REALLY Bad Special Stipulations

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The following Special Stipulations are real. The names of the parties have been changed to avoid embarrassing the agents who are sure to never commit such errors again.

Buyer Clara Careful entered into a binding agreement on July 1 to purchase a home through her buyer’s agent, Sally Speedqueen. The home Clara wanted to buy was in “rough” condition and there were several obvious repairs which Clara wanted the seller to complete prior to Clara hiring a home inspector to check out the house (and the repairs the seller would have just completed). Not a problem for Sally Speedqueen, who quickly created a Special Stipulation stating that the seller would make the specific repairs AND that Clara Careful’s “14-day due diligence period shall not begin until the above repairs are completed.” Clara put up $5,000 earnest money, which Sally’s broker deposited on July 3.

The seller, Pete Procrastinator, took his sweet time doing the repairs, much to Sally Speedqueen’s consternation. In fact, he took so much time that Clara Careful decided to terminate the deal and look elsewhere. Clara Careful signed a Unilateral Termination on July 14 citing her ability to cancel the deal within her Due Diligence period.

Do you see a problem here? Since the seller-performed repairs had not been completed, Clara Careful’s due diligence had not even begun, according to the Special Stipulation written by Sally Speedqueen.

Can Clara terminate the deal if she is not within her due diligence period, assuming there are no other applicable contingencies? No. Clara Careful was so careful to avoid having to spend money on a home inspector before the seller’s repairs were complete that she failed to understand that it was the END of her due diligence period she wanted to leave open, NOT the beginning. Clara was in limbo, not being able to legally terminate the contract until her due diligence period began. She was at the mercy of Pete Procrastinator, wasn’t she? The only way out was to sacrifice her $5,000 earnest money to the seller for breaching the contract.

Another case of “write in haste, regret in leisure”

Agent Rush Deal was delighted when his buyer, Sally Slacker, finally decided to make an offer. Rush prepared the offer and met with Sally for signatures. Sally told Rush that she would not be able to close the sale unless she obtained certain financing. Rush had not brought a Finance Contingency Exhibit but figured he could just create a Special Stipulation to cover this situation. He added “Contract contingent upon lender approval”. The offer was accepted and became binding.

Several weeks later the parties signed an Amendment adjusting the closing date. By this time, however, the seller had become concerned that Sally Slacker was doing little, if anything, to pursue financing, so the seller added to the Amendment, “Buyer must make loan application no later than June 3”. June 3 came and went with no evidence that Sally was pursuing financing, but the seller decided to cross his fingers and hope that Sally had a rich relative somewhere. Three weeks before the proposed closing date, Sally signed a Unilateral Termination citing her inability to secure financing. The seller was furious, claiming the earnest money because Ms. Slacker had not made her loan application by the specified date.

What issues do you see here? That the so-called “financing contingency” didn’t contain any specifics about what type of loan, how much of a loan and what type of documentation Sally Slacker would have been required to provide to prove her efforts? That the seller hadn’t specified what would happen if Sally failed to meet the loan application deadline? There are other issues, to be sure, but these certainly stand out.

My all time favorite

An eager agent, Nellie Naive, wrote a simple Special Stipulation into an offer trying to placate a picky buyer: “Carpets to be cleaned”.

Really? By whom? The buyer was disgusted at the filthy carpets during the pre-closing walk through. The seller was surprised, stating, “I kept wondering when you would bring your cleaning crew over. Oh, you thought I would have the carpets cleaned?” Which carpets? “Oh, you wanted ALL the carpets cleaned? I thought just the main room.” By when? “I cleaned them a month ago, before the repairmen came in to do all their work and got them dirty again. You didn’t specify that I needed to re-clean them just before closing.” How should the carpets be cleaned? “I used one of those rental machines from the big box store and mixed my own detergent to save money; you didn’t specify that you wanted them professionally cleaned.”

Bad things happen when agents attempt to compose Special Stipulations.

1)     The licensee is considered to have “practiced law without a law license” for drafting a legal document rather than using pre-written forms and language developed by GAR or a licensed attorney;

2)     The basics of spelling out the precise “meeting of the minds” are missing. WHO is to do WHAT, HOW will it be done, WHEN will it be done, WHERE is it to be done and WHAT IF it isn’t done as agreed? This last item is very important. Will the non-defaulting party give notice to the defaulting party and allow them a pre-agreed upon period of time to cure the default? Or will the contract become null and void automatically? If so, what will happen to the earnest money? What if neither of the above is specified?

GAR has an extensive library of lawyer-written, court-tested Special Stipulations for all occasions. In the heat of offer-writing, don’t be caught unprepared.

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12 Responses to “REALLY Bad Special Stipulations”

  1. Lloyd Carver, Loan Officer Says:

    As a loan officer with Metro Brokers Financial, one special stipulation that gives us trouble is when personal property is mentioned as part of the transaction. Appliances and fixed items are ok but furniture and other items that can be easily removed from the property need to be put on a separate Bill of Sale. Otherwise, the lender will reduce the sales price by the value of these items resulting in more down payment for the borrower.

  2. Sandra Queen Says:

    Ann, you are sooo right on! I have seen so many open-ended special stipulations and you cannot assume you ‘know’ what people mean! I have told people many times that everything needs to be specific! Thanks for bringing this up.

  3. Lorelei Fischer Says:

    Having just finished GRI 2, I am again reminded that we are not to practice law and to draft special stipulations can easily cross over that line. Prior to taking the GRI courses, I might have been one of those who unwittingly wrote a bad special stipulation—guilty as charged! Thus, might I recommend that if a special stipulation cannot be found that fits the situation in the GAR Special Stips already drafted by attorneys, call Broker Support! Thanks, Ann, for a great reminder!

  4. greg barnum Says:

    When even in a little doubt, CALL BROKER SUPPORT. An agent working for a fly-by-night brokerage may not have anything like broker support and may just maybe have a tiny excuse. None of us is that agent.

  5. latisha Says:

    Wow. Great information. I will keep this in mind. Thanks, Ann.

  6. Steve Adkins Says:

    I recently had an issue with a broker/owner who wrote some off-the-wall stipulations that we ended up just walking away from this deal. And when I questioned this broker on these stip’s, he started threatening me. Thankfully Broker Support was there with great works of wisdom!

    Never be afraid to walk away when you know things will go bad and there is nothing you can do to prevent it!

  7. Rick Troup Says:

    Not only does GAR have an extensive list of Special Stipulation, all of them are available to insert into a contract with just a couple clicks of your mouse through Transaction Desk. You can also save the special stipulations provided by Broker Support as a personal clauses and re-use them later.

  8. Marilyn Fraley Says:

    Thanks Ann for another great blog! This is a great reminder to always reference and utilize GARs Special Stips.

  9. Tom Davis Says:

    Broker Support is an invaluable resource….it is like like having your own personal Thesaurus or Black’s Law Dictionary. Please keep up the great work!!!!!

  10. suzie perlstein Says:

    just saw this. love it! I agree, always get with Broker Support, even if you have to call them while writing the offer. It difficult to have every special stip at your offer writing, but if you can get to a computer with a printer you can get it done. My favorie: “carpets to be cleaned”.

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