written in and initialed, and large insertions can be added by way of addendum.One clause we rarely see in residential form contracts is the “Drop Dead Date” clause. The danger in not putting a deadline for both parties to sign (“Drop Dead Date”) is that the contract is not over until it’s over. For example, let’s say the buyer signs a purchase agreement for House #1 and sends it to the seller for signing. The seller takes two weeks to decide if it wants to accept the deal, and then signs the contract. If the buyer signs an agreement to buy House #2, one week after the buyer signed the contract for House #1, (figuring the seller of House #1’s silence meant it was not going to accept buyer’s low offer), the buyer must buy House #1, as well as House #2. The buyer can always send a notice to a seller, that it is terminating its offer (provided the notice is received by seller, prior to seller signing/accepting buyer’s offer), but buyers often forget to do that. An automatic Drop Dead Date clause, declaring the agreement void if not signed by seller within a week of buyer’s signing, would easily have prevented the problem exemplified above.In commercial transactions, standard forms can rarely be relied upon, since the commercial transaction usually involves more dollars and more complexities. The problem we see most often with commercial contracts, is the over reliance on originally drafted forms for previous, “similar” deals, that are in reality, different in some way. For example, if the contract for seller’s “new deal” does not contain the clause: “subject to rights of tenants in possession”, because there were no tenants in seller’s previous, “similar deal”, the Seller would be in default, unless its Tenant voluntarily leaves the property before closing. This situation is more of a problem when a developer buys a property and wants to develop it for a new use, free from existing tenants.Please note that brokers crossing out contract provisions and drafting new language may be crossing the line into the “unauthorized practice of law.” Contract modification is best effected with advice of counsel.Finally, it is important to remind buyers and sellers to consult an attorney before the purchase agreement is signed. The disgruntled suit buyer can insist that the seller re-alter or accept the return of an ill-fitted suit. The disgruntled property buyer (or seller) however, has no legal grounds to insist that the other party accept changes to the contract after it is signed.AUTHOR”S NOTE: In the “Watch Your Language” section of our Blog, we plan to:1) Discuss, in general, language issues with various real estate forms and documents (The “If the form does not fit, you must alter it” Series). For example, this week we discussed the need to alter “standard” Purchase and Sale Agreement forms so they are tailor made for each unique real estate transaction.2) Illustrate how specific wording and grammar (even placement of a comma) can change the meaning of a document, contrary to what one party intended, often with costly results (The “Say what you mean, precisely, or a judge will decide what you meant” Series).

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