By Gary S. Mueller, Mueller & Associates, LTD
At the time of writing this article, we are diligently working on preparations for Thanksgiving. We are also working with a potential new CEO for TRAR in finalizing a new employment agreement (hopefully the “reveal” will be soon after this Article reaches your email address). Once again, I, personally, thank David McClintock for all that he has done for me, for my firm, and for our Association. He will be greatly missed. David---I hope you enjoy your “retirement”!
This month, I want to concentrate on some issues/concerns/developments that have been presented to me by a number of our members. I hope you find the following insightful.
First, with the inclement weather we just experienced, please remind your clients, especially senior citizens, about the “home repair” scam that rears its ugly head every time there is a weather issue. As you may be aware, there are roving groups/contractors who travel with the bad weather. These contractors will walk up to homes/businesses and say that, due to the inclement weather, the owner MAY be entitled to a new roof, or new gutters, or new something. The contractor, who arrives at the home/business without request by the owner, indicates that the contractor will, if the owner will sign over the rights to the claim, take the matter and push through a resolution/settlement with the owner’s insurance company and oversee the construction/repairs. The contractor’s standard paperwork indicates that the contractor will be paid 40% (percentage varies) of the approved claim amount in exchange for getting the work done. THESE SET-UPS ARE SCAMS! Initially, if a contractor shows up unannounced and the owner has no idea the identity of the contractor, the owner should NOT talk with the contractor. If the owner truly has suffered weather-related damage, the owner should reach out to his/her insurance agent---directly. Dealing with the unsolicited contractor is, more often than not, a very bad idea. Caution your current clients and past clients to avoid this situation. Though a client may have just used your service in conjunction with his/her home or business, informing him/her of these types of scams places you in a great light with the client. As we all know, word of mouth is a major referral source. Also, a pleased customer WILL tell others about your actions.
Second, I have been asked about the use of escalator clauses in real estate contracts. An escalator clause is one where the buyer indicates, “I will pay ____ for this home, but if the seller receives another offer that’s higher than mine, I am willing to increase my offer to a capped price of ______.” Another example is where the buyer indicates, “I will pay ______above the highest offer presented by another buyer.” At first blush, I would argue that such a clause is invalid and does not bind either party to the terms of the clause. A contract, to be binding on the parties, requires an offer, acceptance, and consideration from each party. In such a case, the escalator clause does NOT provide a definitive amount the buyer will pay. Additionally, the clause may put the buyer at a disadvantage as the seller will be made aware of the amount the buyer is willing to increase his/her offer to secure a valid contract on the property. Why should the seller settle for the initial purchase price if there are multiple offers? Further, the utilization of the escalator clause may lull the buyer into a false sense of security; the buyer may feel that he/she is covered up to the cap provided in the clause. The seller will “have” to accept my escalator figure if a buyer offers less than the cap on my escalator. Thinking of this another way (perhaps backward to some forward thinkers)-----if the seller accepts a different offer that is less than the cap in the escalator clause, what will happen? It is likely that the buyer who had the escalator clause will lose in court as a Judge will fail to see an actual, valid, enforceable contract was ever created between escalator clause buyer and the seller. Thus, I would be leery about accepting offers with escalator clauses.
Third, the issue of procuring cause is always discussed between agents and my office. A recent situation occurred where the selling agent procured an offer that was accepted by the seller. The buyer proceeded to pay for a professional inspection, paid for all financing expenses (including appraisal), and was to receive a clear to close on the day that the SELLER had a change of heart and decided NOT to sell the property. Now what? The clear to close did issue. The selling agent did all she was supposed to do. The buyer did all he was supposed to do. The Seller attempted to terminate the contract, return the earnest money, pay for the inspection, and reimburse the bank fees for the loan. Guess who was left out of the discussion by the attorney for the buyer----you guessed it, the selling agent! Though she earned her commission, she received nothing. In that case, the selling agent decided it was better to simply allow this to happen so that she could still work with the buyer and anticipates that word of mouth will bring her more deals. My frustration-----why did the attorney for the buyer fail to even consider the selling agent? Why did the attorney for the buyer NOT see that she was the procuring cause and, thus, was entitled to a commission? My practice tip----make sure you are working with an attorney that, when needed, will push for fairness in each case for ALL persons involved in the transaction.
As this is the final RAP of the year, I wish you and all those deal to you a very Merry Christmas, Happy Hanukkah, and a safe, healthy, and Blessed New Year. For many, 2021 CANNOT arrive fast enough. Thank you all for being there. Take care and stay relevant and involved.