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Asked by Karrie, Florida Fri Sep 5, 2008

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Answers

26
Alan May, Agent, Evanston, IL
Sat Sep 13, 2008
The purpose of my statement was not to make realtors give up their profession
~~~~~~~~~
I didn't really think it was... but I appreciate the add'l response.

Here, in Illinois, we have the interesting back-up that 99% of our transactions are handled by attorneys, and we have a 5-day Attorney review that immediately follows the acceptance of any contract. During that 5 days the attorney will review the contract, and if there's anything that s/he finds that s/he doesn't like... s/he will alter it... the only thing they are not allowed to change is the purchase price.

So a clause, like the one I mentioned, will have been reviewed by an attorney, and validated or modified, and Illinois Realtors are fairly well protected. But if I had not included the language of "Buyer may, at his option..." then I'm relying that the attorney (who might be overworked and working on 40 transactions at once) will pick up on that nuance... better for me to put it in, and trust that he'll look at a hand-added clause.

Additionally, most of the attorneys I work with, are familiar with how I write my contracts, in fact I've already had a discussion, with one of them, about this very thread, and the addition of "Buyer may...at his option...", and he said to me... "I've never had that occur, but it's an excellent way to phrase it".

At least in Illinois, I don't think we're in danger of being considered practicing law by doing so... other states... "Writer beware"... check with your managing brokers.

btw... I welcome the questioning and discussion of real estate matters with "unlicensed buyers and sellers"... and it sounds as though Realty novice may have a legal background, so there might be some validity to his/her statement. But as Magda points out... when it comes down to making the decision... rely on a professional (whether that be a Realtor or Attorney) rather than the interested friend, uncle, parent who "thinks" he knows best, 'cause that's how it worked in 1943 when they bought their last house. Rely on a professional who does this for a living each and every day.
1 vote
Realtynovice, Both Buyer And Seller, Akron, OH
Fri Sep 12, 2008
Having reread my post, I apologize, it is prorly contstructed and , to be honest, not completely thought out.
The genneral gist of what I said, I stand with.
1 vote
Alan May, Agent, Evanston, IL
Fri Sep 12, 2008
Realty novice...

I'll take my chances... I'm very comfortable adding in the line "Buyer may, at his option, cancel this agreement if property does not appraise for full purchase price, or above." to protect my buyer

If they attempt to take me down for "practicing law without a license" based on that line, CB has a bunch 'o suits, who can go toe-to-toe with the Illinois Bar Association's suits. That's what I pay E&O insurance for.
1 vote
Alan May, Agent, Evanston, IL
Sat Sep 6, 2008
Elvis... although the agent/broker may not have been negligent in using this verbage, if a lawsuit is filed, the agent/broker would without a doubt be drawn into this suit.
~~~~~~~~~~
Yvonne, as we both know, the agent and agencies are ALWAYS drawn into the suit, as the plaintiffs consider where the money is, and the big agencies are the deepest pockets.
1 vote
Yvonne Cousar, Agent, Round Rock, TX
Sat Sep 6, 2008
Options... you are correct in your assessment. I am not an attorney but I have worked with enough of them to know that a contingency like a contract would normally be construed against the drafter. The continuency wording is ambiguous and a judge could rule in the seller's favor. The word to the buyer is: would the cost of a lawsuit justify pursuing this.

Karrie... you might also pursue mediation of this issue to see where it takes you. It is less expense but you would still have to pay your attorney fees.

Elvis... although the agent/broker may not have been negligent in using this verbage, if a lawsuit is filed, the agent/broker would without a doubt be drawn into this suit.

I think we all have learned a very valuable lesson from this. Sometimes the learning process can be painful.

Yvonne Baker, Real Estate Consultant
http://www.YvonneBaker.com
ycbaker@kw.com
Web Reference:  http://www.YvonneBaker.com
1 vote
Alan May, Agent, Evanston, IL
Sat Sep 6, 2008
I don't agree that your agent did a poor job of covering you... we're not attorneys, we use clauses and addendum that work, and "Contract Contingent upon Appraisal meeting purchase price (or higher)" is the sort of language that has been used by Realtors (myself included) for many years, both effectively and safely.

Your situation is the first time I'm hearing it used in this way, and as Jeff & Ginny mentioned, based on hearing this situation, I will also be altering the language I use for future contracts. I'm sorry that you had to be the precedent for us to learn from. The times, they are a'changin.

Ute suggests that if this went to court, a judge would probably come down on your side, and I tend to agree... the question is: is it worth the effort, pain and time... only you can answer that, and it's probably worth your while to consult a good Real Estate attorney, as it sounds like you might be going down that path. Good luck.

Realty Novice said: "You may want to consider contacting the proper authorities to make a complaint against the RE agent and his broker for practicing law w/o a license."

I'm sorry, I don't see a situation here of the agent practicing law... can you explain how you believe they were practicing law?
1 vote
Jeff and Gin…, Agent, Vero Beach, FL
Fri Sep 5, 2008
This is a sticky wicket, so you should probably consult a real estate attorney if you wish to keep the contract in place. The Sellers seem to have a good point in that the property did NOT appraise at the purchase price. This is a typical contingency protection for a buyer, of course, so that they are not over-paying when they choose not to do so. However, in your case this probably works against you. Please let me know how this turns out because it is an unusual situation. I think I will alter my contingency wording to say that the "Buyer may choose to cancel the Purchase and Sale Agreement if the appraisal does not equal or exceed the purchase price." Oh -- hindsight is easier!
1 vote
Tina Maley, Agent, Brandon, FL
Sun Sep 28, 2008
since the property does not appraise and the owner does not wish to sale your done basically..
0 votes
Tina Maley, Agent, Brandon, FL
Sun Sep 28, 2008
the house is only valued at what someone is willing to pay... I have order other appraisals on properties sometime 2..
0 votes
Maria Morton, Agent, Kansas City, MO
Sat Sep 13, 2008
Yes, they can.
If you still want to purchase the property, you can submit a new Offer To Purchase. Ask your buyer's representative to help you with this.
The owners may still choose not to sell; but you can always ask.
Web Reference:  http://www.mariatmorton.com/
0 votes
Magda Robles, Agent, Weston, FL
Sat Sep 13, 2008
This is a general comment into people's opinions. It is very common to see "unlicensed" buyers and sellers who believe they know more than the Licensed experienced brokers and realtors. I always ask my clients to stay away from family and friends opinions as they all become the experts in real estate and they usually have bought one home or none and many times they just confuse the Prospect. Find an experience Realtor with integrity and who has legal support on his/her network. Trust that You and Your Realtor are acting correctly and that every deal or negotiation is a win win situation and the process would be smooth.

Magda Robles, Realtor, Broker, CRS, GRI, Real Estate Instructor
Web Reference:  http://www.magdarobles.com
0 votes
Realtynovice, Both Buyer And Seller, Akron, OH
Fri Sep 12, 2008
Elvis, et. al.,

The purpose of my statement was not to make realtors give up their profession, but to make you (plural) aware that unless you are an attorney, you cannot give legal advice without liability.

What usually happens is an agrieved individual makes the complaint on a specific incident. If it is determined to be the unauthorized practice of law you could be find and prohibited from doing it again. If you do it again, it gets more expensive and there are stronger sanctions. Big deal. If the general practice of realty was consider the practice of law, the ABA would have put you out of business long ago.

The real big problem comes in your liabilty to the person you unlawfully advised. Unlike the instant question (where the buyer's collection on damages in suit would be so unlikely because there is no way to calculate them realistically, let's say a buyer asks you to advise them on language that would allow them to back out if such and such contigency ocurred but they still want to be able to purchase at their option. You say "sure, i'll put in some language saying that `contact is contingent on such and such.'" Such and such happens, Seller says the contract is void and sells to someone else. Basically same scenerio as here, except this is commercial property, and there is no other property that meets your buyers needs in the area except one that also does not meet the contigency but costs twice as much. Your buyer buys that property through another realtor (of course) and makes a complaint that you were practicing law without a license. You are found "guilty" of the unauthorzed practice of law. As you had advised your client on contract language, you have practiced law.
Your client now sues you for the benefit he lost due to your unauthorized practice of law-the difference between what the propery he tried to buywith you would have cost and what the property he did buy cost him.
You wring your hands a bit and then remember you have E&O insurance and give them a call. They tell you sorry, we don't cover the unauthorized practice of law just like we don't insure you if you shoot a client.
My point is, don't give legal advice, if a client wants some kind of contingency (like the one in the question--not simple things like contingent on appliances include or buyer selling his home, advise them that they should consult a lawyer or they could put in language on their own using their own language that adresses their concern. Know "when to hold them and when to fold them." If the client gets what they want, they're happy, no problem. If you haven't given them legal advice and they don't get what they want, most likely no problem. If you give legal advice and they end up unhappy---could be big problem.
0 votes
Scott Godzyk, Agent, Manchester, NH
Fri Sep 12, 2008
Elvis that is great advise to add the wording "Buyer may, at his option," that would certainly help to eliminate anyone thinking the seller could back out if the appraisal doesnt come in at or above sales price. thanks
Web Reference:  http://www.ScottSellsNH.com
0 votes
Scott Godzyk, Agent, Manchester, NH
Mon Sep 8, 2008
Unfortanately the way it is written they may. Again contact an attorney for the best advice. I agree that this paragraph should not be put in any purchase and sales by any agent especially a buyers agent. if teh appraisal doesnt come in at or aboive prucase price the financing would be denied and teh buyer would have an out under the mortgage contingincy, if this was a cash sale then it would be good to add with added verbage to protect the buyer. looks like a case for errors and ommissions. Your best bet is to draft a letter stating you will be continuing with your purchase if you want it and go after the seller to sell under specific performance,, again a question for your attorney. Good luck Karrie
Web Reference:  http://www.ScottSellsNH.com
0 votes
Realtynovice, Both Buyer And Seller, Akron, OH
Mon Sep 8, 2008
ELVIS,

DISCLAIMER: This is not legal advice, contact and attorney.

The unauthorized practice of law varies from jurisdiction to jurisdiction.
What is or is not a practice of law is commonly a case by case decision by the authorized finder of fact (board or commision authorized usually by the individual states supreme court.) If I recall correctly, in some jurisdictions, there must be a finding of an unauthorized practice before you can proceed with a claim.

A common finding in this type of case is that the filling in of blanks on a form with factual information (i.e dates, sales amount, escrow amount, etc.) often does not constitute the unauthorized practice of law (although the contrary finding has sometimes occured--especially when the form is filed with a court or other governmental entity) However when a third party (e.g. broker's salesperson) adds wordage or additional terms (e.g. contingency)--that HAS been held to be the unauthorized practice of law.
0 votes
Yvonne Cousar, Agent, Round Rock, TX
Sat Sep 6, 2008
Elvis...... that is why I am a firm believer in CYA.

Yvonne Baker, Real Estate Consultant
http://www.YvonneBaker.com
ycbaker@kw.com
Web Reference:  http://www.YvonneBaker.com
0 votes
;, , Riverhead, NY
Sat Sep 6, 2008
Not being an attorney, I'm guessing that the verbiage would NOT hold up in court. If a real estate agent is going to write a contract and the addendums, awareness of proper wording is critical, and this isn't a difficult scenario in which to cover the buyer. The verbiage below is wording that I've used, and seen, on more than one occasion. Contingencies need to be specific to the party for whom they're intended.
The wording indicated, to me, permits an out from either party, because it wasn't specific to the buyer. Intention means nothing- bottom line is what it reads. Just a guess.
Web Reference:  http://optionsrealty.com
0 votes
Yvonne Cousar, Agent, Round Rock, TX
Sat Sep 6, 2008
Good Morning Karrie... The ambiguity of the wording of this contingency is problematic, and will give many realtors food for thought. Although this continuency was designed to protect the buyer, it appears at the same time to give a seller a way out. I do not have an answer for you because I am not a lawyer, however, this is the stuff that lawsuits are made of.

If you decide to talk to a real estate attorney on this one, please post his/her advice. It should be very enlightening.

Yvonne Baker, Real Estate Consultant
http://www.YvonneBaker.com
ycbaker@kw.com
Web Reference:  http://www.YvonneBaker.com
0 votes
;, , Riverhead, NY
Sat Sep 6, 2008
I wonder why the contingency didn't include verbiage along the lines of, "buyer MAY, at his option, cancel this agreement" (in the event of an appraisal that doesn't meet the sales price). As indicated below, without that caveat, you're now subject to paying a lawyer to see if there's any other interpretation. Sounds WAY too open ended to me- if the contingency was inserted as you indicate, your agent did a poor job of covering you on this one- it's way too vague.
Web Reference:  http://optionsrealty.com
0 votes
Magda Robles, Agent, Weston, FL
Fri Sep 5, 2008
Dear Karrie, Answering a question without looking at the contract is guessing responses. If you or your realtor are in doubt, ask him/her to contact the Principal Broker, or the attorney representing the brokerage OR FREC if necessary. However, The ONLY one "sells" is the "Seller" when it transfers ownership by signing the deed" You might not be able to force seller to sell, but you and the brokers in the transaction might have - recourse - to claim damages or commissions. Ask your Realtor to help you obtain legal advice.
Wishing you the best, Magda Robles, Broker Associate, Plantation Florida
Web Reference:  http://www.magdarobles.com
0 votes
Ute Ferdig, Agent, Newcastle, CA
Fri Sep 5, 2008
Hello Karrie. It is very unfortunate that the offer was worded this way (i.e., not specifying who has the right to cancel the contract if the contingency is not met) as it renders the contract subject to interpretation.

If I were the judge, I would rule in your favor as a reasonable interpretation of the clause is that it was included for the protection of the buyer and the seller would not have been able to make an issue of the appraised value if you or your agent had not informed the seller of the low appraisal. Since you are willing to make up the difference, the seller is not affected by the low appraisal unless your lender will not give you a loan because of the low appraisal. You should definitely make sure that the appraisal will not affect your ability to get the loan before you insist on going through with the transaction.

I would also check the contract to see what it says about the seller's right to cancel. Typically, the seller's right to cancel is much more limited than the buyer's rights to cancel (again, this is a question for an attorney). I am only familiar with the CA standard purchase agreement which also gives the option to make satisfactory appraisal for no less than the purchase price a contingency of the agreement without specifying that it's only the buyer who gets to cancel the agreement if the appraisal comes in low. When seen in the context of the limited seller cancellation rights, interpreting the appraisal condition as giving the seller a way out does not make sense. In CA, the seller would have to first give the buyer a notice to perform asking the buyer to remove the appraisal contingency. If the buyer fails to remove the contingency within the time specified in the notice to perform, then the seller could cancel the agreement. Again, that's how it would be done in CA. Only an attorney licensed to practice in FL can tell you what your rights are and I can only hope that sellers in FL can't cancel just because a condition that protects the buyer is not met. It should be left up to the buyer to waive the condition and to proceed with the transaction.

Good luck to you.
0 votes
Realtynovice, Both Buyer And Seller, Akron, OH
Fri Sep 5, 2008
This is not legal advice, contact and attorney.

You may want to consider contacting the proper authorities to make a complaint against the RE agent and his broker for practicing law w/o a license.
0 votes
Realtynovice, Both Buyer And Seller, Akron, OH
Fri Sep 5, 2008
This is not legal advice but only an recitation of common contract law.

Of course it was "implied" that the "buyer" could retract if hte contigency was not met and a buyer could sue on that theory and take their chances and go to court. However, the genreral rule is a contract is limited to the "four corners" of the contract - meaning what is written on paper is what controls as far as a court is concerned. In effect the contract on paper says: we have a contact if the contigency is met --if it isn't met, we don't have a contract.
See an attorney--but good luck.
0 votes
Bill Eckler, Agent, Venice, FL
Fri Sep 5, 2008
Karrie,

This is an interesting turn of events.........an a situation that needs to be brought to the attention of a real estate attorney.

Good luck
The "Eckler Team"
0 votes
Michael Sand…, Agent, Stuart, FL
Fri Sep 5, 2008
Although I would check with a real estate attorney, I believe that the contract was contingent on the appraisal. It did not appraise therefore the contract is void. That does not preclude you from "renegotiating" the contract or putting in another offer. It seems that the contigency is a double edged sword.
0 votes
Barry Lynn M…, , Trussville, AL
Fri Sep 5, 2008
I tend to agree with Jeff if there was no specific wording stating who had the right to cancel if the appraisal come in low then they will have a leg to stand on. However if you find a good attorney they could argue that this statement was a general rule to protect Buyer and was not intended for the seller protection and the fact that the amount a person is wiling to pay for a property trumps the opinion of an appraiser.

The appraiser main purpose is to honestly protect the lender if the truth be known.

So after all that with the market the way it is do you really want to pay top dollar for a property it would seem to be a long time to get your investment back.
0 votes
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