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I Didn’t Know That…

Do You Know What You Just Signed?

Do You Know What You Just Signed?

I don’t know about you, but I get excited and even a bit nervous when I’m about to make a large purchase. My heart begins to beat faster and my hands get sweaty. Your hands get sweaty too, don’t they?

When I purchased my first home, I was so excited that I didn’t bother to read the writing on the contract. I faintly remember hearing my Realtor explain the terms of the contract, but in truth, I had no idea what I was signing.

The Importance Of A Good Realtor

As excited as you may be about your home purchase, a good Realtor will take things slow and be sure to explain every paragraph in the contract.  While this may seem tedious and boring (which it can be), it is definitely in your best interest to listen and make sure you fully understand your rights and obligations.  When I’m writing an offer for a client, it can take a few hours to get through the paperwork.  My goal is to explain everything and make sure that my client understands what he/she is signing.

Why Are Contracts So Verbose?

Lawyers… I think sometimes they get paid by the word when it comes to contract language. In all seriousness, the language is complicated as a result of previous lawsuits.  When I purchased my first home back in 1988, the contract was two pages long.  Now, a standard contract can easily exceed 10+ pages!

The attorneys who draft up the contracts try and make the terms so clear and concise, that sometimes it actually makes things more confusing for the average person to understand.  All of which leads me into the purpose of today’s post:

Each week Annie Fitzsimmons, the hotline attorney for the Washington Association of Realtors (WAR), answers a legal question pertaining to real estate.  These are questions that have been asked regarding the various parts of the real estate contracts.

Here is this week’s question:

Question:
Buyer A made an offer with $500 earnest money deposit, subject to financing. The offer was accepted. Seller notified Buyer A with form 22 AR of the seller’s right to terminate the transaction if the buyer did not waive the financing contingency. Buyer A waived the financing contingency, however does not have the ability to close the transaction if the loan does not close. Seller referenced the purchase and sale verbiage, ”Buyer has sufficient funds to close this sale in accordance with this Agreement and is not relying on contingent source of funds, including funds from loans”, etc. Seller contends that since the buyer does not have available funds to close, Seller may terminate the agreement. Buyer A contends that the contingency is removed, and that while she is in jeopardy of losing her earnest money if the contract does not close, the seller cannot terminate the contract. Who is correct?

Answer:
Buyer is correct. Based on the information presented, Seller has no basis for terminating the agreement at this point and any attempt to do so would constitute a breach by Seller. Buyer is entitled to use the time allowed until closing to obtain the funds necessary to close the transaction. If Buyer is unable to do so, then at closing, Buyer will breach the agreement. If Seller’s remedies are limited to forfeiture of EM, then Buyer will lose the EM but not face any more significant risk. Seller did all that Seller could do by giving the notice of right to terminate. It is now up to the Buyer to obtain the funds necessary to close the transaction.

Clear as mud, right? That’s why it makes sense to have a trained professional on your side. Do you have a question about real estate? Give me a call!

When REALiTY BiTES, Bite Back!

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