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Weekly Membership Newsletter
November 21, 2017 • Stay Connected!
         

QUESTION:  Buyer waived all contingencies and is a cash buyer. The buyer's broker was given the Seller’s Disclosure at the time of mutual acceptance. Days before closing, the Buyer's Broker called to say that the smoke detector and carbon monoxide detector boxes had not been checked by the seller on the Seller’s Disclosure Statement. The detectors were present and listing broker advised buyer's broker that the detectors were present. Listing broker just received a rescission notice from the buyer based on the fact that those boxes were not checked and using the Seller’s Disclosure Act as his reason for terminating. Is this a legal rescission since it was obvious that the detectors were there and this was not a significant issue?



ANSWER: The answer to this question is not entirely clear because it is unknown whether the court that would be asked to answer this question would apply a strict application of the Seller Disclosure Act or not. If strictly applied, it is absolutely true that the Seller Disclosure Act mandates that seller answer ALL questions on Form 17. The instructions on the form advise seller to mark an answer to all questions including those where the answer is "N/A". In this situation, seller failed to comply with state law and buyer's express remedy is termination of the PSA.
 
The reason that is not a reliable answer is that it is never clear whether a given court will apply a strict reading of a statute like the Seller Disclosure Act when the clear implication is that buyer is attempting to avoid the consequences of an otherwise binding contract. Buyer entered the PSA, knew the consequences of failing to close, assumed those risks while keeping seller's property off the market and then, when buyer chose not to close the transaction, found a "loophole" to justify buyer's actions that would otherwise, constitute breach of contract.

For sellers to avoid this dispute in the future, the answer is simple ... if a Form 17 question includes the answer boxes of "yes, no, don't know and N/A" then seller should mark one of those boxes, even if the question seems wholly irrelevant. This is not because marking the box provides buyer any greater information. This is because marking the box eliminates any argument from buyer that seller's failure to mark the box gives buyer an excuse to terminate the agreement days before closing.

A trend is emerging in the industry, arising out of this strong seller market. Competitive buyers often find themselves in a purchase agreement without any contingencies, yet days before closing, they are unable or unwilling to close the transaction. If that buyer (or buyer's broker) is savvy, the first place buyer looks is the Seller's Disclosure Statement. If buyer reviews the disclosure statement and finds any question unanswered, even a wholly irrelevant question, that unanswered question gives buyer room to, at the very least, make an argument that buyer is entitled to terminate the PSA and recover the earnest money. That "argument" is often all that it takes to throw the parties into litigation and/or to force the seller to compromise with buyer regarding retention of earnest money to which seller is otherwise, clearly entitled.

Seller and listing brokers should carefully review seller's completed Disclosure Statement, before it is delivered to buyer, to insure that every question is answered. Additionally, seller and listing broker should insure that if seller answers "yes" to any asterisked question, that seller also includes additional information and/or attaches relevant documentation. Only with these protocols in place, can seller eliminate a subsequent buyer argument that buyer has the right to terminate the PSA based on seller's failure to completely answer all statutorily required questions on the Seller Disclosure Statement.
 

 

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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REALTORS® Square Up - House Passes Tax Bill
(Source: REALTORMag) The House on Thursday passed a tax reform package that the National Association of REALTORS® calls a tax hike on many middle-class homeowners and says would lower property values for all homeowners.  The bill has gone to the Senate and they may vote on the bill the week after Thanksgiving. There's still time to tell congress to protect housing! It only takes a couple of clicks/taps to make a difference!
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New Home Construction Increases
(Source: HousingWire) The construction of new homes increased in October to meet the rising homebuyer demand, according to the latest report from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development..."Overall, the total activity for the country is moving in the right path,” NAR Chief Economist Lawrence Yun said. “More supply will boost future home sales." 
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Computation of Time Reminder
Thanksgiving Day & Native American Heritage Day
This is a good time to remind everyone that when computing time, Thanksgiving Day and Native American Heritage Day (Thursday and Friday) are both legal holidays and do not count as business days. Questions on computing time? Email Annie Fitzsimmons, the Legal Hotline Attorney, at legalhotline@warealtor.org (don't forget to include your NRDS ID#).



Legal Hotline Video:
Who Gets The Earnest Money?
Washington REALTORS® Legal Hotline Lawyer Annie Fitzsimmons answers a frequently asked question, "Who's entitled to the Earnest Money?"... typically this arises as a Buyer's claim for the Earnest Money under the Financing Contingency, but that decision is hinged on the details of their Lender Letter being in compliance. Watch to find out Annie's answer...
 
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Primary Mortgage Rates Survey
(updated every Thursday)  Source:  Freddie Mac
 
 November 16, 2017  30-yr FRM  15-Yr FRM  5/1-Yr ARM
 Average Rates  3.95%  3.31%  3.21%
 Fees & Points  0.5
 0.5
 0.4
 Margin  N/A  N/A  2.74



 November 9, 2017  30-yr FRM  15-Yr FRM  5/1-Yr ARM
 Average Rates  3.90%  3.24%  3.22%
 Fees & Points  0.4
 0.5
 0.5
 Margin  N/A  N/A  2.74



 November 2, 2017  30-yr FRM  15-Yr FRM  5/1-Yr ARM
 Average Rates  3.94%  3.27%  3.23%
 Fees & Points  0.5
 0.5
 0.5
 Margin  N/A  N/A  2.74



 October 26, 2017  30-yr FRM  15-Yr FRM  5/1-Yr ARM
 Average Rates  3.94%  3.25%  3.21%
 Fees & Points  0.5
 0.5
 0.4
 Margin  N/A  N/A  2.74





 
 
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