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Weekly Q&As

Can a notice sent electronically be “legal notice” under the standard offer to purchase and contract?

Release Date: 06/21/2016

This email address is being protected from spambots. You need JavaScript enabled to view it., Martin & Gifford, PLLC

QUESTION: My clients have a fully executed contract (Standard Form 2-T), but the buyers have not timely delivered the agreed upon earnest money deposit and due diligence fee. We know we can send a notice to the buyers demanding that they deliver the funds under paragraph 1(d) of the contract. Does the notice have to be an actual writing or can it be sent electronically?

ANSWER: Paragraph 1(d) of the Offer to Purchase and Contract (Standard Form 2-T) states that “[s]hould Buyer fail to deliver either the Due Diligence Fee or any Initial Earnest Money Deposit by their due dates, . . . Buyer shall have one (1) banking day after written notice to deliver cash or immediately available funds to the payee.” The “written notice” requirement of Paragraph 1(d) should be read in conjunction with Paragraph 21 of the Form 2-T. Paragraph 21 states that “any action” between the parties “relating to the transaction contemplated by this Contract may be conducted by electronic means, including . . . any notice or communication given in connection with this Contract.”

Since Paragraph 21 allows the parties to send notices through electronic means, it is perfectly legal for a seller to send the “written notice” contemplated by paragraph 1(d) electronically as long as the buyers filled out the “Notice Information” section of the Form 2-T, located on page 11. Please note, however, that notice by electronic means would not be allowed if in the “Notice Information” section: (1) the buyers and their agent marked “N/A” next to any of the communication methods listed; or (2) the buyers and their agent did not provide an email address or fax number.

 

NC REALTORS® provides articles on legal topics as a member service.  They are general statements of applicable legal and ethical principles for member education only.  They do not constitute legal advice.  The services of a private attorney should be sought for legal advice.

© Copyright  2016. North Carolina Association of REALTORS®, Inc.  This article is intended solely for the benefit of NC REALTORS® members, who may reproduce and distribute it to other NC REALTORS® members and their clients, provided it is reproduced in its entirety without any change to its format or content, including  disclaimer and copyright notice, and provided that any such reproduction is not intended for monetary gain.  Any unauthorized reproduction, use or distribution is prohibited.

 

 

What form do I use to list real property that has a mobile home on it?

Release Date: 06/14/2016

This email address is being protected from spambots. You need JavaScript enabled to view it., Martin & Gifford, PLLC

QUESTION: A client has approached me about selling a piece of land that has a mobile home on it. The mobile home is hooked up to the county water system, but the waste is handled by a septic system located on the property. The hitch and wheels are still on the mobile home, but it has been sitting stationary on the same concrete pad for about six years. Should I treat the mobile home as personal property and use the vacant land listing agreement (Standard Form 103), or should I use the normal exclusive right to sell listing agreement (Standard Form 101)? 

ANSWER: A mobile home, or manufactured home, is considered personal property unless it has properly been converted to a fixture on the real property. Section 105-273(13) of North Carolina’s General Statutes says that in order for a manufactured home to become real property, it must: (1) be a residential structure; (2) have the moving hitch, wheels, and axles removed; and (3) be “placed upon a permanent foundation either on land owned by the owner of the manufactured home or on land in which the owner of the manufactured home has a leasehold interest pursuant to a lease with a primary term of at least 20 years and the lease expressly provides for disposition of the manufactured home upon termination of the lease.” If a manufactured home meets these requirements, then the owner must file an affidavit with the North Carolina DMV notifying the DMV that the manufactured home is now affixed to the real property.

Looking at your facts, it does not appear that the mobile home meets the requirements of General Statute 105-273(13), because the hitch, wheels, and axels have not been removed. That means the mobile home is still personal property. To list the real property for your client, use the vacant land form (Standard Form 103) and have your client fill out the information in section 9(j) so that you have the necessary information about the mobile home.

 

NC REALTORS® provides articles on legal topics as a member service.  They are general statements of applicable legal and ethical principles for member education only.  They do not constitute legal advice.  The services of a private attorney should be sought for legal advice.

© Copyright  2016. North Carolina Association of REALTORS®, Inc.  This article is intended solely for the benefit of NC REALTORS® members, who may reproduce and distribute it to other NC REALTORS® members and their clients, provided it is reproduced in its entirety without any change to its format or content, including  disclaimer and copyright notice, and provided that any such reproduction is not intended for monetary gain.  Any unauthorized reproduction, use or distribution is prohibited.

 

 

Are escalation clauses legal?

Release Date: 06/07/2016

This email address is being protected from spambots. You need JavaScript enabled to view it., Martin & Gifford, PLLC

QUESTION: I’ve heard people talk about escalation clauses but now I’ve received an Offer to Purchase and Contract on a hot listing of mine that has an escalation clause addendum attached to it and I don’t know what to do.  What is an escalation clause exactly?  Are they even legal?  What should I tell my seller? 

ANSWER: In answer to your first question, according to one source, an escalation clause is “a provision in a purchase contract allowing for incremental increases in the offer price, up to a predetermined amount, based on and evidenced by competing offers.” In other words, an escalation clause might provide among other things that the purchase price will be increased by a specified amount over the purchase price in any bona fide competing offer, up to a specified maximum amount.

To answer your second question, our view is it’s likely that a contract containing a properly-drafted escalation clause would be found to be legally enforceable in North Carolina.  We are not aware of any North Carolina law specifically addressing the legality of escalation clauses. However, there is case law supporting the proposition that so long as the price can be readily determined by reference to some ascertainable standard (which in this case would be the price in the other offer), the contract is not unenforceable simply because the final price isn’t in the offer itself.

There are a number of other issues that should be taken into consideration by a buyer who wants to consider making an offer containing an escalation clause or by a seller who wants to consider accepting one.  Some of those issues are discussed in a 2013 Forms Guy article on the subject that may be viewed by clicking here.  As to your third question, you should present the offer with the escalation clause to your seller and strongly recommend that he or she seek legal advice before accepting it.  You should also advise the seller that you may not be in a position to share an offer from another buyer with the buyer who included the escalation clause in their offer because that might be considered “shopping” the other offer in violation of NC Real Estate Commission Rule 58A.0115, which provides that “[a] broker shall not disclose the price or other material terms contained in a party’s offer to purchase, sell, lease, rent, or to option real property to a competing party without the express authority of the offering party.”

 

NC REALTORS® provides articles on legal topics as a member service.  They are general statements of applicable legal and ethical principles for member education only.  They do not constitute legal advice.  The services of a private attorney should be sought for legal advice.

© Copyright  2016. North Carolina Association of REALTORS®, Inc.  This article is intended solely for the benefit of NC REALTORS® members, who may reproduce and distribute it to other NC REALTORS® members and their clients, provided it is reproduced in its entirety without any change to its format or content, including  disclaimer and copyright notice, and provided that any such reproduction is not intended for monetary gain.  Any unauthorized reproduction, use or distribution is prohibited.

 

 

Do buyer agents have a duty to verify square footage information?

Release Date: 05/31/2016

This email address is being protected from spambots. You need JavaScript enabled to view it., Martin & Gifford, PLLC

QUESTION: Several years ago, I represented a buyer who purchased a condominium. The unit had been listed in the MLS and the listing agent reported the unit as having 900 square feet of living area. My client purchased the property and lived there for several years. He recently asked me to list the unit for sale. As part of my regular practice whenever I list property, I measured the unit and discovered that it only has 820 square feet of living area. I am concerned that my client will be upset with me over my failure to verify the square footage when he purchased the property. Do buyer agents have a duty to verify reported square footage in every transaction?

ANSWER:  We have written previously about the responsibilities of listing agents to provide accurate information if they choose to report the square footage of their listings in their advertising. But buyer agents have responsibilities as well.

The Real Estate Commission has published Residential Square Footage Guidelines which can be viewed on the Commission's website under the "Publications" tab. On page 6 of that publication, the Commission writes as follows: "Generally speaking, an agent working with a buyer (either as a buyer’s agent or as a seller’s agent) may rely on the listing agent’s square footage representations except in those unusual instances when there is an error in the reported square footage that should be obvious to a reasonably prudent agent. For example, a buyer’s agent would not be expected to notice that a house advertised as containing 2200 square feet of living area in fact contained only 2000 square feet. On the other hand, that same agent, under most circumstances, would be expected to realize that a house described as containing 3200 square feet really contained only 2300 square feet of living area. If there is such a “red flag” regarding the reported square footage, the agent working with the buyer should promptly point out the suspected error to the buyer and the listing agent. The listing agent should then verify the square footage and correct any error in the information reported."

Based on the Commission's own guidance, your failure to notice an 80 square foot discrepancy in a condo listed as having 900 square feet does not mean that you would definitely receive discipline by the Commission. However, that does not mean that your buyer client might not file a lawsuit in an attempt to hold you and your firm responsible for damages. The best suggestion we can give to buyer agents: always think carefully about the square footage being reported. When in doubt, tell your client... and ask for verification.

 

NC REALTORS® provides articles on legal topics as a member service.  They are general statements of applicable legal and ethical principles for member education only.  They do not constitute legal advice.  The services of a private attorney should be sought for legal advice.

© Copyright  2016. North Carolina Association of REALTORS®, Inc.  This article is intended solely for the benefit of NC REALTORS® members, who may reproduce and distribute it to other NC REALTORS® members and their clients, provided it is reproduced in its entirety without any change to its format or content, including  disclaimer and copyright notice, and provided that any such reproduction is not intended for monetary gain.  Any unauthorized reproduction, use or distribution is prohibited.

 

 

How many bedrooms can I advertise if the county has no record of the septic system capacity?

Release Date: 05/24/2016

This email address is being protected from spambots. You need JavaScript enabled to view it., Martin & Gifford, PLLC

QUESTION: My clients have a four bedroom home they want to list for sale. I have called the county to figure out what the septic system’s bedroom capacity is, but the county does not have any records. My clients also do not have any records since their home is over 50 years old and they are not the original owners. Can I just list the home as having four bedrooms, or do I need to find another way to verify the septic capacity before listing my client’s property?

ANSWER: Section 93A-6 of North Carolina’s General Statutes prohibits any licensed agent from making a negligent misrepresentation and continuing that misrepresentation through an advertisement. The North Carolina Real Estate Commission has made clear that this statute imposes a duty on the listing agent to “to take reasonable steps to assure that property data included with the listing is correct.” Article 2 of the Code of Ethics also states that “REALTORS® shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property or the transaction.”

As a licensed agent and a REALTOR®, you have a duty to take reasonable steps to make sure that your clients’ septic system has the capacity to support four bedrooms before listing the property as a four bedroom home. Checking the county’s permit records is a good start, but be sure to also check the tax records. If the tax records for your clients’ home show that the house is a four bedroom, and you do not have reason to believe otherwise, it is a good indicator that the septic was permitted for four bedrooms when the home was built.

Regardless of the outcome of your search in the tax records, however, the North Carolina Real Estate Commission has recently said that you should disclose what you know to potential buyers, which is that the property has four bedrooms but the permit for the septic system cannot be located. By making this disclosure clear and apparent, you will limit both your potential civil liability and the possibility that someone will make a complaint for misrepresentation with the Commission or your local association of REALTORS®.

 

NC REALTORS® provides articles on legal topics as a member service.  They are general statements of applicable legal and ethical principles for member education only.  They do not constitute legal advice.  The services of a private attorney should be sought for legal advice.

© Copyright  2016. North Carolina Association of REALTORS®, Inc.  This article is intended solely for the benefit of NC REALTORS® members, who may reproduce and distribute it to other NC REALTORS® members and their clients, provided it is reproduced in its entirety without any change to its format or content, including  disclaimer and copyright notice, and provided that any such reproduction is not intended for monetary gain.  Any unauthorized reproduction, use or distribution is prohibited.