What do you mean my contract is unacceptable.

By
Real Estate Agent with Residential, Investment properties, rehab projects, property management, luxury homes, new construction!

A while back, an agent sent over an offer on a short sale that I had listed. 

Not his Real NameAgent Billy Baldwin presented a contract that was full of errors which, if left uncorrected, would have left my seller open to issues and liability.  Keep in mind that I have the listing and am working with the seller.  I do NOT have ANY fiduciary responsibility to watch out for the buyer other than to act fairly and honestly.

So I thanked Billy for his offer and requested that the following corrections be made before I could present it to my seller:

1.  The purchase contract is not signed by the buyer and is therefore not acceptable as an offer on the property.
2.  Your purchase contact refers to repairs after inspection but this is a short sale and the seller will not make any repairs to the property.
3.  Special provisions sections refers to a carpet and paint allowance but the home is as is and no allowance will be permitted by the lender in MOST cases.  If you would like to submit with an allowance,  you will need to specify the amount.
4.  Earnest money amount is unacceptable and must be in line with market norms of 1% of offer value.
5.  The property is already listed well below market value and your offer is $50,000 below that AND requests carpet and paint allowance AND closing cost assistance.  I would expect that if this is a serious offer and your buyers are sincere about obtaining a home and not just looking for a bargain, a revision of the offer to something more in line with the current market would be suggested.  I do not want to waste anyone's time as the short sale process can be drawn out as it is without unnecessary delays going back and forth on counters to get to market value.
6.  All necessary addenda should be included with this offer.  The property is part of a mandatory HOA and is a short sale.  Addenda for those items should be included.
7. A pre-approval letter from the buyers lender that indicates the sales price of the  home as well as indicating that credit and assets have been verified is required.
8.  The third party financing addendum is not complete (values are missing for origination charge and appraised value).  Additionally, 4% interest is not acceptable.

Ron the Broker

The next day, Billy came back, acting like an obedient dog who had chased down a frisbee for his owner and asked, "How'd I do this time". 

Umm, Billy...that scares me. Oh yeah, I'm scared

So I looked over the contract, found many MORE new errors and recommended that Billy might want to get his broker, Alec B to assist him in completing the TREC contract and protecting his buyer.  I asked for these corrections to be made:

1. Line 7(d) 2 can not be submitted with a general statement of repairs per inspection.
2. There is no closing date specified.  I understand with a Short Sale it's hard to specify a closing date but put 30 days and if need be because of the approval process we can amend it to denote the proper closing date.
3. Please place the Title company with XXX Title as we need to specify some title company and escrow agent.
4. Per my seller, the earnest money deposit at $500 is not sufficient. 5.  Section 16, no box is specified for Mediation.
6. Line 4A should be $154,400 and not $160,000.
7.  In your Third Party Financing Addendum,  per my seller, the interest rate must be 5% or more to be market rate.  In addition, there is no origination fee specified and the amount needed for appraisal can not be more than the amount they are looking to finance ($154,400) as you have $180,000 in that spot.
8. I will submit with the request for repair allowances for carpet and paint but I will need a letter from the buyer's lender stating that they are allowed these allowances and whether the amounts are to be escrowed for specific purpose. If their loan program does not allow these funds to be disbursed, the seller's lender would keep any funds disallowed by the buyer's loan program.
9. The seller will NOT be able to furnish subdivision information as they do not have the ability to have that ordered separately from closing.
10. The HOA amendment and Third Party Amendment are not signed by both buyers.
11. There is no loan officer signature on the Preapproval letter and we have been unable to verify the pre-approval letter.  

 So off went Billy again after arguing with me that $500 earnest money is sufficient by law.  I tried not to hurt his feelings but let him know that it's negotiable and my seller was not willing to accept $500.

  When the offer finally came back, the offer amount had increased substantially and I felt they were finally serious about the offer.

Let's Make a Deal

As I perused the offer, the issues I had asked be addressed were corrected.  The $4000 carpet/paint allowance was gone and the option period was left blank.  It probably should have been filled out but that's not MY fiduciary responsibility to protect the buyer here. (this becomes important very soon).  Instead of an option period, Billy inserted this phrase in special provisions:

"Contract to be terminated if inspections find the house to be uninhabitable"

Ok...I already KNOW the house isn't inhabitable because my sellers were living there just last week. 

We signed executed and sent off to lender for short sale approval...

LIGHTNING FAST Wells Fargo answered us in about 48 hours.  We were approved.  (SMALL CHEER FOR WELLS FARGO!)

Inspections occured.

Billy called me to tell me that he really screwed up and his buyer is TICKED.  He "FORGOT" to add the $4000 carpet allowance and could I "give the buyer" $2,000 of my commission. 

 

I explained that it was time to put on his big boy pants and fix another one of his errors...perhaps even call in Broker Alec but that I was NOT donating my paycheck to the buyer who was already about $50,000 under market on this house!

 

 

The buyer then comes with a TERMINATION OF CONTRACT because of Water penetration and a superficial 2 inch hairline crack in the foundation  (which our inspector determined to be NOT foundation failure).  The water penetration was a large stain on the ceiling that had been there the entire time and if they had just looked above the stain, they would have seen the A/C Unit and realized it was a drip pan overflow...nothing permanent or serious.

So, I know this has been a LONG story, but does the buyer have the right to terminate this contract based on the house being "INHABITABLE" ?

Does the buyer have the right to terminate at ALL if an OPTION PERIOD is not specified and accompanied by proper compensation?

Does the buyer realize how poorly Billy Baldwin (who, by the way never contacted Brother, umm I mean Broker Alec for help) performed his duties for her?

Does the buyer realize that while discussion of the return of said earnest money, that Billy snapped at the listing agent not to bother him at work at Home Depot, errr, on the set of his new movie, "INCOMPETENT AGENT "000""?

 Do answer...I'd love to hear your thoughts and then tell you "THE REST OF THE STORY" as they say....it will shock you!

 

Comments (6)

Allen Stout
Allen at OklaHomes Realty, Inc. - Claremore, OK
Realtor you can trust

Why didn't the seller just reject his offer or rewrite it for a counter.  That would have saved a lot of time and aggravation. 

Mar 29, 2011 05:08 PM
Chuck Carstensen
RE/MAX Results - Elk River, MN
Minnesota/Wisconsin Real Estate Expert

That is a crazy amount of errors.  You were teacher for the day I guess!

Mar 29, 2011 05:16 PM
Michael C. Price
Keller Williams - Ann Arbor, MI
Ann Arbor-Real Estate Strategist

Gosh.. I would quit if I made that many errors on one contract

Mar 29, 2011 05:22 PM
Harriet Maj
Classic Realty Group - Orland Park, IL
Professional & Caring Real Estate Services

WOW! Great Story of life in the trenches, super Art & You have a great sense of humor! Based on the inspection wording, did he really say inhabitable or uninhabitable? quite a big difference don't you agree? If it does say inhabitable, then yes, i guess the buyer can back out. I feel sorry for all concerned! do tell us the ending, PLEASE.

Mar 29, 2011 05:28 PM
Michael Jacobs
Pasadena, CA
Los Angeles Pasadena 818.516.4393

Hello Ron --- okay, so this is sarcasm gone wild???  Really wild???    I'm not sure there's anything in your post that could possibly have happened.   So let us all in on the joke.....

Mar 29, 2011 07:08 PM
Ron Tarvin
Residential, Investment properties, rehab projects, property management, luxury homes, new construction! - Katy, TX
Broker, Katy, Houston, Cypress 77450,77494,77095

I do wish this was sarcasm gone wild but it's just a transaction gone wild!

It's pretty simple though...if you don't pay for an option to terminate, you don't have an option to terminate!  Update will be along later!

 

Mar 31, 2011 01:41 PM