Proper Form Use

QUESTION:   Broker represents Seller who went under contract with a Buyer. The parties did not execute a RE-27. Seller requested Broker to continue to market the property in order to obtain backup offers. Broker questions whether or not an Idaho REALTORS® form RE-27 is required if Seller wants to continue to market the property and accept backup offers.

RESPONSE:   No, Seller always has the right to market property until it is transferred to another party. Certain restrictions and limitations apply but generally a prospective Buyer’s consent is not required. The confusion seems to arise from the title of the Idaho REALTORS® RE-27 which states, “Seller’s Right To Continue To Market Property” however, it is important that the document be reviewed in its entirety which reveals it is not simply a right to continue to market the property but also a right to force a Buyer to remove a contingency. In the event there is no RE-27 the Seller can still market the property but has no right to have Buyer remove a contingency.

Seller should be advised that Seller is under a legal contract with the Buyer and cannot breach that contract without consequences. In addition, Brokerages who continue to market property which is already under contract should exercise caution and ensure that proper disclosures are made. The fact that a property has a contract pending would most likely be considered an adverse material fact by the Idaho Real Estate Commission and thus would have to be disclosed by any real estate brokerage. In addition, failure to properly advise backup Buyers of the pending contract may violate the REALTORS® Code of Ethics.

In addition, the various MLSs throughout the state all have very particular rules pertaining to how property must be listed on their systems. So long as Brokerage follows the applicable MLS rules and said rules do not prohibit the continued marketing of property under contract, Brokerage is free to leave the property displayed on the MLS.

Like Brokers, the Legal Hotline does not provide legal advice to Buyers or Sellers, nor is it intended to be used as a resolution for disputes between Buyers and Sellers.  Most every real estate transaction involves unique facts and circumstances which require specific in-depth analysis to formulate a legal opinion.  The Legal Hotline provides general guidance to Brokers and cannot serve as a substitute for legal advice from an attorney who has access to all the particular facts.  Brokers should advise their clients and customers to seek legal counsel if they have questions concerning their legal rights or contract interpretation. 

QUESTION:   Broker is involved in a transaction where Buyer #1 is assigning his interest under the Purchase and Sale Agreement to Buyer #2.  Broker believes it would be most appropriate to use an addendum to modify the original Purchase and Sale Agreement rather than to use the Idaho REALTORS® Form RE-29.  Broker questions the legal significance between these two different methods of assignment.

RESPONSE: The Idaho REALTORS® forms library includes the RE-29 which will accomplish an assignment between Buyer #1 and Buyer #2.  However, this form is not designed to relieve Buyer #1 from obligations under the Purchase and Sale agreement. While the RE-29 is acceptable for many circumstances, there are instances where a seller, original buyer or subsequent buyer may desire to reform the Purchase and Sale Agreement. The most common reason for choosing an addendum over the RE-29 is when Buyer #1 wants to be completely relieved from his obligations under the Purchase and Sale Agreement.  In these instances, brokers would be better suited to employ the use of an addendum that modifies the Purchase and Sale Agreement rather than use the RE-29.

Like Brokers, the Hotline does not give advice to Buyers and Sellers and is not intended to be used as a resolution for disputes.  Broker should advise client to seek legal counsel if they have questions concerning their rights in this matter.

QUESTION    Broker has noticed offers coming in with the word “market” written in as interest rate on the loan application section.  Broker questions how this might affect the contract and also how agents should proceed when receiving an offer with “market” instead of a number.

RESPONSE:  Section 3(D) of the Purchase and Sale Agreement states:
$                                      NEW LOAN PROCEEDS: If a number greater than zero appears in the preceding blank, then this Agreement is contingent upon BUYER obtaining the following financing: FIRST LOAN of $             not including mortgage insurance, through ¨FHA, ¨VA, ¨CONVENTIONAL,   ¨IHFA, ¨RURAL DEVELOPMENT, or OTHER                                   with interest not to exceed     _          %…. (Emphasis added).

According to the facts presented by Broker, some Buyer’s agents have been writing the word “market” on the bold blank line above, rather than a number.  Best practice is to always fill in that blank line with an actual number in order to eliminate any ambiguities from the contract.  Black’s Law Dictionary defines ambiguity as:

Doubtfulness or uncertainty of meaning or intention, as in a contractual term or statutory provision; indistinctness of signification, esp. by reason of doubleness of interpretation.
Black’s Law Dictionary 97 (10th ed. 2014).

Broker should instruct her agents to go back to Buyer to get a proper interest rate for the financing section.  Like Brokers, the Hotline cannot make conclusive determinations as to the existence or interpretation of ambiguities, nor does it get involved in disputes between Buyers and Sellers. 

QUESTION:   Broker questions the best use of addendum and counteroffer forms.

RESPONSE:   The intended use of the RE-11 Addendum is to make changes to the contract after all parties have agreed to and signed the Purchase and Sale Agreement.  The RE-13 Counter Offer form should be used to make changes to Buyer’s original offer prior to all parties signing the RE-21.  The RE-13 contains language that indicates the parties accept the terms of the Purchase and Sale Agreement by signing the Counter Offer: “The parties accept all of the terms and conditions in the above-designated Purchase and Sale Agreement with the following changes…” (Line 11, RE-13). The Addendum form does not contain such language, and using it incorrectly can cause confusion as to when the parties went under contract.

QUESTION:   Broker has a Buyer looking to buy farmland that does not include a residence, but does include several significant items of personal property.  Broker questions which Idaho REALTOR® Form would be more appropriate, the RE-23 (Commercial/Investment) or the RE-24 (Vacant Land).

RESPONSE: Either form may be appropriate for this type of transaction however one will probably be more applicable depending on the specific facts. Broker should sit down with Buyer and review the differences in the two forms and let Buyer determine which form they feel is best to use in conjunction with the offer Buyer wishes to make. In the event that neither form fits the circumstance Broker should advise Buyer to consult an attorney to draft appropriate transactional documents.

Like Brokers, the Legal Hotline does not provide legal advice to Buyers or Sellers, nor is it intended to be used as a resolution for disputes between Buyers and Sellers.  Brokerage should advise its clients and customers to seek legal counsel if they have questions concerning their rights or contract interpretation.

QUESTION:  Broker is involved in a vacant land transaction. Buyer and Seller have exchanged multiple RE-10 forms negotiating on Seller’s response to Buyer’s requests for repairs. Broker’s client is growing tired of the exchanges and Broker questions when the exchanges have to stop.

RESPONSE: The relevant part of Section 7(c) of the RE-24 states:
4. If  SELLER does not agree to correct BUYER’S disapproved items/conditions within the strict time period specified, or SELLER does not respond in writing within the strict time period specified above, then within ______ business days (three [3] if left blank) the BUYER has the option of 1) negotiating with SELLER to obtain a modification of SELLER’S response 2) proceeding with the transaction without the SELLER being responsible for correcting the disapproved items/conditions stated in that particular BUYER’S notice, or 3) giving the SELLER written notice of termination of this agreement in which case Earnest Money shall be returned to BUYER. If within the strict time period specified in this paragraph BUYER does not obtain a modification of SELLER’S response or give written notice of cancellation, BUYER shall conclusively be deemed to have elected to proceed with the transaction without the repairs or corrections to the disapproved items/conditions stated in that particular BUYER’S notice.

Presuming a 3-day period, according to the terms above, Buyer had 3 days from Seller’s response to 1) obtain a modification to Seller’s response, 2) elect to proceed, or 3) terminate the contract. If Buyer did not accomplish 1 or 3 within 3 days, he will be deemed to have number 2- which is to proceed with the transaction. Parties are free to extend the 3-day period but any agreement to do so would need to be in writing, and likely prior to the expiration of the original 3-day period due to Section 24 which states: 
ENTIRE AGREEMENT: This Agreement including any addendums or exhibits, constitutes the entire Agreement between the parties respecting the matters set forth and supersedes all prior Agreements between the parties respecting such matters. This Agreement may be modified only by a written agreement signed by each of the parties.

QUESTION:   Broker questions the best way to proceed if a Seller responds to an offer with an addendum instead of a counter offer form.  In this case, both parties signed the addendum prior to Seller signing the RE-21.

RESPONSE:   The intended use of the RE-11 Addendum is to make changes to the contract after all parties have agreed to and signed the Purchase and Sale Agreement.  The RE-13 Counter Offer form should be used to make changes to Buyer’s original offer prior to all parties signing the RE-21.  Given that Buyer had not yet received an accepted RE-21 from Seller, the addendum in question should have been on a counter offer form.  The RE-13 contains language that indicates the parties accept the terms of the Purchase and Sale Agreement by signing the Counter Offer: “The parties accept all of the terms and conditions in the above-designated Purchase and Sale Agreement with the following changes…” (Line 11, RE-13). The Addendum form does not contain such language, and using it incorrectly can cause confusion as to when the parties went under contract.

In this case, best practices would be to have the parties execute an addendum that clearly states the acceptance date of the contract to eliminate any confusion.  Further, Broker should train agents to go back to listing agents who incorrectly use an Addendum form to counter a RE-21 and ask them to recreate it on the proper Counter Offer form.

QUESTION:   Broker represents Seller.  They have received an offer from a Buyer who used California forms.  Broker questions whether Seller can accept an offer made on out-of-state forms.

RESPONSE:  Technically yes, there is no law that says an offer to purchase must be made on the IR Forms.  However, the Hotline strongly urges against the use of out-of-state forms since Idaho licensees are not familiar with them, and because Idaho REALTOR® forms contain the specific language and terms required by Idaho law.  If forms other than Idaho forms are used, it would be prudent for Broker to remind the client in writing that broker cannot interpret Buyer’s contract and therefore assumes no responsibility for its use, appropriateness or legality and that Seller should retain legal counsel to review the offer from Buyer.

QUESTION:   Broker represents Seller. Seller accepted an offer from Buyer contingent on Seller being able to continue to market the property and accept other offers.  The parties signed the RE-27 which listed Buyer’s financing contingency. Seller received another offer that had an earlier closing date than current offer.  Buyer was notified of the offer and decided to remove the financing contingency listed in the RE-27. Broker questions if Buyer also has to agree to meet the closing date listed in the second offer received.

RESPONSE:   No, Buyer would have no obligation to meet said closing date. The RE-27 is designed to allow the Seller to continue to accept offers subsequent to accepting an initial offer; typically because the initial offer has at least one concerning contingency. The concerning contingency must be stated in the RE-27, and according to the facts presented to the Hotline, the only contingency listed related to financing, not a closing date. If a second offer comes in that Seller finds more acceptable Seller must notify the initial Buyer that he would like to accept the second offer. The initial Buyer then has 72 hours (or the timeframe specified on Line 55 of the RE-27) to waive or remove Buyer’s contingencies as listed in the RE-27 or Buyer will lose his contract with Seller

If Seller’s intent was to “bump” Buyer 1 if an offer with an earlier closing date was received, an addendum signed by both parties indicating that Buyer 1 needs to meet or beat any new terms would be required.

The Hotline does not get involved in disputes between Buyer and Seller.  Broker may wish to advise clients to seek independent legal counsel.

QUESTION:   Broker questions how to list “Seller” on the RE-21 and all pertinent forms when the seller is a trust or estate.  Is the name of the trust sufficient or does it need to include the name of the trustee or personal representative; i.e., “Sam Smith, Trustee of Jane Doe Family Trust?

RESPONSE:   Legally, the owner and therefore the seller of the property is the trust and therefore the “Seller” line on the purchase and sale forms should be the name of the trust.  However, under Idaho Law anything a trustee signs as trustee will also be interpreted as acting on behalf of the trust. Additionally, the trustee is the person who will be signing the documents on behalf of the trust and should put their title after or under each signature.  Nevertheless, the title company may have other rules and preferences and the contracts may have to be filled out according to the title company instructions.