This entry was posted on Thursday, March 15th, 2007 at 3:16 pm and is filed under Agents & Brokers, Contracts + Records, Lessons. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
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March 15, 2007
Pray with them
Contracts are legal agreements between parties who are legally able to voluntarily agree to something. It is binding as long as it does not supersede the law. This means even if your apartment contract says you must give 30 days notice before leaving, the law says 15, and legally, you are only required to give 15 regardless of the contract.
This led to a story about unilateral contracts. These are contracts which allow a buyer the option, but not the obligation to buy. Developers will often do this if they think there is a chance the city will not allow them to buy the land.
Our instructor told us about a group of homeowners who all bought homes with overly large lots. They had gotten together and were looking to sell their back lots. Our instructor came in and bought the options to all of these lots with the intention to develop it as a separate complex.
Soon he found himself with all the lots but the two end lots (which were the only street access ones). These two decided to greedily hold out for more, and he soon found himself fighting the same people who had sold him the lots in the City council. He explained that the property values had skyrocketed, and the option to buy which he had greatly upset many of the land owners who realized they’d sold their yards for a fraction of what they were worth.
Under an option, the sellers are generally unable to change their minds. Our instructor could have done so but he would have lost his option money. Even if the landowners tried to give him his money back, he was able to refuse them legally.
This brought us into the REPC, the real estate purchase contract which we have all seen at one time or another.
We were warned that if you do not like negotiations, this is NOT the business to be in.
Our instructor told us how being an agent for the both the buyer and seller can be useful, because if either one mistakenly lets out a bit of information useful to the other party, you can, no you have a fiduciary obligation to let the other party know that information.
Please consider this if you ever have an agent pressuring both sides to use him as the agent. Your Agent WILL give information to the other side in order to see the transaction go through, often with HIS best interests in mind.
Let me provide a possible situation.
Buyer comes in willing to use your agent. Another buyer with a different agent also wants to buy. Which buyer is likely to get the key information in order to get the best price, and have the most success in getting the home? The agent is going to tell the buyer willing to use him all the necessary information to get him into the home. This information may well compromise many things you thought or assumed your agent would keep secret.
Now obviously, the real estate agents have an obligation to present all offers. Keep this in mind when you find an agent refusing to give an offer because he thinks it to be too small. Agents want the home to sell for more. They are ALWAYS going to suggest you bid higher than you should. Low ball everything, in most cases you’ll get a counter offer that is MUCH lower than what your agent suggested as an initial offer.
We were then told: “YOU NEVER WANT A BUYER TO REJECT ANYTHING” Always counteroffer. This makes sense, as a counteroffer is in essence a rejection of the initial offer, doesn’t come off as a rejection, and keeps a potential buyer around.
We were told that there are some sellers who demand that you do not present any offers lower than asking. This is illegal, and we were told to refer them to an agent you don’t like. Don’t take the listing we were told.
This brought a story about a home listed for $200,000 that received an offer of $148,000. The seller raged, and demanded that they reject the offer outright. After much urging, they countered at full price and were later told that if the buyer’s other offer hadn’t been accepted, they would have actually gone with the counteroffer.
The listing sat a while, and then a female attorney (we were warned that female attorneys are meaner than males) made an offer of $147,000 requiring all the property flaws she had noticed. The seller again countered with full price, but offering to fix all the problems listed. “It sold!” our instructor beamed!
Many buyers are just testing the waters we were told. Make things work and you’ll be a hero to both sides. Know when your buyers are close to making an offer. They will tell you either in action or by words. Most buyers get cold feet. Write the offer there and then. Don’t take them back to the office.
They’ll be angry if the home gets sold before the offer gets in. Go fast.
If they want to pray about it, offer to pray with them our instructor encouraged. He laughed and said he was kidding, apologizing if he had been sacreligous, though he claimed he had seen agents actually praying with them, and saying again: “Do whatever it takes to get them to make the offer at that moment. Respect their religious preferences, but get them to write the offer. If they sleep on it, you won’t get the buy”.
This brought a story about a Mormon here in Utah which didn’t want to use an agent that was a Catholic, so the broker had a Mormon agent write the offer for 10% of the commission, with the rest of the commission going to the Catholic agent without the buyer ever knowing.
Always get things in writing, no matter how dumb it seems so that you avoid problems in the end.
We were warned about working with elderly, who can be incompetent either by age or mind. Use a family member or case worker, or better yet, an attorney to make sure the person is competent or the closing will NOT be valid.
Non-signed rental contracts are considered month-month contracts. Underage renters cannot be held to a contract.
Make sure you write time is of the essence on all home contracts. Not doing so can destroy your chances for closing.
Most defaults mean that the earnest money is forfeited. You cannot sue without returning the earnest money.
Usually, if a seller is trying to backout, you just have to threaten action. It will rarely come to that. People generally agree to mutually let each other out in contracts here in Utah. People can be nice.
Utah law requires using a certain real estate contract form. This can be altered if the buyer and seller so desire however. Only licensed agents are required to use the REPC form.
We were warned to never give advice as an attorney or tax advisor.
We then were told to make sure that there was a huge earnest money deposit. Agents want to see the home close, and this keeps clients from backing out. If earnest item is other than money, it is given to the seller. State law states a broker has 3 working days once the offer has been accepted to put the money into their trust account. The buyer’s brokers trust account generally receives it.
If you plan to sell a home we were reminded. Remove items before you list it. You don’t want buyers coming in and falling in love with a chandelier or stove that you plan to take with you.
We were reminded to have a calendar out while filling out a contract. No one in Utah will close on a Sunday.
We were also told that you should check a home prior to buying, to ensure the home is insurable via Home Owners insurance. Too many claims can render a home blacklisted.
And that was class.
We were handed a sample Real Estate Contract which I will upload shortly along with a bunch of other goodies.
read comments (2)
March 15th, 2007 at 5:36 pm
How much does someone put down when they get the option to buy? Do they lose all of it if they choose not to act on that option?
March 15th, 2007 at 6:49 pm
It varies, and yes they generally lose it, much like an earnest money deposit.