Real Estate Agents Want to Know
One of my standard continuing education classes is Contract Law. It never fails that when I’m marketing my CE classes, people ask, “Why don’t you teach something more exciting like social networks, or something that will help us to get more business?” My come back is usually, “I have those classes in my training seminars. This is an educational course, and I promise to make it exciting.” Then I keep my word by including games that are competitive between groups, and give awards and prizes.
Class date rolls around and it’s time to begin. I pass out a class Pretest consisting of only one question; name all the elements of a legal, binding contract. Surprise! Surprise! Surprise! I couldn’t pass the class as a whole even if I graded on a scale. This allows them to see they do need to know more about Contracts.
Attorney’s Prepare the Forms
As practitioners in real estate, we deal with contracts daily. However, we don’t create the contract itself from scratch. As a rule we complete forms that furnished to us. We fill in the blanks, get the signatures, and hope it will hold up if litigation were to present itself. Let’s take a quick examination of daily issues associated with contracts.
What Makes A Contract Legal and Binding
The first problem is agents don’t thoroughly know and understand the form. They may have read it over a time or two but they have been instructed to fill in certain blanks, a certain way. Forms used in real estate are generally prepared by attorneys to cover all the legal, binding affects. We are allowed to write in certain exclusions, or contingencies, and even attach an addendums. This document becomes legally binding upon the Agency and your client. I always stress the importance of understanding every word used in contractual form and take the time fully explain it to your client. Don’t worry about the time it takes to explain because it is for your clients benefit.
Adding Phrases to a Contract Can Be Dangerous
Another problem I see is in writing in or adding to the form certain contingencies, is the wording we use. Don’t feel just because a blank is provided that something has to be written in it. Most forms address the most common issues already and when we write in a phrase (trying to sound like an attorney) we may counteract a prewritten statement that would have protected our client.
Are Addendums A Part of A Contract
Another issue is addendums. An addendum can become a part of the contract so long as it is referred to in the main body of the contract itself. Without reference in the contract it is useless. I often see, especially with short sales, addendums to the contract that were never referenced in the contract; then agents complain because their transaction fell apart before closing.
When Does A Contract Become A Contract
Another issue in real estate transactions is the delivery of the contract. Typically agents are concerned with presenting the offer, and receiving an acceptance or counter offer. Let’s say you write an offer that is presented and accepted as written. Normally the two agents communicate that acceptance between each other verbally. Then you call your client to inform them that their offer was accepted. Am I right? The problem is, the contract has not been physically delivered to your client so that your client has a signed copy of the contract. This is the delivery process which is one of the elements that make the contract legally binding.
For all these reasons and many more, I constantly provide classes on Contract Law to help educate agents about forms they use daily, trying to impress on them the significance empowered upon Realtors® to create contracts without holding law degrees.
I want to encourage you to subscribe to our “News & Updates” weekly report so you can stay abreast of issues that might affect you when buying or selling real estate.