Updated: Wednesday, May 23, 2018
The Legal Ties That Bind With Your Down Payment
Question: We are both in our upper sixties and retired. Last October, we put money down on a condominium apartment that is to be completed around September of this year. We put down ten percent of the price in cash and the money is earning a modest amount of interest until settlement. We have some savings, but the balance would be paid in cash from the proceeds of the sale of our present home.
Although we believe the price of the condominium has gone up slightly since we signed the contract, we now have serious thoughts about apartment living and about putting most of our resources into this transaction because of some new and serious health concerns.
Is there any way we can cancel our agreement and not lose the down payment?
Answer: The lawyer in me says that a contract is a legally binding document that must be upheld. The humanitarian in me suggests that, at the very least, you should try to get out of the contract, especially with the facts you have described.
First, review the terms of the contract very carefully to determine your rights and responsibilities. Are there any contingencies in that contract, such as your ability to obtain financing or the necessity to sell your house? If any of these contingencies legitimately cannot be met, it is possible you have the legal right to declare the contract null and void.
Next, determine whether the contract can be assigned. Although most developer contracts are not assignable, it may very well be that you have the right to sell your contract to someone else. And even if you do not have that right, it never hurts to ask the developer.
For example, if the contract is for 100,000 and the market value now is 110,000, if you have the right to assign that contract, you may find someone who would purchase your contract for the contract price -- or even a few thousand dollars above the contract price.
The person who buys your contract would be obligated to follow through on all of the terms of your contract. In effect, the buyer would be stepping into your shoes, assuming all the rights and responsibilities you presently have.
As I have indicated, although most developer contracts do not permit such assignment, it is worth looking at this aspect of your contract.
Next, do not hesitate to discuss this matter with both the real estate firm representing the seller and try to speak directly with the seller. Explain your situation. They may be sympathetic. If the market for your condominium is anticipated to be strong, the seller-developer may be able to make more money by reselling the property to someone else.
Finally, you may want to consider buying the property and then trying to sell it yourself. Unfortunately, this is risky because there never is any guarantee you will find a buyer quickly and the duplicate settlement costs, financing charges and other settlement->You may also have to pay a real estate commission for that second sale. Realize that until the developer has sold most, if not all of the condominium units, you are competing against the house. And as we know, the dealer always wins.
You indicated you have put down a deposit of ten percent and you do not want to lose the money. However, there are times when a buyer would prefer to walk away from a transaction, lose the money and avoid subsequent aggravation.
Peace of mind sometimes cannot be measured in terms of dollars and cents. Although I cannot recommend forfeiting your deposit, if this is an option you are willing to consider, make sure you discuss the situation with the seller before deciding. Sign a >Basically, if a buyer defaults on a real estate contract, the seller has three options available:
- Suing for specific performance, in effect, asking the court to require you go ahead with the transaction.
- Suing for damages if there are substantial monetary damages involved as a result of your failure to live up to your part of the contract. For example, if the seller has to resell the property at a lower price than your contract price, this would be the measure of damages.
- Electing to retain the deposit as the only remedy. Remember, if you decide to forfeit, make sure the seller agrees, in writing, that the only remedy will be the forfeiture of the deposit. This may also be spelled out in the form contract you signed.
Although I recognize that conditions often change and new circumstances often arise after a contract is entered into, it must be pointed out that, in most cases, the time to decide whether you want to purchase property is before you sign a contract.
After your signature is on the contract and you have given some money down as a deposit, you are legally bound to comply with all the terms and conditions of that document. Your fate basically depends on how the developer reacts to your situation.
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Ask the HOA Expert: Restricted Activities
Question: One of our homeowners kids would like to raise chickens in the backyard. Our governing documents restrict this activity. Any advice to head off this public >Answer: Most HOA governing documents restrict raising poultry and other farm animals or local laws may do so. If this is something like a short term 4-H project, its probably no big deal. If it is an ongoing production facility for eggs and meat, not a good idea. The main issues are sanitation and noise particularly from roosters.
Question: I recently had a leak in my unit that damaged wall and flooring and I am in a battle with the HOA regarding who is responsible for the repair charges. My unit is in a mid-rise condominium. The leak was coming from a rooftop chiller pipe that feeds the air conditioning units for me and several neighbors. The plumber determined that the pipe was leaking because of improper soldering. The board says neither the plumbing repair or damage to my unit is the HOAs responsibility.
Answer: This is a >
Typically, the HOA is responsible for repairing common plumbing lines. Since the plumbing line in question serves multiple units, it is considered common. Damage repair to units caused by the leaking pipe, however, is usually the unit owners responsibility unless the HOA neglects to perform plumbing repairs in a timely manner when informed by a unit owner. For a sample Areas of Responsibility Policy, see www.Regenesis.net
Question: A homeowner is requesting a copy of a violation letter that was sent to another homeowner. Are we required to provide that?
Answer: Unless state law requires sharing this kind of information, a violation issue is a private matter between the board, management and offender. Such information should not be shared with other owners.
Question: What is the proper protocol for a special assessment? Should the board hold a special meeting to announce it with the homeowners, then follow up with a letter to all of them?
Answer: If the board has decided to move forward with a special assessment, it should definitely hold an informational meeting to discuss the reasons and to answer questions. It is possible that there will be people that take exception to the special assessment and want to express that opinion. They have a right to do that as long as they are civil.
The board should attempt to respond to all questions and concerns if possible. Trying to respond to "I dont have the money" is a waste of time even if true. Special assessments are never pleasant and there will always be some that have a problem paying them due to disability, unemployment, divorce, too cheap, etc. Going forward, the board should have a long range plan to avoid them in the future by setting aside adequate reserve funds to avoid special assessments. It would a good thing to point this out to the members now.
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Builder/Realtor Relationships Poised For Long-Term Win-Win
ldquo;I feel about as comfortable as a condemned man, lecturing the firing squad on marksmanship because everything I say can be held against me.rdquo;
Who would have the nerve to think what anyone had to say mattered to 1.3 million Realtors, most of whom are not encouraged or trained to work with homebuilders?
After thanking home builders for providing much-needed inventory, I can only think of two things to say to this hardworking, risk-taking group:
One, stop telling Realtors they wonrsquo;t get paid if they donrsquo;t bring the prospect to your sales office first. This 40-year policy became outdated about a generation ago the first time a home shopper completed a builders internet registration form. We both know you make exceptions on a regular basis. Why not say so up front?
Two, stop telling Realtors they need to learn construction because nothing could be further from the money ndash; or the truth. There no evidence to support this assumption. Case studies do, as we shall see.
What caused builder/Realtor >
The most important event by far happened in August of 2012, when Realtor.com and Builder Digital Index BDX announced a partnership whereby BDX would feed its national inventory of new homes to REALTOR.com.
Homebuilders now had what they had long lacked, access to the Realtors Multiple Listing System MLS. And Realtors had access to inventory of new homes in a format they are trained to use. Realtors can find inventory of new homes, floor plans, prices, amenities, and more side by side with resales.
The increased demand by new home shoppers forced Realtors to start showing new homes, whether they were trained to or not. It seems to be working big time.
ldquo;Millions of new home shoppers were drawn to this new service,rdquo; according to Senior Vice President of Channel Sales and Operation, Tricia Smith, speaking at the 2018 National Association of Home Builders International Builders Show in January.
In December 2013 the headline below appeared in Realty Times:
Bank of America Urging Home Builders and Realtors to Work Together.
ldquo;If you are a REALTORreg; looking for some unusual but timely business advice from a banker, E.J. Achtner, Senior Vice President of Bank of America, has some for you.
"Education, training and >
Why is a banker suggesting new home training to Realtors?
According to Achtner, "many builders, regardless of their size, are taking a much more collaborative view of partnering with Realtors than in the past and we encourage our builders to work with Realtors.rdquo;
It would be safe to assume that other lenders started encouraging their builders to do the same thing,
Then less than two years later, more than 25 MLS Partners were offering inventory of new homes from their local source.
BDX Announces 25 MLS Partners Providing Access To New Construction Inventory For 400,000 Realtors.
"With our partners in this effort, nearly 400,000 REALTORSreg; have direct access to New Home Source Professional through their MLS today," said Tim Costello, President and CEO of BDX.
"More than half of all home shoppers consider new construction, so its imperative that we continue this industry collaboration to help agents and brokers serve their clients.
ldquo;Today builders and Realtors are working closer together than ever,rdquo; Costello said.
Systems are in place to communicate clearly and accurately. Commission issues are few and far between.
While builders are finally working within the MLS system, they still have a way to go with their Realtor training. A study said they need to do a better job of bringing Realtors into their process.
Two Out Of Three REALTORS Say Homebuilder New Homes Training Is Not Useful
According to a study commissioned by Builder Homesite Inc, "nearly two-thirds of Realtors believe that builders are not offering useful training about how to sell new homes."
Why? Because what they teach does not engage Realtors in the sales process. The Builder Homesite study nailed it with this statement:
ldquo;There is a sizeable portion of Realtors that would welcome an outreach effort to engage them in a sales process and increase the proportion of new homes that they sell."
A national position on a few key issues would be helpful. We will get to those issues in Part 4.
Summary: Except for a lingering lack of trust, there is no excuse for Realtors to ignore inventory of new homes.
Homebuilders, your training question is this:
lsquo;Is what I am saying, or about to say, building more trust in my product or me?rdquo;
If you struggle with the answer, you need to rethink your message, which we will address.
Next: Part 2 How Experienced New Home Co-Brokers Feel About Selling New Homes
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