No deposit? Amend the agreement

True or false: Deposits are essential to bind the parties to an agreement of sale. And the answer is true and false, sort of.

A deposit is not essential to create a binding agreement. Even without a deposit, the buyer has a right to enforce the agreement of sale by suing for specific performance. Likewise, a seller has the right to sue a breaching buyer, even one who has paid no deposit, for the full purchase price. That is, unless the seller has agreed to limit his remedies upon buyer default, which is clearly what most sellers do when they sign the PAR agreement.  When listing agents allow their sellers to sign agreements with a checkmark in the box limiting their sellers’ remedy to deposits paid, they have done just that. Why?  Well that is a story that will fill another article.

 

While not a legal necessity, a deposit is what holds the buyers feet to the fire. For that reason it is standard fare in the real estate community.  Many of you have never seen an offer that is not accompanied by a deposit. Or have you?

Modern practice makes liberal use of the email transmission of offers and of acceptances. The problem is that while technology may permit payment via the Internet, it is not happening with respect to deposits. Instead, the agreement of sale may be passed electronically, signed electronically, or printed, signed and scanned. The deposit check will then follow hours or days later.

The problem is that the signed agreement of sale likely provides for a deposit “at the signing” of the agreement. It has not!  And this creates risk for all.  Risk to the seller that the buyer will walk before the deposit is tendered, in which case the seller has recourse if that box is checked in the default clause. Keep in mind that the liquidated damage clause provides that the seller may retain sums “paid” (past tense). Because it provides that seller may keep sums paid and not sums that should have been paid, the seller gets nothing.

And there is risk to the listing agent who allowed her seller to accept an agreement that clearly states that a deposit was paid at the time of signing when it was not. And risk to the buyer agent whose deal is now unraveling. Additionally, the buyer and listing are at risk for disciplinary action by the Real Estate Commission because they allowed their clients to sign a contract clearly stating that the deposit has been paid when it has not. And yes, licensees have been prosecuted for this very offense.

Avoidance is easy. If the deposit does not accompany the offer, amend the agreement to show that the deposit is to be paid in the future on a date certain or within a specified time. Amending the agreement necessitates the additional step of having the revision initialed by all parties. The problem is more easily avoided when buyer agents draft the agreement accurately to begin with.

By James L. Goldsmith, Esq

Latest New Home Sales

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses new home sales.

• New home sales fell sizably in July. The latest figure of 394,000 (annualized sales rate) is 13 percent below the prior month’s level, though still up from one year ago.
• New home sales measure contract signings and not closings. By contrast, existing home sales released earlier in the week,  which had spiked upward to the highest level in 4 years, measures closings. The fact that contract signing is coming down on new home sales likely reflects higher mortgage rates. Another factor is the still very sluggish level of new home construction. Simple math of low new home construction means fewer new home sales. This is reflected in essentially 50-year low inventory levels, as even falling new home sales is not leading to any measurable gains in unsold inventory.
• Meanwhile, the median price of a new home rose by 8.3 percent from one year ago. Tight inventory and higher construction costs are pushing up prices. The gap between new home price and existing home price is still abnormally high. Therefore, there is still further room for existing home prices to catch up.
• The prospect for new home sales is still up, despite the latest month’s tumble. The reasoning is simple. There is a broad housing shortage. Only homebuilders can genuinely relieve the inventory conditions. Whatever builders are building are selling, despite again the one month hiccup. Therefore housing starts will rise over the next two years for sure. More new home construction, then naturally, more new home sales. The only bottleneck at the moment is the difficulty of obtaining construction loans. 

by: Lawrence Yun

Renovate Your Kitchen for Under $1,000

Get the Look for Less

Want to redo your kitchen without breaking the bank? "It is possible to give your kitchen a whole new look for much less money," says Nikki Trivisonno, president of the Ohio State Chapter of the National Kitchen & Bath Association. "But you have to be willing to make some compromises."

Start by updating the color and reducing clutter then add new hardware, fixtures and a backsplash. You'll go a long way toward stealing the high-end look you crave. 

Replace the Hardware

"Hardware has a really big impact on a kitchen's style, so changing it is a great way to freshen up the look of your kitchen," says Trivisonno.

For less than a couple hundred dollars and just a few hours of work, a homeowner can swap out every handle and knob in the kitchen. Styles range from contemporary to rustic to traditional. Finishes come in ultra-popular oil-rubbed bronze or easy-to-clean polished chrome. To make installation a breeze, Trivisonno suggests that homeowners bring along an old drawer pull when shopping to make sure the new hardware matches the holes of the previous set.

Depending on the style and finish of the hardware and the number of drawers and cabinets, the average kitchen can be completed for as little as $150. 

Replace the Faucet

Fixtures are the jewelry of the kitchen, and the kitchen sink is often the focal point of the room. Investing in a new faucet is a simple and cost-effective way of giving the whole room an updated look. Like cabinet hardware, faucets come in a wide range of shapes, styles and finishes, making it easy to match the decor of the room.

Kitchen faucets come in single- and double-handled models and can include a separate pull-out sprayer, requiring an additional slot. Match the new faucet footprint to the old to save hours of frustration and quite possibly the cost of a brand new sink. 

Install a Stainless Steel Laminate Backsplash

"For a really clean, contemporary look, a homeowner can easily install a stainless steel laminate backsplash," says Trivisonno.

Capped with a thin layer of stainless steel, copper or aluminum, metallic laminate sheets can be used as countertop backsplashes, as appliance covers and for the wall area behind the cooking range. And because they install with little more than a few dabs of panel adhesive, the job is easy enough for any do-it-yourselfer.

A properly sized metallic laminate panel affixed to the face of a refrigerator or dishwasher can modernize its look for a tiny fraction of what a new appliance would cost. 

Add a Ceiling Fan

When shopping for a fan, look for the Energy Star Label, which means the product has met the U.S. Environmental Protection Agency's energy-savings standards. Experts say an energy-efficient fan can save up to 40 percent on summer cooling costs and up to 10 percent in the winter. In other words, they're well worth the effort to install. They'll keep your kitchen cool and provide a new visual element to your space.

By Douglas Trattner

HGTV.com