Whether you are using the South Carolina Association of REALTORs contract or the Central Carolina REALTORs Association contract, agents seem to make the same mistakes. Many of these mistakes are costly to your client and even you. In this podcast I countdown the Top 5 mistakes that real estate agents continue to make in writing contracts. Learn what the mistakes are so you can avoid them in the future.
I also introduce a new feature, "The End of the World as We Know It". We end as always with another installment of Gary's Good News Only!
* Gary serves on the South Carolina Real Estate Commission as a Commissioner. The opinions expressed herein are his opinions and are not necessarily the opinions of the SC Real Estate Commission. This podcast is not to be considered legal advice. Please consult an attorney in your jurisdiction for applicable legal advice germane to your issue.
*selected music by audionautix.com
This is edition dirt with Gary pickin South Carolina's only podcast dedicated to the real estate agents crap. Hey Greetings everyone and welcome back to another episode of edition dirt I am your often opinionated, but always correct hosting cherry picker and and on this week's episode we are going to discuss the top five things that real estate agents screw up in the contract I guarantee you learned something, listening to this week's episode of a new segment called it's the end of the world as we know it great REM song, which I think is very appropriate for this week's segment. And then we'll finish up with Gary's good news only. Before we start a show, I ask a big favor of you if you will go to YouTube and type in Blair Cato bl a irca. To and subscribe to our YouTube page, we're closing in on 500 subscribers, I really want to hit that 500 mark here real soon. So if you do that, I greatly appreciate it. Also, if you like our show, if you would like us, share us and even subscribe to us so that you'll get notifications when new shows come out. We do come out every Thursday morning at I think it's about 5am when show volley post but every Thursday morning, and it will be always less than 30 minutes. Now next week is Easter weekend spring break. So we'll not be doing a show next week. So hopefully you'll be able to survive one week without me. But we'll be back the following week with yet another tantalizing issue to be shared on ditching dirt. So this week shows about the top five things that real estate agents mess up in our contracts. And it doesn't matter whether it's the ccra contract or the state contract, these screw ups are universal. So we're going to go over the top five, we'll actually do a countdown this week. And I'm even going to throw into extra ones as honorable mention. And that's what we're going to start today is with our two honorable mention screw ups. The first screw up that is an honorable mention is agents not understanding when we have contract acceptance. In order to have contract acceptance, we have to have a contract that is signed, sealed and delivered. You remember the r&b song from the 70s, signed, sealed and delivered I'm yours. That's what you got to have in order to have contract acceptance signature by itself is not contract acceptance. So if I make an offer to you, and you sign the contract and never send it back to me, we do not have deliverance. So without the contract being delivered back to me, we have no contract. And the reason being is if you sign the contract today and take off to the beach, I have no way of knowing that you've accepted my contract, I can rescind my offer and go and do something else. So you have to deliver the contract back to the person who made the final offer. Now if I make a contract offer to you and you don't like my offer, and you make a counteroffer to me, when I get the contract back, if I assign the counteroffer, we still don't have a contract until I deliver it back to you. So the contract has to be delivered to the person who makes the final offer that's accepted. And that's very important, because until we have ratified contract, many of the deadlines in the contract do not begin to count. So for instance, a due diligence provision may not start the counting of the of the days until the contract has been ratified and accepted. So make sure you understand what contract acceptance is. And so that's honorable mention number one. Honorable Mention number two is written language in the contract is added by the real estate agent. I noticed as more and more we have agents who will add provisions add things in the contract, they don't go into full enough detail, they may write a sentence as five or six words and think that that will cover the issue. And so you have to make under make sure you understand whenever you write anything in the contract. There's additional terms, I always tell people to think back in middle school, when you had to write a paragraph, you always were taught how when, what, where, why, and how. Make sure you're covering all of those things when you write the the provision that you know, how's that provision going to work? Who's going to do it? When's it going to get done? How how's it going to be paid for any limitations? What I always do as a lawyer is I will write it and then I will go do something else. And I'll come back and look at the provision. And then I put myself in the shoes of the other attorney and say okay, how can I screw Gary now in that provision that he's written, and if I can find a loophole, he didn't say this, or he said this, which could be interpreted this way, then I go back in and I tighten it up. A lot of problems we have in arguments at the closing table is from these provisions that are written into the contract by real estate agents. And they don't cover enough of the information to let the parties really know who's doing what how they're doing it, who's making the selections, how it's being paid for if there's a limitation on that, when it's going to be done and things of that nature. So whether you're writing a repair addendum, or doing any provision in the contract and paragraph, I think it's 18 and the CCR a which is a Central Carolina realtors Association contract or paragraph 28 and state contract. Be sure that those provisions are written, clean and personal. And if you want a good example of how to do that, go listen to the podcast I did a couple of weeks ago on your repair denim socks when my guest was Mary lane Sloane, and we talked about how not writing the repair addendum correctly can come back and cost you or your clients 1000s of dollars. So make sure you're writing any extra provision and the contract concisely and being right on point and covering all the issues you need to cover. Alright, so those are our two honorable mentions. Now let's get to the top five things that you real estate agents typically don't get right in the contract that makes your contracts mad, make them wrong, make some some time so so the number five thing will come in started our countdown at number five. Our number five thing of things that caught that agents do in contracts that are done wrong, they're screwed up is not completing all of the contract. Now under your statute 40 dash 57, you as a real estate agent have an absolute duty to make sure that all blanks are completed, that all initials are added on dates are put in and everything is signed properly. So if you are missing areas and missing sections in a contract, you have broken state law as it retained pertains your license and agreements could be filed against you if an issue arises. So please make sure before you submit that contract to the other party, that you have gone through the contract and made sure that all the blanks are completed, that everything's initialed. Everything is dated, everything is signed, things that are done are not applicable or scratched out or nav written in them and make sure that you have completed all of the contract. I see too many contracts that come in this office that have very important parts either not completed or half completed. We see this a lot with the home warranties where people will put in there that the buyer will pay for the warranty. They don't put for how much they don't put the warranty company. And so those items are left blank, I have actually seen them where neither party is selected for paying for it. But they put the warranty amount and they put the warranty company. And so there we are at closing arguing about who's going to pay for it because neither the buyer nor the seller is denoted in the contract. And both parties are saying Well, I'm not paying for it. So guess who pays for it, the real estate agent pays for it. I had one of my top agents tell me the other day she got a contract on a house that the last name was the only name they gave for the buyer. they skipped them first name and just put the last name, say like the offer or willing to accept it. But they had to counteroffer back to the buyer to get the buyer to write the code full name in there. Maybe that doesn't sound like a big to do. But let's say that offer came in they were willing to accept it, but they don't because they send it back to you and ask you to correct it and put the full first name. But in the meantime, a better offer comes in, guess what? while they're waiting for you to write your clients first name in the contract, they've gone ahead and accepted another offer and now you have lost out. That's a problem right now. Well, we have houses that are getting 10 and 15 and 20 offers in 20 to 4024 to 48 hours. So you don't want to give the other side any reason to have to come back to you to ask for additional information or to figure out particular terms of the contract. Make sure every term in the contract is 100%. Completed, completed properly and initial. It'll save you the problem of getting grieved later down the road if it becomes an issue. But it also give a good strong offer. So you don't have to worry about your offer being rejected. Very simple. Alright, that's number five. Now let's move on to number four. This is the number four thing that real estate agents screw up in the contract. It's counting days. Agents tend to mess this up quite a bit. I understand why days are a little bit different in ccra contract versus the state contract. In the CCR a contract we defined it in 29 a paragraph 29. A it says a single business day is defined as a 24 hour period that begins at 8am have any weekday it's very important understand there 8am is when the business day begins. Not midnight doesn't it doesn't start some time five o'clock or whatever. I've had agents Tell me Oh, it starts at 5am. It starts at 9am. It starts at midnight. No it clearly says here in the contract. They business day begins at 8am of any weekday. It does not begin on a Saturday, it doesn't begin on a Sunday, it doesn't begin on a federal holiday, nor does it end on one of those days. So make sure you understand when days began when they in and how to count it. Now for purposes of this contract when we look for the first business day, it begins at 8am of the business day following final contract acceptance, which goes back to one of our honorable mention items, which was not understanding when we have a final acceptance. That's why it's very important to understand when you have final acceptance because you have to have that knowledge before you can even begin to count business days on the day contract. It's a little bit different. The state contract has a lot of blanks for you to fill in. And so I see clients filling in the it'll be 10 business days, it'll be 10 days, it'll be 10 calendar days. So a lot of it is controlled by the agent and what you write in in the blanks for when due diligence ends when the repaired then demands and things of that nature. So there are a lot of blanks for the agents to do that. Just be sure whatever you write in that blank that is clearly defined. So if I wrote in the blank 10 business days, I don't know that business days is defined anywhere. So if you're gonna write 10 business days, you better write business day it begins at 8am have a non a day, that's not a weekend or holiday. Because if you're not putting that in there, you cannot ematic automatically assume that that's what a business day is. Because a business data song is Monday through Friday, a business data, a lot of banks now is Monday through Saturday. So you have to make sure you define that term, if you're going to use it in their blanks. They also have places where they use the term business day and they have somewhere like two business days to do something. But then I don't see that business day is defined. So I guess they're assuming that business day is Monday through Friday, but again, a lot of banks now are counting. Saturday is a business day, particularly for refinance purposes. You know, you have a three day right of rescission. And most lenders now are counting Saturday in that right of rescission. And then I've also seen blanks in the state contract where it says, also done by 6pm on Blank day, and so you're just writing a calendar day. So whatever you're doing there, be sure that you're defining the terms, I think in that contract is better to put dates like June 21, than it is 10 business days, go ahead and count it out. Right now, when you're filling out the contract and write the date, and the time that it will end. So due diligence will end on June 21 at 5pm. And my opinion is a lot better than writing 10 days, or 10 business days or 10 calendar days. Why leave it up for interpretation, just go ahead and write the definitive date. This is when it will end. And that's number four way that real estate agents screw up contracts. Number three, the third most common way that real estate agents screw up contracts is not understanding preparations. Now. proration is what I'm talking about now is really just the tax preparations. And what I mean by the tax preparations is under ccra paragraph which is paragraph 19. It says real estate taxes will be adjusted as of the date of closing unless otherwise agreed to in writing by the parties of the contract tax preparations pursuit of this contract are to be based on the most current tax bill prorated on that basis. And all preparations are final. So two things are really important here is number one is we're using last year's tax bill, the most current tax bill and typically last year's or the tax bills come out the most that current tax bill to prorate taxes. And the reason we do that is there's really no other good information tax estimators are not good information. Because on the county website, it says these are for information purposes only and cannot be relied upon. So they're only true information we have is what's in on the tax records. And we use last year's tax bill that also says the tax preparations are final. So there will not be a readjustment of taxes after closing. And the reason we did it that way on the contract committee was because years ago, when we allow for Reparations, the tax bill instead of being $854 would be 840 $40. And the buyer would call back and want a tax proration change for the 2030 bucks. And then they would want you to contact the seller 50 times when the seller would return the phone calls. they'd want you to file a lawsuit against the seller and they'd want you involved in it. It was just an unworkable and untenable situation. So we just make all preparations final. Now tax preparations are an issue in South Carolina because as you know, if you live in the house as your primary residence, you're taxed at 4%. And if you don't live there as your primary residence as an investment property or second home or whatnot, it is taxed at 6%. But mainly the tax problem is because it's 6% you have to pay educational taxes, but 4%, you don't so some tax bills can actually double or triple when they go from 4% to 6%. So when a seller is not living in the house, and they're being taxed at 6%, they won't and they know the buyer is going to move in the house as their primary residence. They want the taxes prorated at 4%. Because they recognize the buyer will qualify for 4% for the full year. Essentially what they're trying to do is steal the buyers benefit. My position is the sellers already stuck at 6%. So why are they trying to get the buyers benefit, they act as if it's somehow punishing them. I say it's not because the seller was already paying 6% if they don't sell the house are going to have to pay it at 6% or the buyer doesn't qualify they got to pay it at 6%. So I think bro rate is 6% and let the buyer get the benefit of it. It's just a benefit for the buyer but it's not on the back of the seller. It's actually on the back of the county who's giving them the full benefit. But I have a lot of sellers who don't like that. But it does allow in the CCR a contract it does allow the parties if they want to change it, they can negotiate that as part of the contract and they can have a separate writing saying how taxes will be prorated and we occasionally see that where the parties agree that taxes will be prorated on 4% versus 6%. But you need to understand if you represent the buyer that you are giving away a huge credit so when you tell your buyer yeah go ahead and do that. At 6% they may be getting a $3,000 tax credit at closing but at 4% it may be only 1000 so that means your buyers had to bring two more $1,000 to closing than they would have been had they kept the proration is based at the last year's tax. Bill. And doing this at the closing table is never a good idea. And I've actually had people do this at closing where they're like, Oh, that's fine, go ahead and we'll change it. And then you go in there and change and you go, Okay, well, that $3,000 credit the seller was giving you is now $1,000 credit. So I need two more $1,000 in order for you to keep complete your closing. And by the way, that lender now has sent you back to underwriting because they don't know that you have the $2,000 to pay for it. So that's why we make taxes final preparations final. That's why we use last year's tax bill. And that's why I don't recommend you doing things of that nature. I think it causes a lot of problems. Now in the state contract, we're looking at paragraph 22. They say the closing attorney shall make tax preparations based on the available tax information deemed reliable by the closing attorney. I don't know what other informations that could be deemed reliable by a closing attorney other than last year's tax bill because as I said earlier, the tax estimator is not reliable, they flat out tell you it's not reliable in the county website. It also says should the tax or tax estimator proration later become inaccurate or change? Well, it's probably going to be if they use a tax estimator, buyer and seller shall make any financial adjustments between themselves once accurate tax information is available. Now they're saying that the buyer and the seller will take care of adjusting it between themselves. But the reality of it is the buyer is going to call you the agent or the seller is going to call you the agent and go want you to call the attorney. And now you're going to call the attorney who's going to give you the new proration amounts, but the other party is not going to pay it, they're going to refuse to pay it or they live in Montana now you can get in touch with them. And so ultimately, what the client does is say, Well, I want you to pay for it, or I want you to contact them or I want you to follow all Sue. So it's just an unworkable situation. And I don't I don't like how the state contract covers that at all. And that's the third most screwed up provision that the agents mess up in the contract. So Moving now to the number two number two, the most second most screwed up thing that real estate agents do in the contract is not understanding the difference in the appraisal and the financing contingency. So in the South Carolina contract, the appraisal is paragraph 10. And in paragraph seven would be your financing contingency in the CCR a contract financing contingency is paragraph six, and the appraisal is paragraph six II understand these two contingencies are completely separate from each other. Even though an appraisal is part of financing, you may qualify for the loan, but the house doesn't appraise and you can terminate under the contingency for the appraisal financing contingency may have expired, as it does in the ccra contract five days prior to closing. And then the house doesn't appraise the day of closing, and the contract has to be terminated if the contract is contingent on appraisal if the appraisal doesn't come in. So understand when you look at these two contingencies, do not look at them together, look at them separately. Did they qualify for financing? Is the financing been approved? If so they then their contingencies taken care of, even though they qualify for the financing contingency. Now you look separately at the appraisal contingency if the contract is contingent on appraisal, and the house doesn't appraise. It doesn't matter what happened under the financing contingency whether the financing contingency is already been satisfied, or even if it has fallen through, or the date expired, it doesn't matter. The appraisal contingency is 100% separate, big 100 misunderstanding of that I have a lot of agents who will say, well, it's already two days and under the ccra contract, they'll say it's two days prior to closing and the financing contingency is already expired. So they're now calling saying it doesn't appraise. So they don't that they can't use that know if the contract is separate contingency on appraisal that is completely separate from the financing contingency. One has nothing to do with the other. And that's the second way that real estate agents screw up the contract for the number one way that real estate agents screw up the contract. It's asking for too much transaction cost. What are we talking about? What we're talking about here is you write a contract and you write in seller to pay $5,000 in closing cost, only to find out that the buyer is doing 100% financing with closing costs included in the financing. Or to find out that your buyer has to put a certain amount of money down and when the seller pays $5,000 in closing costs, it won't work. And so now they get less closing costs because in both contracts, any closing costs that are not used reverts back to the seller. And so what I see happen quite often is that the agent will write in $5,000 or whatever for closing costs. And then the closing costs are only $3,000. So the seller gets a $2,000 benefit, or the buyer writes in they write in $5,000 in closing costs, but yet when we get to the loan, the buyer has to have $5,000 of their own money in the closing. So by the time the seller starts paying closing costs, they don't have enough money in the closing. So in order to get there they cut the closing cost so that the seller will have their $5,000 in the closing and so they lose money there. Or I see a lot of times where the lender will do 100% financing or financing with no closing costs and so the closing costs aren't there for the five. So typically how these closing costs come about is it the parties agree that the buyer is going to pay say $200,000 for the house, but they won't $1,000 in closing costs, so they right raised the price to $205,000 with $5,000 in closing cost. So the seller still realizes 200 grand, and as long as the house appraises that works, unless the buyer doesn't have another enough closing costs. So let's say that the loan only has $3,000. In closing costs, well, you raise the price of the house five grand to cover closing costs, but you only needed three. So your client overpaid $2,000, they just gave the seller $2,000 for nothing. And I have set there and many closings and watch this happen. And I can tell you even though your buyer may not say something, you can see the little mouse in their head spinning in the wheel, and they're like, why did I raise the price from 200 to 205. If I'm only getting $3,000, in closing costs, paid, overpaid by two grand, they understand it, they may not say something, but they truly understand what's happening. And that's going to hurt you in getting referrals in the future. So before you just go out and say let's put $5,000 or whatever for closing costs, you need to make sure they're pre approved with their lender, and the lender can tell you how much they're going to need for closing costs or how much they're gonna have to put down for down payment. And if that's going to affect the closing costs, you need to understand what your clients doing with their loan before you just go and select a number for closing costs. This happens way too much. It's almost like weekly where this happens and it is rather embarrassing for you. So don't let that happen. So that guys are the top five ways that real estate agents screw up our contracts with two honorable mentions. I hope you found this beneficial. I think I'm going to also do one on the top five ways that real estate agents screw up self disclosure. Now moving on, we have a new segment today. called This is the end of the world as we know it. It's a great REM song if you guys are Generation Z look up REM they were a band that came out of the University of Georgia back in the 80s and 90s. They had a lot of really good songs and into the world as we know it was one so here's our story about the end of the world as we know it. Our story comes from Fox five in Las Vegas and the headline was 76 all cash offers on one home. The housing madness shows no signs of slowing down. Ellen Coleman is a real estate agent with 15 years experience showing and selling houses and Washington DC she had a house listed for $275,000 She said she listed it on Thursday by Sunday evening she had 88 offers she said the offers just kept coming I felt like I was Lucy with the chocolates. I don't know if some of you younger people remember might not remember this. But there was that Love Lucy Show there was a show where she was trying to grab chocolates and the chocolate just kept coming down the conveyor belt point she was trying to eat them all and hide them in her shirt. She said this has just gotten out of control of the 88 offers 76 were all cash. There wasn't even enough time for all the bidders to visit the property. 15 of the offers were sight unseen. That is where we have now gotten in our market that people are writing cash offers sight unseen people who don't even have enough time to see the see the houses. And that is why it's the end of the world as we know. And finally let's move over to Gary's good news only. Good news only this week's gonna be all COVID lots of great things are happening in COVID. I know that you keep listening to the CDC and the doom and gloom lady that runs the CDC. It is utterly amazing. There's nothing that can happen in this world where this lady will give you any positive news. So Gary is going to give you the good news only. I have listened to a bunch of the newscast. I don't care which news it is. It's all doom and gloom, which seems so detached from reality today. So let's look at the good news. South Carolina open the COVID vaccines for anyone over the age of 16. I implore you please get the vaccine. It is so simple. I got the Johnson and Johnson one shot and done no side effects whatsoever. It was easy breezy. South Carolina as of March 29th 2.1 1 million shots have been given 1,378,000 people have gotten at least one doses, which is 26.78% of our population. 756,000 people are fully vaccinated in South Carolina, which is almost 15% of our population. In the United States. 94 million people have received at least one shot which is 28.53% 51.5 5 million point 5 million rather have received both shots or the only necessary shot which is 15.72%. Remember, they say every time when you get even the first shot, you start building up immunity in the US 6665 years of age and older 71.1% have gotten at least one dosage 45.9% are completely done with the COVID virus vaccine. That's incredible. 65 and over is the number one risk group. If you take all the deaths, it's like in the I think it's around 80 some percent of them or more have come from that 65 and older age group. So in the United States, almost all of our senior citizens have been able to get the COVID vaccine. In fact, I listened to radio today they said everybody in the United states will have a vaccination facility within five minutes of their house. In South Carolina. We now ranked 18th overall in the country for having our senior citizens vaccinated. 71.7% have been vaccinated, or at least one shot 49.4 have completed it. Now I went back and read an article that cnn had out on September 18 2020. And the headline read president says every American can get Coronavirus vaccine by April but health experts say that is unlikely. And the first sentence it says the president claimed Friday they will not be enough there will be enough Coronavirus vaccines for every American by April, a claim that does not match any timeframe given by the federal government health agencies, private researchers or even the companies making the vaccines to have the nation vaccinated by the end of 2021 would still be a world land speed record. Well, I guess we set that land speed record and we'll have it set by April remains. So once again, I just reiterate how much bad news doom and gloom that our media continues to give you. And that's why we have Gary's good news only. Also some more information in the United States new cases 45,000 as of March 28, that was the same level of new cases we were averaging back in October. deaths in the US were only 487 on March 28 that also matched early November, October numbers are seven day rolling average for death now is down to 990. In the country, South Carolina we had in the four hundreds, with no new deaths. So several times in the last couple of weeks, we've had no deaths. Now here's another one of the so called medical experts on one of the TV channels. On February 27, the 22nd renowned expert Michael osterholm, said that hospitalizations in the United States would be at 195,000 in the near future due to the UK variant over a month later. They're now at 40,000, which is a decrease of like I think was like 30 or 40%. So I don't know where this near future is. But so far he has been way off of that. And then also on CNN, they said new hospitalizations or numbers are out. So let's take a look at Texas 25 days after this is when cnn said that the ending the mass mandate in Texas was head scratching an anti science decision. Well, actually it was pro science because they are down 41% since cnn made that declaration. And then the last two things Steve days mentioned us on his website that leading public health birds experts in the county now are saying on the country. Now we're saying that true IFR of COVID is just point one 5% which is barely above the point one 0% for the flu. So basically IRF is basically closing in on the flu levels. And lastly in Montana, North Dakota, Mississippi and our we have four states here that had been three plus weeks removed from lifting their statewide or countywide mask mandates. Not a single one of those has seen seen an increase in hospitalization since the mask mandates went away. So great things happening on COVID. Take what you like discard what you don't all I'm doing is reporting what I find truthful from good resources. That is not doom and gloom like your mass media is and that is garius. Good news on Well, that's our show for the week. I hope everybody has a wonderful and safe Easter holiday. And like I said we will be off of the show next week. So we will skip next week's show but week after that, we will come back with yet another topic that I hope that you will find interesting and important to your practice. Again, if you like our show, please like us, subscribe to us and share us and please let other real estate agents in your market know about our podcast so that we can continue to get out very important information so that we can make our profession the best profession out there. Alright, hope everybody has a great Easter. Take care