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Legal Hotline Attorney Vern Jarboe answers frequently asked questions from Kansas REALTORS® about their transactions.
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Contract - Buyer Loses Job Preclosing
Question: You have a situation where a property that you had listed went under contract in a cooperative sale. Buyer had produced evidence of preapproval. Various other conditions leading to closing have occurred, but now the buyer indicates they have lost their job.
Answer: The question is regarding earnest money refund. The buyer's entitlement to a refund of earnest money is dependent upon contract language. Presumably, the buyer's obligation to close is contingent upon the availability of a loan. Preapproval, as you know, is not a guarantee that a loan will be issued because it necessarily indicates other conditions preceding closing must be met. In this instance, it is likely the lender will issue a letter indicating the loan is no longer available due to the change in economic circumstances of the buyer. Assuming that occurs, the buyer probably has the better argument. In any event, the earnest money cannot be released until you have a closing, which appears unlikely, a court order, or get the consent of both parties. In the event the earnest money is not released then the property will remain under contract and the seller should consult with independent legal advice before entering into a second contract to sell the property to another buyer. Both parties should be referred to independent lawyers.
Contract - Obligations for Property Protection
Question: You have a situation where you have a listing which is a foreclosed property under management by someone independent of the lender. Property damage has occurred due to the fact that utilities were shut off.
Answer: There are cases in other jurisdictions where real estate licensees have assumed the responsibility for property management and become liable for this type of occurrence. That seems unlikely here because there is an independent property manager and the respective duties seemed to be defined by both contract and actions. You should document your activities and conversations carefully.
Contract - Contingency on Inspection Resolution
Question: You have a situation where a property went under contract. Your board form requires that after inspections the parties have an opportunity to renegotiate or cancel the agreement.
Answer: There is an obligation for each party to mutually work toward resolution of concerns. However, this does not require parties to agree. On that basis, they either resolve the problem or they don't and there is nothing the Realtors® can do about it no matter what you think about the reasonableness of your parties' position.
License Law - Prize, Gift, and Gratuities
Question: You have a question about whether or not an agent could place a box in a restaurant offering a drawing for a free dinner.
Answer: So long as the advertising is accurate and the brokerage firm name is indicated, then offering a drawing for a free dinner where there is no obligation on the party of the participants to list or sell through your firm, should not be objectionable. You can look at the Kansas Real Estate Commission's website where they have a document related to prizes, gift, and gratuities and offer items which are considered to be acceptable and those which are not acceptable.
Contract - Client with no English Skills
Question: You have a situation where you have a client with no English skills. However, you have a real estate licensee who speaks the language of the non-English speaking client and can assist them with documentation. You asked whether there is risk in having the licensee translator complete the seller disclosure form in their hand writing after interviewing the non-English speaker.
Answer: There is certainly increased risk in conducting business the way you described. However, it seems inevitable in this case that you will incur additional risk in working with a non-English speaking client. The only other choice would be to simply refuse to work with them. While limitations of risk are always advisable and I would generally recommend that agents not interview sellers and complete the seller disclosure form because of the enhanced risk due to a seller denying that you wrote down what they told them, there are some situations where obviously that is going to occur. It is not illegal, simply inadvisable due to a risk avoidance concerns.
Contract - Utility Support for Energy Star
Question: You have a situation where a local utility is offering to assist consumers with the purchase of energy rated heating and air and other appliances. The utility in effect buys the appliances or advances the money so that the homeowner can, and then the homeowner pays the utility back on a monthly basis. If someone buys from a seller who has engaged in this activity, then there is a presumption that the acquiring buyer also inherits the obligation.
Answer: Obviously, this liability needs to be disclosed to the buying consumer. The local utility has started filing a lien to protect themselves. The lien will show up on the record and will then need reconciled prior to closing. While the existence of energy rated appliances may enhance the value of the home, it also may reduce the net available to the seller by the amount of the lien. Some sellers do not want you to disclose the existence of the liability. I don't think you can avoid that issue. On the other hand, placement of this information in agent only sections of your MLS so that selling licensees know the information is available and can then disclose it to buyers they are working with seems to be one appropriate way of making this disclosure.
