Forms questions from the Legal Hotline

Answers about counter offers, repairs, square-footage information, and more.

by Ron Walker    The following are actual questions recently received on the TAR Legal Hotline on topics relating to the use of forms.

The buyer wrote in special provisions, "refrigerator stays." After the buyer moved in, the buyer claimed that the refrigerator was not the same refrigerator that the buyer intended the seller to leave. How should a situation like this be addressed in the contract?

Use TAR Form 1924, Non-Realty Items Addendum. This form asks for any personalty to be specifically described, addresses whether the buyer will pay an additional amount for the personalty, and provides that the seller does not warrant future performance of the personalty.

The buyer obtained an inspection. The buyer and seller amended the contract to provide that the seller would complete a number of repairs before closing. After the buyer moved in, the buyer became dissatisfied with the quality of the repairs.

The buyer claims that he was never given the opportunity to inspect the property after the repairs were made. Who is responsible under the contract? Are the repairmen responsible? Is the buyer agent or listing agent responsible?

Paragraph 7A of the contract forms provides that the buyer may inspect the property after repairs and treatment are completed. Paragraph 7F provides that the seller will use persons who regularly provide such repairs or treatment. Paragraph 7F also provides that the buyer may elect for the seller to transfer any transferable warranties for the repairs to the buyer at closing.

If repairs were not completed or were not made by persons who regularly make such repairs, the seller may have breached the contract. The seller, and possibly the buyer, may have a claim against the repairmen, but recovery against a repairman depends on the repair and any warranty associated with the repair.

A claim against the buyer’s agent would most likely be based on whether the buyer’s agent was negligent in not keeping his client informed of the client’s rights under the contract and when to exercise those rights.

A claim against the listing agent likewise depends on the tasks that the listing agent undertook in the transaction. Obviously, more facts not stated here are necessary to properly evaluate each claim. It might be useful for an agent to implement a final walk-through procedure before closing. Specifically, TAR Form 1925, Buyer’s Walk-Thru and Acceptance Form, may prove beneficial. A buyer’s agent may want to suggest that the buyer ask either before or at closing for copies of the repair invoices and any repair warranties.

Our office regularly uses TAR Form 1926, Seller’s Rejection of Offer with Invitation for Submission of New Offer. Recently, however, a few buyer agents have requested that the seller make a specific counter offer in writing. Is it prudent for the seller to make a written counter offer or use TAR Form 1926?

TAR Form 1926 was developed to address a certain negotiating strategy. It is used when the seller wishes to: a) reject an offer; b) encourage the buyer to submit another offer; and c) maintain the seller’s ability to accept or make another offer without having to revoke a counter offer made by the seller. It may also prove useful in situations where the seller has received or intends to receive multiple offers.

But Form 1926 was not designed to be used in every transaction. Making a written counter offer may prove to be the best strategy in a certain transaction. For example, in a buyer’s market, the seller may want to make it easy and expedient for the buyer to enter into a binding contract by making a written counter offer. The seller’s strategy will determine if Form 1926 should or should not be used.

There seems to be a number of lead-based paint disclosure forms that are in print. Which form is the right one to use?

In sales transactions other than HUD-owned properties, use TAR Form 1906 (TREC OP-L), Addendum for Seller’s Disclosure of Information on Lead-Based Paint and Lead-Based Paint Hazards as Required by Federal Law. In sales of HUD-owned properties, use TAR Form 1907, Lead-Based Paint Addendum to Sales Contract - Property Built Before 1978. (This form is for use with HUD contract forms.) In lease transactions, use TAR Form 2008, Addendum Regarding Lead-Based Paint. Be sure that all buyers and tenants interested in purchasing or leasing property built before 1978 have received EPA’s pamphlet entitled Protect Your Family from Lead in Your Home (TAR Form 2511).

I represent a prospect interested in purchasing a property that is not listed with a broker for sale. The prospect wants me to approach the seller and make an offer. The prospect wants me to seek my compensation from the seller. How can I secure payment of the commission?

Look at TAR Form 2401, Registration Agreement between Broker and Owner. This form allows the broker to register the prospect with the seller, and if the prospect buys or leases the property, the seller will pay the broker. If the seller refuses to enter into an agreement under TAR Form 2401 (or a similar agreement), the broker should inform the prospect and seek further instructions from the prospect. It may become necessary for the buyer to pay the broker directly, but seek certain concessions for the buyer in the contract.

A prospective buyer asked me for the square footage of a certain property. I looked on the appraisal district’s information and reported the size back to the buyer. The buyer purchased the property. The buyer later claimed that the property is 400 square feet less than what was reported. The buyer claims that I misrepresented the size of the property. Does the buyer have a claim against me?

This fact scenario has been the subject of several lawsuits over the last few decades. A number of facts will have to be established to conclusively determine whether the real estate agent has any liability in this case. For example, did the agent disclose the source of the information? Did the agent have any reason to believe the information to be inaccurate? Is the discrepancy material? Did the buyer rely on the information reported?

This type of claim emphasizes the prudent suggestion for real estate agents to disclose the source of any information they pass on to clients and prospects. For example, the real estate agent might want to habitually state, "According to the appraisal district (or whatever source), the property has _______ square feet." This is prudent advice not only for information about a property’s size, but for any information.

It is also prudent for the real estate agent to document the source and communication of the information in writing. Use of TAR Form 042, Notice of Information from Other Sources, is an excellent tool to use when passing on any information to a client or prospect. This form has also been reduced down to "rubber stamp" format so that a real estate agent can stamp the statement on whatever information the agent passes to a client or prospect. The stamp format states: "Notice: This written information is from _______________. I have relied on it and have no reason to know it to be false or inaccurate, except _________________. I do not warrant or guarantee its accuracy. Do not rely on it without verification. Signed _________."

Ron Walker is director of legal affairs for TAR.

Two people from each TAR member office can access the TAR Legal Hotline. For more information about this free member service, call 800/873-9155.

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