DID YOU KNOW???.....

DID YOU KNOW???…..

…that there are at least TEN points in a standard One to Four Family Residential Contract promulgated by the Texas Real Estate Commission that, if not paid close attention to, could cost a seller thousands of dollars??? 1. The new contracts, mandated as of March 1, 2011, which are dated 2-14-2011, now include several items in paragraph 2.B&C that require certain things in a property to be included in the sale that a seller may want to exclude. Items like mirrors, television antennas, satellite dish system AND equipment, mounts and brackets for televisions and speakers, water softener systems, swimming pool equipment, and ALL window shades, draperies, and rods, to name a few. If a seller is not paying attention to this paragraph it could cost them money due to an oversight of excluding items they value and want to retain.

2. Paragraph 6.B. states that a title commitment will be provided to a buyer, by the seller, within 20 days of the effective date of the contract (when both parties agree to terms and sign the contract) and the buyer has a negotiated time after that to object or withdraw from the contract due to the information in the commitment. If the commitment is not delivered timely, the buyer may wait an additional 15 days or up until closing and could have a “free walk away” from the contract regardless of what is agreed upon during the option period. With multiple contracts, this could cause the loss of another more appealing offer or at a minimum the loss of marketing time if the buyer withdraws at the last moment.

3. Paragraph 6.C. is a little tricky with regard to the seller providing the buyer with an old survey, which is typical but must be paid special attention. If the survey AND a T-47 affidavit stating there have been no changes to the property foot print since the survey was prepared are not delivered within a negotiated time, then the seller could be at risk for buying the purchaser a new survey which could be a $400-$600 expense to the seller.

4. Paragraph 6.D. allows the buyer a negotiated time in days, after the title commitment is received, to object to items on the title commitment. This line is well hidden and often times overlooked by agents who then leave the time for review and objection open ended. A costly mistake for a seller in terms of risk and time.

5. Paragraph 7.B.2. addresses the delivery of the seller’s disclosure notice to the buyer within a negotiated time in days. If the deadline is missed, the buyer may terminate the contract at ANY TIME up until closing and the earnest money will be refunded to the buyer. This gives complete control to a buyer in a transaction and minimizes any leverage in negotiations that a seller may have.

6. Lender required repairs are not REQUIRED to be paid by either party to the transaction. If a buyer refuses to pay lender required repairs, he may terminate the contract; however, a seller could pay the repairs to keep the contract in tact unless the cost of repairs is over 5% of the sales price in which case the buyer has complete control over that decision.

7. Paragraph 9.A. addresses the closing date, the most exciting date on the contract! However, if you as a seller are paying off a FHA loan, be careful. If the contract states closing to be on or before April 30 and some unknown delay in the loan process or repairs takes place causing the closing to be pushed one day to May 1, you Mr. Seller get to pay a whole month of additional interest on your payoff. FHA payoffs are always calculated as the full month of the month in which the closing takes place, so be sure to pay off that loan at the end of the month or a day or two early.

8. Paragraph 12.A.1.B. is another obscure line item that is sometimes overlooked. It is where the buyer asks the seller to pay for part or all of the buyer’s closing costs. If skimmed over in the review of the offer this could be extremely costly since many buyers may request $3-5,000 or more in closing costs from a seller.

9. Occasionally, buyers and sellers cannot come to agreement or something is found in the property inspection that is a “deal-killer” for the buyer without negotiation. At that time a termination and release of earnest money is required. If either party wrongfully fails or refuses to sign a release acceptable to the title company within SEVEN days of receipt of the request they will be liable for liquidated damages in an amount equal to THE SUM OF three times the amount of earnest money, the earnest money, reasonable attorney fees, and all costs of the suit! A seller cannot re-sell his home until that escrow item is cleared or title will be clouded.

10. LAST BUT NOT LEAST! Of the many items in a contract requiring attention, this is the last major point that should not be overlooked by a seller. The termination option is the term (usually 5-14 days) during which the buyer pays a nominal fee to perform all due diligence and inspections. The buyer can walk away for ANY or NO reason and only forfeit the negotiable option fee (usually $100-200) and still have their earnest money protected. HOWEVER, if the seller does NOT receive the option fee within two days after the effective date of the contract or if the option fee amount is left BLANK, the termination option is NOT a part of the contract and the buyer has NO UNRESTRICTED RIGHT TO TERMINATE the contract. A huge mistake on a buyer agent’s part and a windfall for the seller in terms of negotiation.

I am not an attorney and cannot and will not appear to practice law. These are my interpretations after 30 plus years of experience and any buyer or seller should seek the advice of an attorney if they are not comfortable with any terms of a contract. My comments come from actual transaction experiences and strategies developed over time and, I believe, are solid guidelines for structuring an offer to sell residential real estate. Call a Realtor with experience. Don’t Do It Yourself or you could be sorry.

(photo is “Clueless” by Blyzz)