In order to make a prospective buyer’s offer more attractive to a seller, we sometimes see buyers take risks that impact certain key contractual protections.  A few examples that we have seen are
    • high initial deposits
    • financed transactions that are written as cash transactions, and
    • offers lacking any contingency for the sale of a buyer’s residence when the buyer does not otherwise have the cash to close
When writing up an offer that includes any of these items, it is important to have a thorough conversation with the buyer to make sure that the buyer fully understands the contract to prevent issues later on.
For example, if the buyer is choosing to submit an offer as cash but intends to finance the transaction, it is very important to understand that the buyer is losing the protections afforded under the financing contingency clause of the contract, as well as the ability to lean on any other protection in the financing section.  The buyer can no longer benefit from the automatic extension provision of the FR/BAR Contract in the event that delivery of the Closing Disclosure by the lender is not timely made and the three-day rule would otherwise cause a delay in the closing date.  Additionally, the buyer cannot rely on the FR/BAR’s post-loan commitment contractual protections, such as
  •          the buyer not being found in default if property related conditions of the loan are not met
  •          if the appraisal is insufficient, or
  •          if the buyer’s bank completely dissolves mid-transaction
If you are assisting a buyer with an offer and the buyer elects to submit the offer as cash, when the transaction willin fact be financed, it is important that the buyer speaks to a real estate attorney if they do not fully understand the contractual safeguards they may be risking.
Another example of a risky offer is one that does not include any contingency in the contract for the sale of thebuyer’s property when the buyer does not otherwise have the cash to close.  In some such cases, buyers are under the mistaken presumption that they are still covered by the financing contingency as their loan commitment may be contingent on the closing of their first sale.  It is important that such buyers know that this may not be the case, as their sale may only be a requirement of their loan commitment when it is issued.  Without that contingency, if the buyer’s home does not sell, the buyer is nearly certain to be forced to breach the contract and risk losing the earnest money deposit if the buyer is unable to secure an extension from the seller.   This risk would be eliminated with the addition of language in the Additional Terms section of the offer, or by use of an additional Addendum.
If your buyer needs assistance understanding the legal implications of their offer or contract, or if you have any questions about any of the foregoing, contact your local real estate attorney.
Berlin Patten Ebling, PLLC
Article Authored by Jessica Featherstone, Esq.
This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.
All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged.
3700 South Tamiami Trail, Suite 200, Sarasota, FL 34239   P (941) 954-9991  F (941) 954-9992
247 Tamiami Trail South, Suite 201, Venice, FL 34285  P (941) 955-9991  F (941) 484-9992
8130 Main Street, Suite 206, Lakewood Ranch, FL 34202   P (941) 907-9022  F (941) 907-9024

Did you find this real estate law content useful, but need actual legal counsel?

Speak to a real estate attorney!

, , , , ,

Mind the Gap, Prevent a Bad Rap

  Offers well above market price are the new normal! As real estate attorneys, we are reviewing more and more contracts with additional terms or addenda attempting to resolve any potential appraisal issues related to the “Gap”. The gap can be easily be defined as the difference between the appraisal value and the purchase price.…

Get in the Zone

  As our local residential real estate market remains hot and single-family home inventory remains historically low, our team at Berlin Patten Ebling has seen an increase in vacant land contracts and zoning issues that naturally follow. With the tip-off of March Madness right around the corner, we believe it is a perfect opportunity to…

Well, That Escalated Quickly!

  Do I hear $500,000? $510,000? $520,000?! Sold to the highest bidder! No, this is not a BLOG about auctions, but rather about the feeding frenzy that is the current Southwest Florida residential real estate market. As anyone in the local real estate business knows, we are currently experiencing market conditions the likes of which…

“Will You Accept This Addendum?”

  Roses are red, Ink on contracts are blue, it’s the middle of season, which addendum is right for you? When writing an offer, addenda specifically tailored toward the current transaction might be included. Picking the perfect addendum, like finding a Valentine, can be challenging and overwhelming. The FAR/BAR Contracts are dense and full of…

“Can We Fix It? Yes We Can!”

  So you’ve entered a contract to sell your property. There are some repairs to be done, some which require permits, but the Buyer is willing to pay for the work to be done. The Buyer really wants the home and agrees to pay for the permitting, the work, and the materials. But what happens…

‘Twas The Night Before Closing…

  *’ Twas the night before closing and all through the house, not an issue was stirring not even a spouse. The deed and the mortgage were drafted with care in hopes that the couple would soon sign and share. The CD and Note were snug in the file, hoping to close the year-end in…

A Home Loan For The Holidays

  Oh, won’t you please close my loan before the holidays… No matter how I really need to be in this home… If you want to make me happy in a million ways… before the holidays, please just close my loan! My apologies to Perry Como for butchering his famous “There’s No Place Like Home…

Rebel Without a (Procuring) Cause

  Every listing agent knows that their commission is usually premised on the existence of a Listing Agreement. And every agent has also heard of the concept of “procuring cause.” A topic that is not so frequently discussed is how those ideas interact with one another and whether they can both apply to the same…

Use Caution When Attempting to Reduce Commissions in the Contract

  Every once in awhile I see handwritten clauses added to Section 20. Additional Terms of the Contract that attempt to reduce the commission that will be paid by the Seller to the Realtors at the Closing of the transaction. This typically happens when Brokers agree to a reduced commission as an enticement for the…
selby lights in bloom

Stealing Home

So the contract is signed, the earnest money deposit is in escrow, the lender has approved the loan, the survey is clean, the home inspection reveals no issue, and the closing date is set. What could possibly go wrong? You show up to closing only to find out that the Seller never owned the property! This scenario has…

Do You Have 2020 Vision for Your Closing?

On behalf of the entire BPE family, we want to wish everyone a Happy New Year. Its times like this where it can be helpful to reflect on the prior year, and since this year is 2020 (presumably the year of “perfect vision”), let’s take a step back and reflect on those instances where the…

Movers and Breakers

Moving day can be an exciting time for many!  However, the thought of moving always causes angst, frustration, and physical/emotional exhaustion.  To avoid most of these emotional and physical moving issues, Sellers and Buyers should research said issues and then eventually hire vetted and reputable moving companies. Moving companies come in all sizes (i.e., National to local) and shapes (i.e., service and costs). …

Standard Or “As Is?” That Is The Question

While Florida law requires no particular form of contract for a real estate transaction, the FR/BAR Contract forms are the most utilized and well-recognized residential contract forms in Florida.  The FR/BAR Contracts, created and approved by a collaboration between the Florida Association of Realtors and the Florida Bar, include two Contract forms: the Residential Contract…

Show Me The Money!

Disbursement instructions to closing agents come in all shapes and sizes, but they all have one thing in common. Each involves a specific direction to the closing agent to disburse the funds entrusted to the closing agent precisely as instructed. The most common form of disbursement instructions involve the settlement statement itself (which is executed…
Paper House

What you need to know about an action for partition in Florida

Florida law allows property to be owned individually, or jointly by several persons or entities.  We are often called on to help resolve cases where joint owners of a property cannot agree on the management or disposition of the property.  If the owners of property cannot resolve those differences through voluntary negotiation, they are sometimes…

Substituting Contract Pages

We have noticed an increase in a practice, that if not done with full and proper disclosure, could lead to substantial trouble for the parties involved, including civil liability, license forfeiture, or worse yet, criminal sanctions.  The practice involves changing and/or substituting pages to a fully executed contract.   While we recognize the reality that…

Counting Time Periods When Using The FR/BAR Contract Form

Under the FR/BAR Contract calendar days are used when calculating time periods versus the CRSP-12 Contract form, in which business days are used. Consequently, it is much easier to count time periods using the FR/BAR since you don’t have to worry about excluding national legal holidays when counting your time periods.  You don’t count the…

How to Effectively Use an Attorney From a Realtor’s Perspective

We have found with our experience that most real estate professionals are not aware of how they can most effectively utilize an attorney throughout a real estate transaction to not only protect themselves, but to better serve their clients. Many real estate professionals (and/or even their clients) are under the assumption that they will receive…

Addressing Financing Contingencies

Under the Financing Contingency paragraph of the FloridaRealtors/FloridaBar-1 Contract and As-Is Contract (hereinafter collectively referred to as “Contract”), when can the Buyer or Seller terminate the Contract and is the deposit returned to Buyer? Prior to Loan Commitment Date, Buyer notifies Seller in writing that Buyer can’t obtain financing after using diligence and good faith,…