Must I return a Due Diligence Fee check to the buyer if they demand it?

Thinking of buying or selling?   Carolina Living can guide you through the entire process.    

Here is a good example of a recent transaction gone bad!  Not My transaction by the way!  :-)

QUESTION: I won’t give you all the gory details but suffice it to say there is a dispute between my buyer client and the seller about whether there is a binding contract on the property between the seller and my client. The seller thinks a contract has been created while my buyer does not. I am holding the buyer’s check for the Due Diligence Fee and was prepared to deliver it to the listing agent when the dispute arose. Now the buyer is demanding that I return the DDF check to her. What am I supposed to do? I know that if there’s a binding contract, the buyer owes the DDF to the seller. Do I hold the DDF in case there is a contract, or do I follow my buyer’s instructions and deliver the check back to her since there’s a dispute about whether a contract has been formed?

ANSWER: Whether or not there is a binding contract, an agent who is holding a Due Diligence Fee check is required by Real Estate Commission Rule 58A.0116 to return it to the buyer upon the buyer’s request. The Rule may be accessed by clicking here. Subsection (b)(4) provides that a broker may accept custody of a check or other negotiable instrument made payable to the seller for a due diligence fee, but only for the purpose of delivering the instrument to the seller.  However, the next sentence of the Rule provides that “[w]hile the instrument is in the custody of the broker, the broker shall, according to the instructions of the buyer, either deliver it to the [seller] or return it to the buyer.”  Since the buyer has instructed you to deliver the DDF check back to her, that’s what you must do to be in compliance with the Rule.

It should be noted that this Rule also requires a listing agent to return a Due Diligence Fee check to the buyer upon the buyer’s demand if the check is in the listing agent’s possession at the time of the demand. For that reason, any DDF check received by a listing agent should be delivered to the seller without delay.

If a binding contract has been formed between the seller and your client, you are correct that the buyer would owe the DDF. If the buyer doesn’t pay it, the seller likely would have the right to go after the buyer for the DDF and any Earnest Money Deposit that may have been payable, and may be entitled to recover attorneys’ fees to boot. See paragraphs 1(d) and 23 of form 2-T. However, the fact that a seller may be entitled to payment of the DDF according to the contract doesn’t affect the duty an agent holding the DDF check owes to the buyer per the Real Estate Commission’s Rule.

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Winston Salem | What Does Selling 'As-Is' Really Mean?

Courtesy of:  Carolina Living Real Estate and

Stephen L. Fussell, Chief Consumer Protection Officer   NC Real Estate Commission

The term, “As Is,” means that a seller has decided in advance of soliciting offers that he or she will not make any repairs to the listed property.  Disclosing this decision to prospective buyers puts them on notice that the seller will not make any repairs regardless of the results of inspections. However, it should not discourage prospective buyers from ordering inspections as doing so is a prudent means for determining the true condition of a property. One misconception is that when a seller notes “As Is” on a property, the buyer has no right to inspect. The NC Realtors Standard Form Offer to Purchase and Contract (No. 2-T) specifically gives the buyer the right to conduct their due diligence and order relevant inspections.

There is no State law or Commission rule compelling sellers to make repairs. Moreover, Section 4(c) of the NC Realtors Contract 2-T reads in part, “Buyer acknowledges and understands that unless the parties agree otherwise, THE PROPERTY IS BEING SOLD IN ITS CURRENT CONDITION.” With that said, many sellers are willing to make at least some repairs as a means of facilitating a sale.  If every seller refused to make repairs, then many transactions would fail to close for that reason. NC Realtors created the Due Diligence Request and Agreement (“DDRA”) form (No. 310-T) for buyers and sellers to identify the repairs they agree upon.  Once all parties sign this form, the seller then has an obligation to make the repairs listed on the form.

Another common misconception is that selling a property “As Is” gives a seller and/or a listing agent the opportunity to conceal material facts about the property. While a seller can always answer “No Representation” to any question on the Residential Property and Owners’ Association Disclosure Statement (“RPOADS”), a seller who answers “No” to a question when the truthful answer is “Yes,” may face civil liability for his/her misrepresentation.

Real estate brokers, including those brokers who are selling their own properties, must always disclose material facts. A listing agent has the duty to discover and disclose material facts. The Commission holds brokers responsible for the information they know or reasonably should know about or relating to a property. Therefore, even if a seller fails to disclose a material defect on an RPOADS, the listing agent must disclose it to prospective buyers or their agents prior to the formation of sales contracts.  If a seller indicates he/she does not want a listing agent to disclose a material fact, then the listing agent should decline to list the seller’s property.

COMPETING OFFERS - You Might Be Surprised.

Winston Salem | Who gives permission to share or not share an offer to other interested parties?   

My broker stated that the listing agent disclosed my offer to other parties, so they offered more than me for the property. I think the seller didn’t accept my offer because of their listing agent

Commission Rule 58A .0115 prohibits brokers from sharing the price or other material terms with competing parties without the express authority of the offering party (usually the buyer). Express authority is an agent’s power to act on behalf of their principal. In other words, the client gives the broker permission to perform some act. However, brokers should know that License Law and Commission rules strictly prohibits the “shopping” of offers without everyone’s permission to do so. A listing agent should not reveal to anyone other than the seller-client that a ‘full-price’ or ‘cash’ offer has been submitted, because sharing such information with a competing buyer would be a violation of Rule A .0115

For clarification, a seller has the right to consider and respond to one offer or all offers. However, if the seller finds the offers received unacceptable, the seller may request the listing agent to ask prospective buyers to submit their highest and best offers. The seller makes this decision, not the listing agent. If the seller calls for highest and best offers, the listing agent should advise buyers to submit a new offer or stand by their original offer. However, under no circumstances should the listing agent share the offer amount of any offeror without their express authority. Additionally, the listing agent cannot redact the offering price within an offer and share this information without express authority to competing buyers, because “other material terms” are still being shared. In October of 2017, the Commission published the article, “Be Prompt, Fair, and Honest When Dealing with Multiple Offers.” This article focuses on ensuring that brokers present all offers immediately to the seller; however, the seller determines which offers to consider.

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Winston Salem | NAR Settlement Guidelines

The NAR settlement agreement also mandates two key changes to the way members and MLS participants do business.

1. NAR agreed to create a new MLS rule prohibiting offers of compensation on the MLS. This would mean that offers of compensation could not be communicated via an MLS, but they could continue to be an option consumers could pursue off-MLS through negotiation and consultation with real estate professionals.
2. NAR also agreed to create a new rule requiring MLS participants working with buyers to enter into written agreements with their buyers before the buyer tours a home. NAR has long encouraged its members to use written agreements to help consumers understand exactly what services and value they provide, and for how much.
   

Let's sit down and discuss the ins and outs on how I can assist you and navigate these new waters in Real Estate Transactions!  

Winston Salem QUESTION: Commissions – Can I share my commission with my client?

 

I have always been willing to negotiate my commissions with my clients.  With the new NAR ruling, this is even more important.  Below are the rules, I am bound by. (Note, this applies to our Property Management business as well)

ANSWER: Yes. The Real Estate Commission takes the position that brokers may rebate or pay a portion of their brokerage fees to buyers and sellers who purchase or list real estate through the broker, because a real estate license is not required of persons who list for sale real estate which they own or who purchase real estate for their own account. Agents should: (1) have the consent of the principal(s) (for example, if you are acting as a seller’s (sub)agent or dual agent and want to share your commission with the buyer, then obtain the seller’s consent in writing); (2) disclose the payment to the lender; and (3) assure that the payment appears on the settlement statement (failure to disclose the payment on the settlement statement could constitute a “false statement to a lender,” which is a federal crime and also a violation of the License Law and North Carolina Real Estate Commission rules).

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