THE REAL ESTATE TRANSACTIONS THAT TROUBLE ME
Bill Cherry has an excellent post about contracts, and how relocation companies rewrite them for their own purposes. State contracts are supposed to be promulgated to the benefit of both parties in the transaction--at least, to make it as fair and transparent as possible. Bill talks about those situations where the state contracts are brushed aside by relocation companies. In addition, builders use their own.
What do you think? Can Realtors force builders and relocation companies to change their contracts and addenda?
There are three types of real estate transactions I've never been happy about:
- Builders being allowed to employ and use as their sales staff, persons who are not licensed real estate agents or brokers.
- Builders not being required to use state promulgated contract forms
- Attorneys and relocation firms being allowed to gut the promulgated earnest money contracts through long, verbose addenda
When I first received a Texas Real Estate Broker's License in 1964, we were allowed to draft our own contracts, without the assistance of legal counsel. Realtors frequently used a contract format that had been drawn and suggested for use by the Board's legal counsel. However, there was nothing that stopped the agent from lining though, and otherwise amending the contract. And believe me, oft times we wrote and wrote and wrote.
But even worse, the public could get a one page earnest money contract form from a title company, complete it, put the deal in escrow, and close the transaction, with wording like, "the title policy premium will be paid as is customary in the county where the transaction will take place." In Galveston County, it was customary for the buyer to pay the premium. In Harris County, 50 miles away, it was customary for the seller to pay the premium.
Finally at the urging of lenders, underwriters, as well as agents and the public, contractual forms that attempt to treat all parties equally, were promulgated. We're required to use them, unamended, unless the contract we use has been drawn by a state licensed attorney.
The craziness of all of this, though, is that builders are exempt. Consequently, they usually demand that their own forms be used, and that the client negotiate through a sales person who has not proved they are qualified by becoming licensed. The transactions more often than not, are horribly one-sided, favoring the builder.
And on top of that, relocation firms are allowed to append our promulgated forms with multi-page addenda which causes our state approved contract to be impotent. Our contract says all plumbing, electrical and mechanical must be in good working order at the time of closing.
An addendum to that contract that I saw today, that was attached at the insistence of the relocation firm, said anything found not functional after the execution of the earnest money contract was the problem of the buyer. Further, it said that in cases of inconsistencies between the contract and the addendum, the addendum would be favored.
It's past time for the state to clear up these quagmires. It's past time for Realtor associations -- local, state and national -- to aggressively lobby for change.
In the meantime, no buyer should accept these homemade documents and amendments without their being reviewed by legal counsel. And no buyer should ever deal with a new home salesperson without having a licensed buyer's agent there to represent him.
BILL CHERRY, REALTORS
DALLAS - HIGHLAND PARK
Our 45th Year
214 503-8563
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