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March 7, 2017  -  Stay Connected!
 
    

 
QUESTION: PSA included a Form 22A, Financing Contingency and a Form 35E, Escalation Addendum. In the Financing Contingency Addendum, seller agreed to pay 3% of the purchase price toward buyer's closing costs. The purchase price was calculated and agreed using the Form 35E. In the Form 35E calculations, the listing broker rounded the number estimated as the seller concession for payment of buyer's closing costs so that the number used in the Form 35E calculation was roughly $150 more than what 3% of the purchase price would have been. Buyer's broker, buyer's lender and escrow all assumed that since the listing broker used this higher number in the Form 35E calculations, that seller had agreed to pay that increased amount as seller's concession toward buyer's closing costs. Seller believed that seller was only obligated to pay 3% of the purchase price toward buyer's closing costs. Who was correct?


ANSWER: All were partially correct, all were partially wrong. Much of the problem arises from the confusing nature of the Escalation Addendum ... which is not a criticism of the form itself but rather, a comment on the difficulty in buyer submitting an offer with a moving target for an offering price. Form 35E is an unavoidably difficult form to use.
 
Here is what happened. Seller was willing and ultimately agreed to pay 3% of the purchase price toward buyer's closing costs. Form 22A is the only form, in this agreement, that included language in which seller agreed, specifically, to pay a portion of seller's proceeds towards payment of buyer's closing costs. While the Form 35E calculation called for an accounting of seller concessions, the Form 35E does not include any language obligating seller to make a specific payment on buyer's behalf or for any other reason. As a result, the only enforceable agreement against seller, obligating seller to pay buyer closing costs, was the language in Form 22A where seller agreed to pay 3% of the buyer's closing costs.
 
However, Form 35E was used to establish the purchase price buyer would pay. This form will not accommodate rounding because the number derived from the calculation constitutes the purchase price that buyer must pay. In this case, listing broker's rounding up of the number representing seller's payment of buyer's closing costs resulted in a higher purchase price for buyer. Effectively, buyer paid $150 more for the purchase of the property than buyer should have paid because listing broker used a higher number to represent the amount of seller concessions than seller actually agreed to pay. That is likely why it seemed to buyer's broker, buyer's lender and escrow that seller should be paying an additional $150 for buyer's closing costs. Seller benefited with an increased purchase price from listing broker's rounded number on Form 35E but because Form 22A controls seller's obligation to pay buyer's closing costs, seller was not equally obligated to pay additional closing costs.
 
Form 35E actually provides the mechanism for solving this problem. Form 35E says that if the calculation used by the seller to determine the purchase price is in error, the parties agree that at closing, the actual purchase price will be what the purchase price should have been had the calculation been performed correctly. In this transaction, when the error was detected, the actual purchase price, reflected on the settlement statement, should have been corrected by reducing the Form 35E purchase price by $150 and deducting 3% of the purchase price from seller's proceeds to pay buyer's closing costs. 

 

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 . Please tell us your NRDS number when you e-mail the Hotline with your question.



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APRIL 27TH - HILTON SEATTLE AIRPORT & CONFERENCE CENTER
The 2017 Washington REALTOR Business Symposium is proud to announce nationally recognized speaker Jackie Leavenworth will be spending the day with us and sharing her knowledge, energy, and passion for real estate. Jackie will present two of her most demanded classes: Negotiations: The Games People Play and It's a Price War to the Door. Lunch and parking included! [Get more info and register today.]
 
 
 
 
 

 
MAY 24TH - SEATTLE AIPORT MARRIOTT
The 2017 Washington REALTOR Legal Symposium is back and better than ever!  This event has outgrown our original venue so we've relocated to the Marriott Hotel across from the airport.  This event gathers leading real estate attorneys in Washington to share current legal issues affecting the industry & to help our members to stay out of trouble! This year, we have; Annie Fitzsimmons, Justin Haag, Lars Leste, Doug Tingvall, Chris Osborn, Jeannie Simpson, and Mark Schedler. [Get more info and register today.]
 

 
 
UPCOMING CLASSES
 

Agency Law
Wednesday, March 8, 2017 (8:30 AM to 11:30 AM) 3.5 CE Hours
Lower Columbia Association of REALTORS, Longview
 
New Forms, Hot Topics, and Other Industry Fun
Wednesday, March 8, 2017 (12:00 PM to 3:30 AM) 3.5 CE Hours
Lower Columbia Association of REALTORS, Longview
 
Current Issues in Residential WA Real Estate
Wednesday, March 15, 2017 (9:00 AM to 12:00 PM) 3.0 CE Hours
Windermere Real Estate, Puyallup

Real Estate Safety Matters
Wednesday, March 22, 2017 (9:00 AM to 12:00 PM) 3.5 CE Hours
Hood River Elks Club, Hood River, OR
 
Top Shelf Business Practices
Wednesday, March 22, 2017 (12:30 PM to 3:30 PM) 3.0 CE Hours
Hood River Elks Club, Hood River, OR
 

 

 
 
QUESTION from 3/30/2016 - We have seen a few offers from other Brokers in our MLS, attaching the MLS detail listing (initialed & dated by their buyers) with the P&S Agreement.  What is the Legal Hotline opinion on this matter?


  
ANSWER - Seller should never initial the MLS printout as an attachment to the purchase agreement. The MLS printout does not establish the terms of agreement between the parties. To some degree, the MLS printout constitutes the terms of seller's offer to sell and it also provides some seller representations. Under no circumstances, however, should the MLS printout be initialed, by the seller, as an attachment to the purchase agreement. If the parties intend for some aspect of seller's offer, set forth on the MLS printout, to be included in the purchase agreement terms, then those terms should be specifically included in the purchase agreement.
 
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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. Please tell us your NRDS number when e-mail the Hotline with your question.