Choosing a buyer’s agent isn’t just about finding someone who knows the neighborhood, can commit to the time necessary to helping you find your perfect place and can get you to settlement smoothly — it’s also about finding someone with the smarts and detail-oriented know how to help you navigate the plethora of legal forms that you’ll sign binding you to the house you’ll eventually buy.
Most agents are not lawyers, and therefore are not allowed to practice law. But since most buyers don’t meet a lawyer involved in their transaction until settlement, the agents are their primary guide to understanding the impact of what they sign.
For sellers, too, an agent must also be savvy with the ins and outs of the contracts. For buyers and sellers alike, having an intelligent agent who knows the fine print of the standard contracts can give them a huge advantage in the transaction. Most agents use the Regional Sales Contract in the D.C., Maryland and Virginia area around Washington, and there are a number of unexpected surprises contained in those forms, so as a buyer or seller, it helps if you know a few of them too:
1. The contingency expiration date that never comes
Buyers count on contingencies to protect them in the event they find something out during the process that changes their ability or desire to buy the property. Sellers count on those contingencies ending at some point so they can have confidence they’ll actually get to settlement.
Two big contingencies, the financing and the appraisal contingencies, have expiration dates that can come and go, but still remain in effect, even all the way until settlement. The financing contingency does not expire until the seller gives notice (an official signed document pertaining to the transaction) that the deadline has expired. But if the buyer doesn’t remove the contingency within three days of receiving this notice, the contract dies.
The language is worded thus to protect the buyer, obviously. Unfortunately, the effect this generally has is that sellers are so scared to deliver the notice (and therefore risk the contract dying) that they don’t do so, and then the contingency deadline loses all meaning since it goes on indefinitely. Often, sellers don’t even know they have to give notice, especially if they are working with an agent who may not know the contract so well, and think they can take the earnest money deposit (often tens of thousands of dollars) if the buyer doesn’t qualify for the loan after the expiration, only to find out they can take nothing.
Similarly, the appraisal contingency deadline can also come, go, and still remain in effect if the seller does not give notice of that deadline’s expiration. The difference is that if the buyer doesn’t respond in three days, that contingency expires, but the contract survives. Therefore, every good seller’s agent should deliver notice immediately upon expiration of that contingency to ensure the seller is duly protected. Most other contingencies in the standard Regional Sales Contract expire upon their expiration date.
2. The attachments that don’t convey
Most buyers and sellers who have some experience in the market know that attached fixtures (elements of the house or decor that are physically attached to the property in a relatively permanent way) convey, or come with, the property without express written agreement. So the sofa goes, the light fixtures stay; the lamps go but the mantelpiece stays — unless agreed to otherwise in writing.
What about blinds, curtain rods, built-in refrigerators, and, most importantly as of late, wall-mounted flat-screen televisions? Well, good agents know that to ensure there is no dispute down the road, any ambiguous items should be identified and agreed upon in writing. But good agents know that some of these items are already excluded by default in the regional sales contract. For example, mounted televisions and speakers that extend outside the wall or ceiling do not convey unless otherwise agreed upon. Since they are affixed to the wall, many buyers and their agents assume they count as fixtures and will convey automatically. The contract says otherwise, so beware!
3. When digital signatures don’t count
Digital signatures are being used more and more frequently these days, and it’s understandable. In our area, a normal contract usually is more than 25 pages long, and sometimes it’s more than 50! Printing and faxing or e-mailing these docs back and forth has become a huge burden, even as internet speeds improve, so being able to enter a password and click to place your signature in a document on your desktop saves a lot of time and toner.
However, many agents who use digital signatures don’t get a digital signatures authorization form signed from the beginning that allows for digital signatures to be interpreted as valid in a legal sense. Without that one form signed, by hand, the entire contract could be considered invalid. The day of settlement, the buyer could simply walk away. Similarly, a contract originally agreed to in writing but then signed in subsequent parts digitally could be considered valid only until the subsequent parts that weren’t signed by hand. In that sense, if a buyer makes certain demands under the home inspection contingency but submits notice with a digital signature without an agreement to sign in such a way, they have effectively not given notice by the deadline and may lose all the rights to make such demands once the deadline expires.
4. Never leave the blank blank
In the regional sales contract, there are hundreds of blank fields that agents fill in to get the deal done. Many of them simply don’t apply to the transaction; condo language doesn’t apply when you’re buying a single family home, and language that clarifies how a mortgage is to be assumed almost never pertains to transactions these days. But if a blank is left blank in an active and applicable section of the contract, rather than crossed through or filled in with “N/A,” it may eventually come back and bite you, whether you’re a buyer or a seller. For example, says Jason Sherman of Paragon Title Company, in a condominium transfer where there is no special assessment as of the contract date, but one comes up before settlement, there is no clear indication of who will pay it unless the agents fill in one of two options on the condominium addendum. When there’s no assessment it’s almost always left blank, but if an assessment comes in mid-stream there will be problems.
These are just a few of the more common errors I see practiced by inexperienced agents, or misunderstood by most buyers and sellers. But of course there are many more pitfalls that can sneak up on you. That’s why your choice in your Realtor shouldn’t just be based on whether he or she can make small talk at a cocktail party or has a nice advertisement. It should hinge on your confidence that they can handle the tricky — and often costly — intricacies of the legal documents you sign too.
David Bediz is a Realtor at Coldwell Banker Residential Brokerage and part of the Dwight and David Real Estate Group. He can be reached at 202 352 8456 or through www.DwightandDavid.com. He is not a lawyer and none of this article shall be construed as legal advice.