Handling real estate contracts is a complex task. When creating your contracts, you need solid legal advice to avoid costly mistakes. For instance, if you’re brought to court, ambiguity in a contract can make a judge rule against you. Likewise, some contracts become unenforceable by the nature of how they’re worded.
Not all challenges arise within the legal system. Some of the biggest contractual challenges occur with preparing, filing, and enforcing a contract.
Here are some solutions to the most common contractual challenges in the real estate industry:
Handling Signature Styling
The way business entities are required to sign a document is known as signature styling. When a client is conducting business as an LLC, it’s important to ensure the client signs on behalf of the company and not as an individual. An incorrect signature can invalidate a contract.
The best way to avoid this problem is to secure a copy of the company’s Articles of Organization and Signatory Resolutions. These documents will give you the correct and full legal name of the business entity, member names and titles, and will also tell you which members can enter into a binding agreement on behalf of the company.
It’s equally important to check on a business through the Secretary of State to make sure the business is legitimate and in good standing.
Achieve Impeccable Organization
Handling your contracts requires impeccable organization on your part. There will be times when you’ll need to reference information in your contracts or make copies. Without a meticulous filing system, it’s hard to find a contract when you need it.
The difficulty of a disorganized filing method is multiplied when you’re on the road. For instance, do you put your paperwork in a briefcase with the intention of filing it later? Do you place your paperwork in a pile on the front seat until you get back to your office? Do you actually file all of your paperwork when you get home, or do you let it pile up?
When you deal with paper contracts, you can’t actually organize them until you get home, at which time you might be too tired. This issue is solved by using a portable scanner to immediately scan and file your documents the moment they’re signed. By immediately converting your paper documents to digital files, you can wait to file your papers until the weekend, and still have access to the documents from anywhere. You can also email a copy of signed documents directly to your client on the spot.
Handling a Breach of contract
Hopefully, you’ve outlined dispute resolution options in your contracts. If not, and your client defaults on a contract, you can retain their good faith deposit and terminate the contract. Or, you can sue for breach of contract or file a lawsuit forcing them to complete their agreement.
Before handling a breach of contract, always consult a lawyer to make sure you’re within your rights.
Maintaining Data Security Standards
While contemplating the ease of emailing contracts to clients, you also need to consider data security. The Consumer Financial Protection Bureau (CFPB) regulates how realtors protect client privacy. The CFPB is a regulatory organization that came out of the Dodd-Frank Act, and violations can come with fines of up to $1 million per violation per day.
As a realtor, you’re subject to a wide range of laws including state, federal, and local laws. You need a compliance strategy that covers them all, and that should include being strategic with how you handle data security.
According to data security experts at Virtru, realtors are required to protect personally identifiable financial information like names, addresses, social security numbers, information about transactions, court records, and credit scores. Sending unencrypted digital contracts over email exposes personal information to potential hackers. Hackers might be monitoring the network, or they might gain access to your email server in a data breach. Both scenarios happen regularly.
While you can convert contracts into PDF files and password protect those files, the easiest solution is to use an application to encrypt all data sent over email. Or, use a combination of both.
Consult Your Attorney Regularly
Laws and regulations change often. Check in with your attorney regularly to make sure your contracts are still solid and adjust them when necessary. Researching online will give you a heads up about new laws that govern your business dealings, but a lawyer will always be the best source for the facts.
