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January 3, 2017  -  Stay Connected!
 
    

 
QUESTION - On the Purchase and Sale form, 1st page under Earnest Money, there is the 'Default' 1) Forfeiture of Earnest Money 2) Seller's Election of Remedies. My buyer is worried that by checking 2) Seller's Election of Remedies, he would be more liable should he decide to back out down the road for any reason than if we check the 1) Forfeiture of Earnest Money. Can you please explain what those 2 options mean?



ANSWER: "Seller's Election of Remedies" against buyer is a provision that is only triggered if buyer defaults in buyer's obligations under the purchase agreement (buyer breaches the PSA). If buyer terminates the PSA using a valid contingency, then seller has no remedy. With that understood, the difference in the two provisions is simple.
 
If the parties agree that seller's remedies are limited to forfeiture of the EM, then upon buyer's breach, seller is entitled to collect the EM and that is it. Seller has no additional claims against buyer. Seller cannot sue buyer for specific performance of the agreement and cannot sue buyer for additional damages arising from buyer's breach. Buyer has no defense. A lawsuit should not be necessary because the parties agreed, in advance, that if buyer breached, the EM would be fair compensation to seller for seller's losses.
 
If the parties agree that seller may elect seller's remedy, then following buyer's breach, it is up to seller to determine how seller wants to proceed. If seller wants to sue buyer for specific performance, seller may do so. If seller suffered damages as a result of buyer's breach, in excess of the amount of the EM, then seller may sue buyer for recovery of seller's actual damages. Of course, with any lawsuit, the party filing the lawsuit must prove that the defendant is liable (buyer breached the contract) and must prove damages (the amount of money claimed by seller or that forcing buyer to close is the only fair solution). Buyer will have the ability to defend the lawsuit and attempt to defeat seller's claims.
 
There is not a one-size-fits-all remedy. In every case, this provision must be considered by buyer when writing an offer and negotiated between the parties as part of mutual acceptance. If buyer cannot determine how buyer wants to proceed, broker should advise buyer, in writing, to seek legal counsel. Printer-friendly Version

The Legal Hotline Lawyer does not represent Washington REALTORS or its members. To browse through our database of past Q & A's, visit www.warealtor.org. Attorney Annie Fitzsimmons writes the Legal Hotline Question and Answer of the Week. Please submit questions to legalhotline@warealtor.org or call (800) 562-6027. Please have your NRDS number ready when you call or e-mail the Hotline with your question.

 

Thank you, Corporate Sponsors!

   

 

ANNIE FITZSIMMONS ON THE GO!
Now you can listen to the Legal Hotline Videos via audio podcasts! Get your legal briefing on your phone while stuck in traffic, waiting for a client or as you are checking your email. [Listen here...]
 

WHAT TO EXPECT IN 2017
Watch this short video interview with NAR Chief Economist Lawrence Yun on what to expect for housing and the economy in 2017. [Watch it here...]
 

 
REGISTER FOR HILL DAY!
Washington REALTORS® Legislative Day event is scheduled from January 18-19, 2017 here in Olympia. We are facing one of the toughest legislative sessions in history. Come represent fellow REALTORS®, learn the inside scoop on the industry, and help create positive change for your community … all in one day. [Read more...]
 

 
 
NEED SOME SHARABLE CONTENT TO SEND TO YOUR CLIENTS?
You’ll find a years worth of articles and home improvement ideas from HouseLogic.com. Here is a sample: Weekend Projects to Fight Off Cabin Fever – 5 Inspired Storage Ideas: [Read more...]
 

 
 
THE CODE OF ETHICS DEADLINE HAS COME...AND GONE
All of our Code of Ethics webinars filled up fast last month, but we've scheduled two more for January. The National Association of REALTORS® also offers a FREE course for existing members (no clock hours awarded) or a Continuing Education option that awards three-credit hours and satisfies the mandatory COE training for $29.95. Knock out your COE training and get in compliance. [Read more...]
 

Primary Mortgage Rates Survey
(updated every Thursday)

 

(source:  Freddie Mac)
 
 
 
UPCOMING CLASSES
 
Regional Professional Standards
Thursday, January 12
8:30 AM to 4:30 PM  
7.5 CE Hours
Location: Olympia  

NAR Code of Ethics Webinar
Thursday, January 12, 2017
9:00 AM to 12:00 PM  
3.0 CE Hours
Location:  Live Webinar
 
NAR Code of Ethics Webinar
Thursday, January 26, 2017
9:00 AM to 12:00 PM  
3.0 CE Hours
Location:  Live Webinar   
 
Put a S.O.C. In It
Wednesday, February 8, 2017
8:30 AM to 4:30 PM  
7.5 CE Hours
Location:  Tacoma  

 

 
 
QUESTION from 1/5/2016 - Broker drafted Form 21 and completely marked out the purchase price claiming she does not have to state a price on the P&S because buyer included an escalation clause which identifies the final price. As her managing broker, I have always understood that the P&S has to have a price in order to be valid. Is the contract valid if they mark the price out completely?

  
ANSWER -  Form 21 must include a purchase price. There is no logical argument to the contrary. Paragraph 1 of the Escalation Addendum (Form 35E) provides as follow: "If seller receives a competing offer for the Property prior to accepting this offer, with a Net Price equal to or greater than the Net Price on this offer, then the Net Price of this offer shall be increased to ... . The term "Net Price" means the stated purchase price (or the maximum price if the competing offer contains a price escalation clause) less any price adjustments such as credits to buyer for closing costs." The language of Form 35E requires that a purchase price be specified in the buyer's offer. If is from that offer price that any escalation will occur. Without an offering price, buyer's "Net Offer" cannot be determined and buyer's offer cannot be escalated. Moreover, if there are no competing offers that will escalate buyer's offer, then what is buyer's offer if no purchase price is provided? How could seller accept buyer's offer? There is absolutely no justification for failing to include a purchase price on buyer's offer. Form 21 should specify buyer's offering purchase price, notwithstanding the attachment of an Escalation Addendum. 
 
(You will need your NRDS# & password to access the Legal Hotline)
 
The Legal Hotline Lawyer does not represent Washington REALTORS or its members. To browse through our database of past Q & A's, visit www.warealtor.org. Attorney Annie Fitzsimmons writes the Legal Hotline Question and Answer of the Week. Please submit questions to legalhotline@warealtor.org or call (800) 562-6027. Please have your NRDS number ready when you call or e-mail the Hotline with your question.