Top 10 Contract Mistakes for 2012!

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contract_mistakesIt’s that time of year again! Time to recap 2012 and highlight the TOP 10 of pretty much anything you can think of. Here, we’ll reveal the “BHGRE Metro Brokers / Billboard Top 10 Contract Mistakes of 2012” and what you can do to prevent making those mistakes in 2013. Oh, and before you say, “But the seller’s a bank and they don’t do that!”, we removed all the REO deals from consideration before tabulating the final results.

#1 “He Ain’t Heavy, He’s My Brother” (The Hollies, 1969) – A whopping 66.8% of contracts failed to contain the Affiliated Business Arrangement Disclosure signed by BHGRE Metro Brokers’ client or customer. This form is posted on the MetroNet and should be signed by sellers at listing time and by buyers when completing the Buyer Brokerage Agreement or signing the offer. Disclosing our affiliation with Metro Brokers Financial, Metro Brokers Insurance and Metro Title Trust are a legal MUST! Even if your client/customer will not be utilizing their services, we must disclose this information. And, low and behold, sometimes they see this and DO use our affiliated businesses.

#2 “Money, Money, Money, Money!” (The O’Jays, 1973) – Running a close second in the contract mistake ranking is the omission of a complete Commission Confirmation Arrangement (GAR form 32)!  Can you believe that 56.9% of agents fail to complete this? Actually, what most agents do is fill out their portion and leave the rest blank. Pity the poor closing attorney who has to sort this out!

#3 “It’s a Wonderful Day in the Neighborhood” (Fred Rogers, 1967) – It may be a great day in Mr. Rogers’ neighborhood, but not in most contracts. 56% of agents forget to attach or don’t complete the Community Association Disclosure (GAR form 123). Listing agents should get this completed by the sellers at listing time; post it on your listing with complete HOA information. This becomes crucial when the property being sold is a Short Sale. Just who is going to pay for that (suddenly very expensive) HOA letter needed for closing?

#4 “Do You Want to Know a Secret?” (The Beatles, 1963) – Buyers sure do. And they will go to great lengths to discover secrets after closing to sue the seller over. Can you believe that 51.5% of contracts fail to include the seller’s best legal defense, the Seller’s Property Disclosure Statement? Did you know that the law says that a seller cannot avoid disclosure obligations by selling a house “as is”?

For investor-owned and estate-owned properties, the Seller’s Property Disclosure Statement allows the owner to check “Don’t Know” for items unknown to them and counts as “disclosure”. Be safe, be smart! Disclose! Did you realize that the GAR Exclusive Listing Agreement compels the seller to provide this disclosure within 3 days of signing the listing? Check it out – Paragraph 10.

#5 “Running Out of Time” (Ozzy Osbourne, 2001) – Would you believe that 45.5% of contracts underestimate the time needed to close? Yes, Short Sales are largely responsible and REO sales aren’t too far behind, but 30 days? Really?? The average FHA loan today takes 58 days to close. VA loans take an average of 61 days. AVERAGE. Whose deal is average these days?

#6 “No Matter What” (Badfinger, 1970) – We want our buyers to be loyal, yet fail to include a signed Buyer Brokerage Agreement (GAR form 4) 35% of the time. Is it because we really don’t have one? Or because it’s not part of the contract itself and it’s stashed in a file somewhere?

#7 “It’s Too Late” (Carol King, 1969) – This is an oldie, but never goes off the Top 10 list; turning in contracts late. It happens 25.2% of the time and can really cause serious issues for the agent and the broker if earnest money is not deposited on time. In fact, “It’s Too Late” is often followed by “Expensive Things” (Doe Boy Da Dope Boy, 2010) when the earnest money bounces and must be covered by the agent.

#8 “Our House” (Madness, 1982) – Which house? In the middle of the street? Incomplete legal descriptions plague 16.2% of contracts. Either none of the Legal Description boxes are checked (meaning they are not part of the contract) or the data is incomplete. Sometimes we only have the county.

#9 “Paint It Black” (Rolling Stones, 1966) – Was the house, any sheds, barns, or any architectural piece of the house built before 1978? If so, federal law requires that the Lead Based Paint Disclosure (GAR form 54) be filled out, signed, initialed and turned in. That includes that “shabby chic” antique mantel the previous owner found at a junk store.

#10 (TIE) “Lawyer Up” (Destructo Box and Alex Clark, 2011) – Pretty self explanatory; the parties need to agree on a closing attorney. “TBD” hasn’t passed the bar exam, but 10.8% of agents seem to think he/she has.

And

“The Day the Loan Died” (a 2007 parody of “American Pie” by Don McLean) – Another check box issue as 10.8% of agents fail to check the box attaching any sort of Financing Exhibit to the contract or fail to check the boxes on the Exhibit for First Mortgage Loan or Second Mortgage Loan. Somehow the interest rate is also left blank or “TBD”.

There they are, the top 10 memory makers for 2012! Unfortunately, these are songs we’d rather forget, at least for the reasons mentioned above. Let’s learn some new tunes for 2013!

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9 Responses to “Top 10 Contract Mistakes for 2012!”

  1. Lloyd Carver, Loan Officer Says:

    Certainly not one in the top 10 but another common oversight we see on the lender side is that on Fannie Mae or Freddie Mac foreclosures, the borrower’s name on the contract must match the name on the loan docs or Fannie & Freddie won’t let the loan close. You either have to Amend the contract to correct the name issue (which takes time) or you have to change the loan docs and that could mean another credit pull and you don’t ever want to do that in this tight credit market (if you know what I mean).

  2. Mark Broyles Says:

    No wonder so many agents are singing “I Can’t Get No Satisfaction”.
    Great article Ann!

  3. Zann Palmer Says:

    There’ll be a “Tear in My Beer” (Hank Williams, Jr.) if the EM bounces and I have to cover it!

  4. Jan Toussaint Says:

    Ann ~ You have outdone yourself with this one! Thanks for being our “Bridge Over Troubled Waters” (Simon & Garfunkel)

  5. Terry Young Says:

    Thanks Ann … I sure do not want anymore Achy Breaky Hearts (Billy Ray Cyrus 1993) because I’m Sorry (Brenda Lee 1960) just does not cover it. If you just follow the procedures and turn in all the needed paperwork “You” Will Survive (Gloria Gaynor 1978) and in the end you can Celebrate! (Kool & The Gang 1980)

  6. Mis-Sold Mortgage Says:

    Well done Ann, Loving the list.. Very creative.

  7. Bridgette Freeman Says:

    Awe this is so sweet “We Are Family” (sister Sledge) and “Don’t Mess with Bill – I mean Ann” (The Marvelettes ), because she knows her stuff and her songs!

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