Top 10 Legal Mistakes Made by Home Sellers — Part 1 | Print |  E-mail
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Tuesday, 31 July 2012 15:21

Real Estate Reality

By Carl Medford, CRS

Special to the Forum




Minefields frequently remain long after wars have ceased; we’ve all been horrified by reports of children inadvertently activating hidden mines.

Similarly, the real estate legal system has plenty of hidden “landmines” ready and waiting to catch homesellers unawares.

The California Association of Realtors (CAR) reports that there are 10 legal mistakes frequently made by those selling their properties — here are the first five:

1. Accepting the buyer with the highest offer without regard to other contractual terms.

A solid contract is not just about price: length of contingencies, close of escrow, “as-is” and many other factors need to be considered. Some sellers are so enamored by the price they fail to read the remainder of the fine print.

Truth is, a lower-priced offer that closes smoothly may be worth more than a higher-priced contract that may not close for a long time, if at all, and/or result in litigation.

2. Not properly handling multiple offer situations.

By law, all offers, written or oral, need to be submitted to the seller as quickly as possible. If requested by the buyer, the seller must provide proof that their offer was actually viewed and rejected.

3. Not properly handling back-up offers.

If an offer is placed in a back-up position, to be legally binding, it needs to be signed by all parties and accompanied by a CAR Purchase Agreement Addendum (Form PAA) which identifies which backup position the offer is in.

If the initial offer fails, then the backup offer in position No. 1 is legally next in line. Sellers cannot choose a different offer, even if the terms are better.

4. Entering into an agreement with no earnest money deposited by the buyer, or a very small amount.

The more “skin” a buyer has in the game, the higher the chances they’ll stick to it in the end. The normal minimum good-faith deposit is 1 percent, while in multiple offer situations it’s frequently increased to 3 percent.

Technically, the contract is not valid until the buyer’s earnest money has been deposited in escrow. Further, this deposit is only at risk after all the buyer’s contingencies have been removed.

5. Entering into an agreement before verifying the buyer’s financial ability to close escrow.

Excited by high offers, some sellers fail to ensure the buyers can actually close. This can tie up the property needlessly, resulting in financial losses and, in extreme cases, litigation.

Next week: Part 2 — Mistakes 6–10

Carl Medford is a licensed Realtor with Prudential California Realty in Castro Valley. This article is sponsored by the Central County Marketing Association at




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