If you know me, you know that I am frequently frustrated with the lack of understanding of the real estate contract by other real estate agents. Since it is literally THE FOUNDATION of what we do, it’s important to understand every paragraph yet most don’t. I recently had a transaction where the buyer’s agent didn’t procure checks for option or earnest monies when writing the contract for her buyer. The buyer ended up never submitting either and contractually owing my clients $11,000 (the amount of the earnest money). Throughout the three day period, I heard the other agent make numerous incorrect statements regarding the timing of these payments and her client’s subsequent liability. I’ll detail them here because they are VERY important details with significant financial consequences.
- She told her buyer (and me) that since the 3 day time period to submit option money fell on a Saturday, and Monday was a holiday, it wasn’t due to the seller until end of business the following Tuesday. WRONG Since the option money is due to the seller and the seller doesn’t have “business hours,” the option money is due to them on the 3rd day, period. Doesn’t matter if it’s Christmas! And what happens if you don’t get it submitted in time? Many think the contract is void. WRONG You do not have an option period. You have a valid contract, you have no “unrestricted right to cancel.”
- She did have until the end of business on Tuesday to submit the earnest money and in this case, it didn’t happen. The agent then said, “I told him he owes your client the option money.” WRONG Per paragraph 15, which addresses default, the seller could enforce specific performance, terminate the contract and receive the earnest money as liquidated damages, or seek other relief as provided by law. She was advising her client that he would be on the hook for $500 when it was really $11,000 or more!!
In the end, all parties were advised to seek legal counsel. As real estate agents, we can not give legal advice but it is our duty to fully understand the promulgated contracts we work with day in and day out. So many times, I see people pick their agent because they seemed nice in an open house, or because they seem busy on social media, or because they give them a discount! They really should be interviewing agents and checking credentials to see who can best protect their interests. There is no substitute for experience and education!
Learn More about the Risks to Buyers & Sellers in Contingent contracts here.
Learn More about The Seller Temporary Lease or “Lease-Back” here.