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Category Archives: Broker Buzz with Kerry

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Is the seller obligated to respond to an offer?

Is the seller obligated to respond to an offer?

QUESTION: I have a listing that was only on the market a couple of days when three offers came in from three buyers. The seller accepted one of the offers. Now, the broker who represents the buyer whose offer arrived first claims my seller had an obligation to negotiate with his buyer because his offer was presented to the seller first. Is this true?
ANSWER:

No. There is no Florida law that would require the seller to respond to any offer. Additionally, there is no Florida law that requires the seller to negotiate with each buyer in the order in which the offers were received. Furthermore, there is no Florida Law that would require the seller to respond to the buyer in the time frame that is indicated on line 45 of the FAR/BAR AS IS Contract for Sale and Purchase.  That is a protection for the buyer.  If the seller responds after that deadline and accepts the contract as it is written, but the buyer has changed their mind the buyer doe not have to move forward with the offer.

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Resolving Escrow Disputes and Re-Listing The property for Sale

As a Realtor, you need to be careful not to provide legal advice if your clients are in an escrow dispute. Instead, encourage them to refer to their contract for instructions on resolving their dispute and to consult a Lawyer if necessary. Many times, one or both parties will express frustration. Your best practice is to stay in touch with the escrow agent and the other party in the failed contract and continue to update your buyer or seller.
When a real estate transaction fails and there is a dispute over who retains the escrow deposit, there are usually provisions in the purchase contract that provide direction on how to resolve the disagreement. Most importantly, when addressing how a dispute is resolved and who resolves it always starts with the answer to this question: Who is holding the funds?

The Florida Realtors/Florida Bar As-Is Residential Contract for Sale and Purchase is the most common form purchase contract used, according to Form Simplicity statistics. Let’s use it to illustrate how this situation might play out.

The As-Is contract has a section in Paragraph 2 to illustrate who the parties agree will serve as escrow agent — the party that will hold the funds. This will either be the real estate brokerage or an escrow agent, such as a title company or a lawyer. (There is no preclusion who is allowed to hold escrow, so in some rare cases it may be another person or entity.)

Many brokers misunderstand the role of the entity holding escrow money. Escrow holders are neutral. They simply agree to hold funds and may only release the money if they feel legally allowed and will not be exposed to risk.

When a broker is the escrow agent

If the escrow agent is a licensed Florida broker, Florida law comes into play.  Since we don’t hold escrow and this generally is not the norm here I will not cover it here.

Escrow holder is not a licensed broker.

If the escrow agent is a title company, lawyer or someone other than a real estate broker, the dispute is handled as a civil matter initially. The dispute resolution section of the As-Is contract specifies 10 days for the buyer and seller to attempt to resolve the dispute on their own. If that is unsuccessful, the parties are required by contract to submit the dispute to mediation. The contract goes on to explain how the mediation must be handled. Many of these disputes go through a mediation process as part of the small claims process if the deposit in dispute is less than $5,000. If the two parties cannot agree how to divide or handle the escrow deposit, it becomes a legal matter.

The buyer has indicated they are cancelling but there is an escrow dispute can I reactivate the listing?

Yes. An escrow dispute, in itself, does not prevent the seller from advertising or selling the property. So you do not need the release and cancellation signed by both parties to activate the listing, you just need clear intent that the buyer is cancelling the contract.

Disclaimer: This article is for general informational purposes only and should not be construed as legal advice or a legal opinion on specific facts or circumstances nor a solicitation of legal business. You are urged to consult an experienced lawyer concerning your particular actual situation and any specific legal questions you may have. 

Thanks, Kerry

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What Is An Escalation Clause In Real Estate?

Broker Buzz with Kerry!

An escalation clause in real estate, has actually existed for quite some time but is not commonly used in Brevard County.  It is an additional  clause that can be included in a purchase offer that informs a seller that a buyer is willing to beat out competing offers.

Here are some tips if you are the buyer/buyers agent:

  • You should only use one when you are in a multiple offer situation.

  • It is up to the seller if they want to accept and/or consider it.

  • How much is enough, is $1,000 more than the highest offer enough or is $3000 better.

  • How will it effect your buyers loan?  Don’t escalate outside the pre-approval zone.

  • How high is the buyer willing to go and will the property appraise and will this put your offer at a disadvantage?

  • How will the list agent or seller view it and might this put your buyer at a disadvantage.

  • Make sure you ask for proof of the highest offer

 

What does a well written escalation clause look like?:

In the event of multiple competing offers, the buyers will offer $_____ over the highest offer’s net up to a purchase price of $________.  In the event of an escalation, seller is to provide the buyer with proof of competing offer (contract), along with proof of funds/ pre-approval with personal information blacked out.  Seller represents and warrants that competing offers are true and valid offers.

(If the buyer is willing to go up to any price because they are paying cash, then you could leave out the part about up to a purchase price of $_____)

 

If you have any questions regarding this OR any other real estate questions, please contact me!

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Showing Property

In case you missed the email from Leah, here is an important reminder:

It has come to our attention that there have been recent incidences of REALTORS® showing homes and failing to secure the properties when they left.
It is extremely important that you make sure you secure the premises when you leave a property. In many cases, the sellers feel violated and fearful when they return home to find their properties have not been properly secured.
Remember, it’s a privilege to be allowed in a person’s home when he or she is not there. Additionally, failing to properly secure a property after a showing could be a violation of the REALTOR Code of Ethics.
As a REALTOR®, you have an obligation not to interfere with the contractual agreement between the listing REALTOR® and the sellers. Leaving a home open for burglars, vandals and/or assailants could jeopardize that listing agreement.

 

Sincerely,
Leah Selig
CEO, Space Coast Association of REALTORS

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