By Kay Wilson-Bolton
April 11, 2010
Members of the California Association of REALTORS® have a great member benefit. It is easy access to an array of skilled lawyers proficient in the day to day workings of real estate in California.
Unlike an attorney for hire, they are not quick to defend the actions of any REALTOR®. In fact, they are often quick to admonish and educate at the same time. Here are the top questions and answers in brief taken from CAR’s website. We can all learn from the questions and the answers.
What is a contingency in a real estate contract?
A contingency is a contractual provision that gives a party to the contract the ability to condition performance on the occurrence or non-occurrence of a certain event. Assume a buyer has a 17-day inspection contingency, the inspection contingency works as a protection for the buyer.
It allows the buyer to conduct investigations and review disclosures, reports, and other information affecting the property generally required to be provided by the sellers within 7 days of acceptance. If the buyer is satisfied with the condition of the property, the buyer may perform on the contract. If the buyer is dissatisfied with the condition of the property, the inspection contingency allows the buyer to cancel the contract without loss of deposit, or the buyer can attempt to renegotiate with the seller for repairs or a price reduction.
What are mediation and arbitration?
Mediation is a type of dispute resolution that generally occurs outside the court system. In mediation, a neutral third person called a “mediator” assists parties in a dispute. The mediator facilitates discussions and negotiation between the parties to help them reach a mutually-acceptable settlement of their dispute. The mediator generally has no power to impose a decision on the disputing parties.
Arbitration, on the other hand, is another type of dispute resolution that also occurs outside the court system. In arbitration, the parties submit arguments and evidence to a neutral third person called an “arbitrator.” The arbitrator will generally render a decision to resolve the dispute, similar to what a judge and jury do in a court trial.
By agreeing to this provision, the parties give up their right to sue each other.
Is there a checklist I can use to make sure I give my clients the legally required disclosures?
Yes. C.A.R. offers easy-to-reference disclosure charts to guide REALTORS® through the disclosure requirements for common types of real estate transactions. These charts are frequently updated to include new federal or state disclosure requirements, such as the Agency Disclosure Statement, Transfer Disclosure Statement, Natural Hazard Disclosure Statement, smoke detectors, water heater bracing, and so on.
An agent recently showed a home to a buyer. The buyer also signed a buyer and did not reveal that the he/she had written an offer to purchase that home using another agent. The buyer had already signed a Buyer Representation Agreement. Who gets paid?
It depends on many factors, including, but not limited to, the conduct of the agent writing the offer, relationship to the transaction, the other agent’s conduct, the other agent’s relationship to the transaction, the buyer’s choice, and the timeline of events. Procuring cause can be difficult to prove but good records and consistent actions help make a case.
A client is a distressed homeowner facing foreclosure. Will a short sale be better for his credit score as compared to foreclosure?
No. According to www.myfico.com, both a short sale and foreclosure are considered very negative events for someone’s credit rating because they are not “paid as agreed” accounts. Furthermore, www.myfico.com states that, as far as a FICO score is concerned, “there is no difference between foreclosures and short sales.” A distressed homeowner may have other reasons to prefer a short sale or foreclosure, but the two options have the same impact on someone’s FICO® score.
I have found that the jury is still out of this as some lenders have reported a short sale as “debt satisfied.”
An REO lender responds with a counter offer which was a 10-page addendum containing many terms that seemed unfavorable to the buyer.
An agent should encourage the buyer to consult with an attorney. Some think that the REO seller’s terms and conditions are matters of negotiation. Some real estate practitioners witness that REO lender/sellers will not deviate from the boilerplate terms in their agreements, and they typically don’t. Some examples of the potentially unfavorable terms for an REO buyer to consider are, without limitation, requiring a buyer to prequalify with the REO lender, requiring an “as is” clause, disallowing contingencies protecting the buyer, refusing to do repairs, charging a per diem for any delays in closing escrow, and requiring the buyer to waive certain rights. As in any counteroffer the buyer has the right to reject it entirely.
My neighbor referred a client to me. May I pay my neighbor a referral fee?
Probably not. A real estate agent engaged in a transaction for one-to-four residential units with a federally-related mortgage loan is generally prohibited from paying a referral fee to an unlicensed person. This rule is part of the Real Estate Settlement Procedures Act or RESPA, which aims to protect homebuyers and sellers from paying unnecessarily high settlement costs. Despite RESPA’s prohibition against referral fees, you may give your neighbor a small token of appreciation as long as you had no prior agreement to pay in exchange for the referral business.
Kay Wilson-Bolton is the owner of CENTURY 21 Buena Vista in Ventura and Santa Paula. She always brings a regional perspective to local issues. She can be reached at 805.340.5025. Her web address is www.realestatemagic.com