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Legal Hotline Attorney Vern Jarboe answers frequently asked questions from Kansas REALTORS® about their transactions.
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Contract - Bank Addenda, Relationship to Contract
Question: You have a question about the relationship of an addendum required by a bank.
Answer: The parties are bound only to contract elements they have both approved. The seller addendum will supersede the terms and conditions of the contract if the buyer accepts those conditions but it supersedes the basic contract only insofar as it directly contradicts provisions in the base contract.
Contract - Time for Deposit Earnest Money
Question: You have a situation where a contract involves a short sale. You ask whether or not the earnest money should be deposited at the time the contract has been accepted by the seller or after the contract has been approved by the lender.
Answer: The short sale addendum modifies the terms of the contract creating a contingency for the seller to not have to close if the lender doesn't approve. The approval by the seller which still occurs at the time seller accepts the offer, even though it now has an additional contingency. A contract could be modified to require a deposit of earnest money only after the lender approves.
Contract - Short Sale on Multiple Offers
Question: You have a situation where a particular lender wants you to continue submitting offers after the seller is already in contract with the first buyer. You have a situation where a particular lender wants you to continue submitting offers after the seller is already in contract with the first buyer.
Answer: That is acceptable if it is understood by the first buyer that other offers may be submitted. Because the seller's obligations are contingent upon lender approval, and the lenders disapproval of the first offer would necessarily give the seller an out on the first contract. However, it would be unfair if the first buyer were not aware of the circumstance.
License law - holding earnest money check
Question: You have a situation where buyer agent has presented a contract with earnest money check. Buyer agent has asked that the earnest money be held pending some other condition.
Answer: Unless the contract specifically indicates, the earnest money is not to be deposited until the other condition is met, then you are still bound by the requirement that earnest money be deposited within five business days of the offer.
Contract - Multiple Offers
Question: You have a situation where a first offer was negotiated to a verbal contract. No contract was signed with the first buyer. The next day, negotiations with a second buyer ensued. The first broker was called back and advised that this was occurring. The second buyer then went into contract.
Answer: As long as the seller directed the negotiations with multiple buyers, you have no problem. Generally, there is no contract until it is signed by both parties. There are some exceptional circumstances where a contract might arise short of a written agreement. In those events, the parties need refer for independent legal advice.
License Law - Cooperation Without a State Licensee
Question: You have a situation where an out of state licensee wants you to pay a consultation fee to an LLC at closing. The LLC is not a Kansas real estate firm. The out of state licensee does in fact have an out of state broker.
Answer: You could pay a referral fee to the licensee through their home state broker. Changing the name to a consultation fee does not obviate the license law requirement of paying commissions only to licensed persons.
Information Based on an Interview
Question: You have a situation where the real state licensee interviewed the seller. In the interview, a family member of the elderly licensee provided some wrong information which could have been verified easily by the listing agent. It appears that a buyer was well aware of this condition prior to contract. However, the buyer has now asked for the item to be repaired.
Answer: Interviewing the seller by a licensee to fill out a sellers disclosure form is a bad idea because it puts you at risk that the parties will not remember the transaction the way you do. The licensee is then put in the position of providing bad information to the buyer, and a risk that the buyer will ask the licensee to pay for the repairs. Factually, this case would seem to lend itself to an interpretation that the buyer really has no ultimate claim. However, it doesn't mean you wouldn't have to end up defending yourself.
Contract - Verbal Negotiations to Contract
Question: You have a situation where a buyer and seller negotiated verbally with respect to the terms and conditions of the contract. Seemingly, they reached agreement. However, the seller subsequently entered into written negotiations with another buyer and signed a contract with the second buyer.
Answer: We generally believe that a real estate contract, to be valid, must be in writing and signed by the party who needs to be bound by the contract. There are some exceptional circumstances and the parties could be referred for independent legal advice to evaluate those cases. However, the general rule that there is no contract until it is signed would probably indicate that the seller has the better argument in this case.
Contract - Discounted Commission on Foreclosed Property
Question: You have a situation where a lender is unwilling to recognize recent changes in federal law regarding discounted commissions.
Answer: In a short sale or other environment involving foreclosures, the lender may be in the driver's seat. If the lender chooses not to follow the law, then your remedy is probably to take the discount and complain to Congress. Getting into a fight over commissions when you are trying to help your client is obviously not in the client's best interest.
Contract - Foreclosed Property Requirements
Question: You have a situation where a property has been foreclosed upon. The lender/owner is now requiring that any new buyer make an offer contingent upon a loan by the seller.
Answer: While this may be a possible antitrust violation, it does not violate any other rules. Obviously buyers are free not to write offers on those properties and one is free to write an offer using a different lender but the listing agent will still have to present it.
