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Commission Claims
If it doesn't close, is the commission owed?
Question (TX): Under a standard listing agreement, Section 5.B.1 states that the Broker's fee is earned if "a Buyer enters into a contract with Seller to purchase the Property." Does this mean a Realtor can claim a commission even if the Buyer bails after the option period on a contract?
Answer: Paragraph 5.B.1 of the Texas Association of Realtors (“T.A.R.”) Listing Agreement states something completely different from the language you included in your quotes. Section 5.B.1. actually states: “Broker's fee is earned when... (1) Seller sells, exchanges, options, agrees to sell, agrees to exchange, or agrees to option the Property to anyone at any price on any terms;”
The commission, however, not only has to be “Earned,” but it must also be “Payable” (5. C. 1-4).
As for the contract, there are all kinds and types of reasons (some legally justified and some not) that a buyer “bails” on a contract. If it is during the option period and the buyer has paid the Option Fee to the Seller, he has purchased the right to terminate the contract for any reason. If it is after the Option Period, he may or may not have a justified reason to terminate the contract. In either case he is obviously not a ready, willing and able buyer.
Posted May 25, 2010, 8:56am.
One agent - Two Buyers
Confidentiality is a must.
Question (TX): A single real estate agent is representing two separate buyers (buyer 1 and buyer 2) who are attempting to purchase separate town homes in the same complex from two different sellers(seller 1 and seller 2). This is occurring during the same time period.
It has come to light, that the agent is using contractual information from the negotiating process of offers/counter offers between seller 1 and buyer 1 (such as price, contributions to closing costs, etc.) in an attempt to influence the contractual outcome of the negotiating process between seller 2 and buyer 2. Is this contractual information from seller 1 and buyer 1 confidential or, in your opinion, is there a question of Realtor ethics in using this data?
Answer: There is potentially not only a question of Realtor Ethics (National Association of Realtors, Code of Ethics applicable to all Realtors) but also potentially non-compliance with Texas law. Confidentiality and Loyalty are two of the Fiduciary Obligations (among others) required by Texas law when a real estate licensee is acting in an agency capacity for a principal.
We’d recommend that if a real estate licensee has permission to disclose confidential, non-public information regarding a real estate transaction that it is in writing. Absent written permission from buyer 1 to disclose confidential, non-public information to buyer 2 and/or vice-versa, that real estate agent, if what you allege is accurate, would be in violation of the Texas Real Estate License Act and the Rules of the Texas Real Estate Commission.
Posted May 25, 2010, 8:55am.
Can they do that?
Landlord oversteps if all the documents were completed correctly.
Question (TX): My wife and I recently signed a lease to rent a house a month before the move in date. We have two dogs and have officially signed and paid all deposits. Now we have received an email stating there was an error on their part. The email requested us to pay an additional pet deposit and sign a revised pet agreement. Can this happen?
Answer: If the lease was accepted and delivered in accordance with the Texas requirements for valid contracts, our opinion is that the Landlord (or the Landlord’s agent) cannot modify the terms of the Lease Agreement without your written consent. However, that is provided that you did not falsify or mislead the landlord on your application. If the Landlord (or the Landlord’s agent) knew about the two dogs and their sizes, but simply made an error and is now requesting an additional pet deposit and a revised pet agreement, we don’t believe the Landlord can legally do that. However, that might become a fact issue that might require a Court of Law to resolve.
Posted May 25, 2010, 8:52am.
Lending to Friends
Is there a proper way, and can you be protected?
Question (TX): I have a friend who needs to borrow $80,000. I have agreed provided he allows me to secure the loan with a lien on his vacant commercial building. The building has an estimated market value of $500,000. It is not a homestead, is not leased, and has no other liens. What forms do I need to record the transaction? Thanks.
Answer: We don't believe you should do this on your own. See an attorney that is selected by you that has lending experience. State what it is that you want to do and obtain his or her advice. These kinds of loans very often destroy friendships. If your friend can't get a bank to loan to him, why should you?
Nonetheless, if you insist on doing this anyway, one way for you to do this is to structure the loan the way most commercial lenders would. That is, take a complete commercial loan application in which the loan to your friend is secured by the friend’s vacant commercial building. He will need to provide proof of ownership, plus the fact that the property is lien-free and that it is not his homestead. The estimated market value should be recent (within 6 months) and performed by an accredited (licensed in Texas) appraiser. Your friend should also offer an explanation as to why the building is vacant. You will need a loan document (sometimes referred to as a “Promissory Note,” “Note,” or other title indicating debt) together with a Deed of Trust signed by the borrower after you have obtained, to your satisfaction, all the items on the application.
Posted May 25, 2010, 8:50am.
Ask George
Escrow Shortage causes shortage in patience.
Question (TX): Can a mortgage company require me to pay the whole amount of escrow shortage at one time? This mortgage was sold in August of this year and I received a bill in October from the new mortgage company for $1,800. The bill must be paid in full by December 1st of this year.
Answer: Yes, because you have agreed to make up any escrow shortfall. However, if you are on a monthly payment plan to escrow funds, there is a limit as to how many months the lender can collect. The difference here is between Escrow Shortfall and Escrow Monthly Payments.
Section 10 of the Real Estate Settlement Procedures Act (“RESPA”) essentially provides that each month the lender may require a borrower to pay into the escrow account no more than 1/12 of the total of all disbursements payable during the year, plus an amount necessary to pay for any shortage in the account. In addition, the lender may require a cushion, limited to no more than 1/6 of the total disbursements for the year.”
We suggest you call your lender to see if it might accept a two or three month payout of the shortfall.
Posted November 7, 2009, 12:14pm.
Ask George
Tax Sales - How Do They Work?
Question (TX): Last month I attended the auction held at the county court house and was surprised to hear that the minimum bid was not offered. Instead a lady in the crowd yelled out "one hundred dollars." Since no one challenged her she was awarded the tax certificate.
Did I miss something or is it so outrageously simple that people are afraid to try it? I was numb with ignorance that I was too embarrassed to ask anyone what was going on. Can you shed any light on this for me?
Answer: Was it a tax sale? If so, the owner has 180 days to two years to redeem and buy the property back with payment of the sales price and a stiff penalty. Did you look at the property? Most property sold at a tax sale is of such low value that the owner won't pay the taxes on it. There may be adverse possessors, or the property may have hazardous waste on it. If the property has any value, an heir or neighbor always seems to find a use for it.
On occasion you get a good deal, but the people who work these deals do a lot of homework first
Posted November 7, 2009, 12:08pm.
Ask George
Delays at closing, terminating contracts
Dear George:
We're closing on a new home and have all the paperwork ready. Because we're not using the homebuilder's lender, he's saying that we may not get the keys to the house for 24-48 hours after closing. The builder claims that it may take that long for him to get funded. We're giving him a cashier's check for our downpayment and have paid for all the upgrades to the house. Is this normal? If so, whose insurance company is responsible during this period?
Answer:
It's not unusual for lenders to delay funding for a variety of reasons. The seller knows this and is taking advantage of it because you didn't use his lender. Get the lender you're using to "table-fund" at your closing. Pressure them nicely to get this deal done. You might also want to verify that the builder will have presigned the required documents for your closing, if the builder isn't going to show up. In most cases your insurance doesn't come into play until the transaction funds, which is when the title company certifies that it's funded and you get the keys.
The answers to questions in this column do not contain legal advice. If you wish to obtain legal advice, you should consult your own attorney.
Posted November 7, 2009, 11:55am.