Top 10 Questions Answered:
*CONTRACTS*
*Q 1. What is a contingency in a real estate contract?*
*A* A contingency is a contractual provision that gives a party to the
contract the ability to condition performance on the occurrence or
non-occurrence of a certain event. Let’s say, for example, a buyer has a
17-day inspection contingency under C.A.R.’s standard form Residential
Purchase Agreement and Joint Escrow Instructions (Form RPA-CA). The
inspection contingency works as a protection for the buyer. It allows the
buyer to conduct investigations and review disclosures, reports, and other
information affecting the property. If the buyer is satisfied with the
condition of the property, the buyer may perform on the contract. If, on
the other hand, the buyer is dissatisfied with the condition of the
property, the inspection contingency allows the buyer to cancel the contract
and get back his or her earnest money deposit if any.
C.A.R. Legal Articles:
• Contract Law and Real Estate
Transactions<http://www.car.org/legal/2007articles/contract-law-re-transactions/>
• Contingencies and Contingency
Removal<http://www.car.org/legal/2008articles/contingencies/>
*Q 2. What are mediation and arbitration?*
*A * Mediation is a type of dispute resolution that generally occurs
outside the court system. In mediation, a neutral third person called a
“mediator” assists parties in a dispute. The mediator facilitates
discussions and negotiation between the parties to help them reach a
mutually-acceptable settlement of their dispute. The mediator generally has
no power to impose a decision on the disputing parties.
Arbitration, on the other hand, is another type of dispute resolution that
also occurs outside the court system. In arbitration, the parties submit
arguments and evidence to a neutral third person called an “arbitrator.”
The arbitrator will generally render a decision to resolve the dispute,
similar to what a judge and jury do in a court trial.
C.A.R. Legal Articles:
• Private Arbitration and Mediation for Your
Clients<http://www.car.org/legal/arbit-mediation-ethics-folder/private-arbit-med-clients/>
• Mediation for the
Consumer<http://www.car.org/legal/arbit-mediation-ethics-folder/mediation-for-consumer/>(also
available in Chinese, Korean, Spanish, Tagalog, and Vietnamese)
• Arbitration for the
Consumer<http://www.car.org/legal/arbit-mediation-ethics-folder/arbitration-for-consumer/>(also
available in Chinese, Korean, Spanish, Tagalog, and Vietnamese)
*DISCLOSURES*
*Q 3. Is there a checklist I can use to make sure I give my clients the
legally required disclosures?*
*A * Yes. C.A.R. offers easy-to-reference disclosure charts to guide
REALTORS® through the disclosure requirements for common types of real
estate transactions. These charts are frequently updated to include new
federal or state disclosure requirements, such as the Agency Disclosure
Statement, Transfer Disclosure Statement, Natural Hazard Disclosure
Statement, smoke detectors, water heater bracing, and so on.
C.A.R. Legal Articles:
• Sales Disclosure
Chart<http://www.car.org/legal/2010-disclosure-charts/sales-disclosure-chart/>
• New Home Disclosure
Chart<http://www.car.org/legal/2010-disclosure-charts/new-home-disclosure-chart/>
• Lease/Rental Disclosure
Chart<http://www.car.org/legal/2010-disclosure-charts/lease-rental-disclosure-chart/>
• REO Disclosure
Chart<http://www.car.org/legal/2010-disclosure-charts/reo-disclosure-chart/>
• Summary Disclosure
Chart<http://www.car.org/legal/2010-disclosure-charts/summary-disclosure-chart/>
*COMMISSIONS*
*Q 4. I recently showed a home to a buyer. Without first letting me know,
the buyer wrote an offer to purchase that home using an agent from another
office. Yet, the buyer had already signed with me a Buyer Representation
Agreement – Exclusive (C.A.R. Form BRE) and an Agency Disclosure Statement
(C.A.R. Form AD. Aren’t I, not the other agent, the procuring cause
entitled to receive the commission for this sale?*
*A* It depends. Whether you are entitled to recover the commission as the
procuring cause depends on many factors, including, but not limited to, your
conduct, your relationship to the transaction, the other agent’s conduct,
the other agent’s relationship to the transaction, the buyer’s choice, and
the timeline of events. If you and your broker decide to pursue a procuring
cause claim, you would file an arbitration complaint against the other
agent’s employing broker at your local association or multiple listing
service (MLS). Whether your broker or the other broker will prevail as
procuring cause will ultimately be decided by the arbitration panel.
Additionally, in your particular situation, you and your broker may be able
to pursue a commission claim against the buyer under your Buyer
Representation Agreement – Exclusive (Form BRE).
C.A.R. Legal Articles:
• Procuring Cause
Guidelines<http://www.car.org/legal/2006articles/procuring-cause/>
• Commissions <http://www.car.org/legal/2008articles/commissions/>
• Buyer-Broker Agreements (C.A.R. Forms BRE, BRNE, BRNN)
<http://www.car.org/legal/2007articles/buyer-broker-Agreements/> •
Buyer-Broker
Agreements: Q&A for
Consumers<http://www.car.org/legal/2007articles/buyer-broker-qa-for-consumers/>
*SHORT SALES AND FORECLOSURES*
*Q 5. My client is a distressed homeowner facing foreclosure. Will a short
sale be better for his credit score as compared to foreclosure?*
*A * No. According to www.myfico.com, both a short sale and foreclosure
are considered very negative events for someone’s credit rating because they
are not “paid as agreed” accounts. Furthermore, www.myfico.com states that,
as far as a FICO score is concerned, “there is no difference between
foreclosures and short sales.” A distressed homeowner may have other
reasons to prefer a short sale or foreclosure, but the two options have the
same impact on someone’s FICO® score.
C.A.R. Legal Articles:
• Credit After Foreclosure, Bankruptcy, or Short
Sale<http://www.car.org/legal/legal-questions-answers/2009-qa/credit-aft-forecl-bankrup-short/>
• Short Sales <http://www.car.org/legal/2008articles/short-sales/>
• Taxation of Foreclosures and Short
Sales<http://www.car.org/legal/2008articles/taxation-foreclosures-shortsales/>
*Q 6. In acting as a buyer's agent, I submitted an offer to an REO lender
on C.A.R.’s California Residential Purchase Agreement (Form RPA-CA). In
response, the REO lender gave us a counter offer with a 10-page addendum
containing many terms that seem unfavorable to the buyer. What should I do?
*
*A * You should advise the buyer in writing of these provisions and
strongly encourage the buyer to consult with an attorney. You may use
C.A.R.’s standard form REO Advisory (Form REO) for this purpose. The REO
lender's terms and conditions are matters of negotiation for a seller and
buyer entering into a purchase agreement. Your buyer may elect to accept
these terms, reject these terms, or attempt to change them. Some real
estate practitioners believe that REO lenders will not deviate from the
boilerplate terms in their agreements, but that's not necessarily true in
every circumstance.
Some examples of the potentially unfavorable terms for an REO buyer to
consider are, without limitation, requiring a buyer to prequalify with the
REO lender, requiring an “as is” clause, disallowing contingencies
protecting the buyer, refusing to do repairs, charging a per diem for any
delays in closing escrow, and requiring the buyer to waive certain rights.
C.A.R. Legal Articles:
• REO Transactions<http://www.car.org/legal/2008articles/reo-transactions/>.
*AGENCY*
*Q 7. I’m a buyer’s agent. I just finished helping my client write an
offer to purchase a property. When I submit the offer, do I give the
listing agent and seller a copy of the agency disclosure form signed by my
buyer and me, or another agency disclosure form signed by just me?*
*A * Either way is acceptable if you use C.A.R.’s Disclosure Regarding Real
Estate Agency Relationships (Form AD), as revised in November 2009. Under
the traditional approach, agents generate three AD forms. The first AD form
is generally signed by the listing agent and seller before entering into a
listing agreement. Absent dual agency, the second AD form is generally
signed by a buyer's agent and buyer before writing an offer. The third AD
form is generally signed by the buyer's agent and seller. An AD form signed
by the buyer's agent and seller does not create an agency relationship
between the buyer's agent and seller because the AD form is merely an
information sheet. The actual confirmation of agency is stated separately
in paragraph 27C of the C.A.R. Residential Purchase Agreement (Form RPA-CA).
In November 2009, C.A.R. revised the agency disclosure form to give a
buyer’s agent the option of using just one form for both the buyer and
seller to sign. As stated in the explanation box at the bottom of the
revised AD form, agents will still prepare the first and second AD forms as
stated above. The buyer's agent, however, may now deliver to the seller the
second AD form signed by the buyer's agent and buyer. The seller may sign
acknowledgement of receipt of that AD form on the signature line in the
explanation box. No third AD form is needed under this new alternative.
C.A.R. Legal Articles:
• Agency Disclosure and
Confirmation<http://www.car.org/legal/legal-questions-answers/2009-qa/agency-disclosure-confirmation/>.
*REFERRAL FEES*
*Q 8. My neighbor referred a client to me. May I pay my neighbor a
referral fee?...
- NUMBER1EXPERT® 
