In addition to ready, willing and able buyers and sellers, the real estate professionals’ ability to collect a commission is dependent on how solidly the agreement is written. Whether you are the listing agent receiving the offer on behalf of a seller or the selling agent preparing the offer on behalf of an interested buyer, every agent involved in the transaction has an obligation to ensure the contract is well written. Many contracts are filled with loopholes and scenarios that could render the deal void if challenged. Below are the top ten issues that we see in Broker Support that could cause contract nightmares and possibly cause the contract to be voided by one party or the other.
- Blanks on the Contract or using “TBD” for contract items. The contract represents an agreement between the parties and it must be written with as little ambiguity as possible. Everything in the contract must be clear as to who, what, and when.
- Legal Description incomplete or not included at all. The property must be clearly defined for there to be a binding agreement.
- Missing signatures on various documents. The absence of signatures or initials means there was no meeting of the minds. There is no agreement for them and no commission for you!
- Missing or incorrect Earnest Money amount or holder. Earnest money issues often prove to be most severe to the agents involved in the transaction. The handling of the public’s funds requires the utmost care and accuracy. Mishandling of these funds often prove to be detrimental to agents and brokers.
- Corrections/strike thru and handwritten entries on documents with no initials. Again, the absence of initials / acknowledgements of the parties means there is no contract.
- Financing Exhibit with interest rate “blank” or shown as “TBD”. All contract terms must be clearly stated. The buyer’s earnest money may be at risk in the event of a loan denial and the contract contains unclear loan terms. Loan denial letters must contact the terms of the loan for which the buyer has been denied, and these terms must be consistent with the financing exhibit terms to ensure a refund of earnest money to the buyer.
- Contracts not turned in timely. All contracts must be submitted to the broker within 24 hours of the binding agreement date. This is license law and company policy. Failure to comply poses an extreme risk to the proper handling of the earnest money and potentially jeopardizes the contractual agreement. The severity of this violation can prove very costly both financially and disciplinarily.
- Short Sale Contracts with documents missing. The absence of documents causes the contract file to be incomplete and potentially voidable by either party.
- Closing Dates on Saturday/Sunday/Holidays. The lack of clarity regarding closing dates is a major contributing factor to debates regarding closing and possession exchange.
- Incorrect dates and wrong year. Clarity is paramount in a contract. The parties cannot simply state “you know what I meant!” The contract has to have the correct date. Many contracts are being written today with closing dates of January 23, 2014. This is a past date and an impossible date to close. In the event of a contract dispute this will contribute to additional frustration for the parties and agents.
As industry professionals, consumers rely on us to help them structure deals that will increase their chances of achieving their immediate real estate goals. We must demonstrate reasonable competency in performing these duties. Make certain you are not guilty of any of the above reference contract writing flaws and you will have an increased closing ratio and improved customer satisfaction. If your contracts contain any of the above referenced flaws, an amendment can quickly correct the situation.