You cannot practice law in the area of real estate for any length of time without acquiring a collection of stories about clients who have created their own problems. Typically the problems arise when the individual has entered into a contract without the benefit of counsel. Often clients come to closing expecting to have "details" magically resolved to their liking; however, in many instances the direction of the transaction was determined the moment the client signed the contract. Here are a few stories from my collection.
TRANSACTION NO. 1: After being shown several homes, the buyers express interest in a home recently listed with their real estate agent's office. Immediately, the agent portrays the situation as being urgent, because at that price the home will sell quickly. Late one evening the agent appears at the buyer=s front door. The agent warns that another offer is forthcoming the next day and if the contract is not signed immediately, the buyers will lose the house. The buyers have not made up their minds, but influenced by the salesperson's conviction, they sign the contract drafted by the agent. They also provide a small initial deposit, based upon the agent's reassurances that at worst case the deposit will be forfeited if they decide they do not want the home.
The next day, the agent - motivated to ensure there is a binding transaction generating a commission on both sides of the closing for his office - obtains the seller's signature on the contract. During that day the buyers re-visit the neighborhood and conclude that the house is really not big enough. They call the agent to inform him of their recision of the contract. At that point however, they receive some startling information about their obligation for an additional deposit set forth in the contract.
After speaking with an attorney, they learn that indeed, they have a legal obligation to pay the additional deposit. In this case, however, we were able to get them out of the contract without major dispute based upon the actions of the agent. In most cases, that would not have been the case.
TRANSACTION NO. 2: Our client delivers to us two signed contracts. The first is for the sale of his current home, and the second for the purchase of a more expensive home. The purchase contract contains no contingency for the closing of the sale of his existing home. One week prior to closing, the buyer of his current home, in the ultimate attempt to get out of the contract, dies. The client now has no ability to close upon the purchase of the new home and faces a forfeiture of a large deposit, significantly more than the deposit paid by the deceased buyer.
The story ended happily, except perhaps for the deceased buyer. Both transactions were high priced and large deposits were at stake. After the buyer's estate was advised that it would forfeit the deposit (death not being an excuse in the law for non-performance), the sole heir decided to close upon the purchase. Even though a bit late, both transactions closed.
TRANSACTION NO.3: A single person signs a contract to purchase a home in a country club community, putting up a relatively small initial deposit. He returns to his home in Boca Raton to inform his long term girl friend that they are soon moving to Northern Palm Beach County into a wonderful new home. His girlfriend refuses to move without first getting married. Realizing that he may have been hasty, the buyer attempts to cancel the deal, instructing the agent to just give the seller the initial deposit. Our firm enters the picture when we are retained by the seller. We inform the buyer that under the contract the deposit to be forfeited is not only the deposit already paid, but all deposits required to be paid under the contract. The buyer seeks counsel who confirms the obligation. To save his significant obligation, the buyer proceeds with the deal and pays the additional deposit. (Ultimately the buyer forfeited the entire deposit the day before closing due to the same personal relationship. Apparently, he had more complications in his life than just real estate.) The buyer could have avoided this loss altogether had he understood the need to add a clause either modifying the deposit provision or allowing a review period.
Buyer and seller predicaments arise from many circumstances, such as: failure to define the inventory of personal property being sold; failure for a buyer to realize until after closing that one of their vehicles or pets is not permitted within the community property; and purchasing a home and only then learning that the new owners cannot join the community country club. The facts are varied, but the failure to understand the contract is common.
Usually, whether dealing with a developer or buying from an individual seller, a selling party will permit the buyer to add a provision allowing the buyer to seek advice of counsel within a brief time (3 to 7 days). A well-written provision can clearly state that the contract is subject to the review and approval of the buyer=s (or seller=s) attorney. The job of the attorney should not be to negotiate a better deal for the party or otherwise change the business transaction. Counsel should advise the client as to the legal requirements of the contract and advise if there are ambiguities or issues not addressed. In that manner, the client can understand the detail of a transaction and knowingly decide if there are issues that need further clarification.
The purchase and sale of a home is a major event in one's life. Retaining an experienced real estate attorney in advance of signing a contract for sale or purchase can protect your investment and assist in ensuring that the transaction proceeds smoothly and in accordance with the party=s expectations. Once a contract is signed, however, obligations are defined - whether or not that party understands the details of the contract. The best and most practical advice is simple: See an attorney prior to signing the contract, or make sure any contract you sign includes the right to seek counsel before it becomes binding on you.