law

Where to Get Help With Real Estate Contracts

October 2, 2016 by khproperties Leave a Comment

When there are issues in a transaction, where do you go for help with real estate contracts? The contracts are legally binding documents and when there are problems, they can have serious consequences. You need to know as much as you possibly can about the contract and what it is your signing, but more often than not, the big questions arise after the fact – when something goes wrong and everyone is starting to get nervous. These situations are often tense and more than a little scary, because there is so much on the line. So what do you do? Who do you turn to for advice and information? Where do you get help with real estate contracts?

Your first step in determining who to turn to should be a simple question – how serious is the issue? Is this something simple that just needs some explanation to clear up the confusion or is this something bigger that might lead to termination of the contract or lawsuits?

Help With Real Estate Contracts

There are a lot of different ways to get advice and information about the contracts used for real estate transactions. Some are better than others and each one has their place. Typically, a combination of the methods described below will help answer your real estate contract questions, but remember, always turn to the people involved in your particular transaction as they have the intimate knowledge of the contract – general knowledge and understanding of real estate contracts can be helpful, but not knowing all of the details can lead you down the wrong path.

Google – We’ll be honest, we have mixed feelings about this one. Google is both the best and worst thing to happen to real estate in the past 100 years. We believe in the free flow of information and as evidenced by this website, we love to help buyers and sellers better understand the world of real estate contracts. But there is a downside to this as well and it’s not exclusive to real estate. Because Google gives us insight into industries and practices that we never had before, it creates a false sense of knowledge about things that while we may know more about than before, we are still no experts in. Having access to this information is indeed helpful, but it does not compare to working in a field or experiencing the information firsthand. Training, skills, study – all of these still apply in the real world. Doctors talk about it all the time – how many times have you looked at WebMD and determined you have either the flu, cancer, or the bubonic plague? We post the articles on this site to help give you the general knowledge to understand real estate, but it should never replace advice and information from experts and those with the knowledge of your particular transaction or situation.
Your Realtor – Your agent is one of the best sources for help with real estate contracts. They have been working alongside you on your purchase or sale and have seen the contract in question and know a lot about you from working so closely with you. They have a level of understanding that few have, because they are so involved in the process. Not only do they have the intimate knowledge of your particular situations, but they often can see the big picture. They know all the players and moving parts of your particular deal and with that knowledge can determine who knows the most about any given piece of the puzzle. They know how the contracts work in their particular state (remember, every state has different laws) and they know what they can and cannot advise you on. They know when to turn to someone better qualified to answer the questions.
The Experts – Depending on what help with real estate contracts is needed, you may need to call in the experts. Is there an issue regarding the lending side of things? You should talk to your lender. A problem with title on the property? The title company. Is the survey wrong? Call the surveyor. Depending on the problem, you may need to call the person involved or maybe you’ll need to seek advice from another in that industry – a second opinion if you will. But remember, the facts and details are important, so when someone that is not directly involved in the transaction gives you advice, they may be missing key pieces of information that don’t give them the full knowledge to give the best answer. This is a great time to talk to your real estate agent as they have both direct access to those involved in your transaction as well as other experts in those fields who may be able to help.
Lawyers – This should always be a last resort as once you cross this line, it’s usually hard to come back. Typically, once you start asking lawyers questions, everyone gets nervous and starts hiring their own attorneys. This can lead to a standoff of epic proportions that could have been avoided. In Texas, our promulgated contracts call for mediation first, so that does help resolve issues without the courts, but you should still hire a lawyer at that point, so it will cost you money. Be especially aware of combining Google and this method as there are a ton of legal advice websites out there, but if you read the fine print, you’ll often find disclaimers about using such advice. As we mentioned previously, the facts and details are crucial to getting the right kind of help with real estate contracts, so a “quick question” often isn’t so quick (or advised), because in order to properly answer the questions, the lawyer will need all of the facts first.

One important note: We all know someone who is an agent or a lawyer or just bought a house, so they’ve been there and can help us. Tread lightly in these areas. While friendly advice or facts from someone else’s home purchase (or sale) can seem to be a quick way to get help with real estate contracts, it often is not the best way. These friends are all well intentioned, but again, they may not know the important facts or details, and may not guide you in the right direction. Bad advice can be worse than no advice at all. Also remember that when someone tells you about their experiences buying a house (family members often do this) and gives you pointers on what to do, when they did this matters greatly. Your uncle that bought his last house in 1979 will have had a much different experience than you as both laws and methodology change over time (sometimes overnight!), so he may have his heart in the right place, but he may be steering you in a completely wrong direction.

We also have to point out to be careful of investment sites and webinars that tell you what to do. We have seen many cases where clients have been advised by one of these sites of gurus of the flipping/investment television shows that are selling a package to teach investors how to make millions to do things that are actually illegal or simply dangerous. From adding wording to the contract that actually puts them in a precarious situation to trying to rewrite sections of the contract that already exist (and have been tested and approved by legal experts) to things that are flat out illegal and should never be done – these things can actually increase your risk and exposure in your transaction. So don’t just write it in because some website or TV personality that overcharged you for a one day seminar told you to do it. Remember, they don’t necessarily have your best interests at heart and often they teach a one-size fits all world of real estate, which couldn’t be further from the truth. Every state has its own laws, but real estate practices vary from town to town. While we obey the same laws, we don’t work the same here in San Antonio as they do in Kerrville.

image courtesy of TMAB2003

What is an escalation clause? Should I use one?

May 14, 2014 by khproperties 3 Comments

Understanding an Escalation Clause

An escalation clause is phrasing in a contract that is sometimes used to strengthen a buyer’s position in a multiple offer situation. The basic idea is that the buyer offers to pay a certain amount more than their current offer if there are multiple offers. Often, when we see them, the escalation clause states something along the lines of “buyer will pay $1,000 more than the highest offer if other offers are present.” Obviously, wording may vary, but we see similar wording to this and it’s important to note (as we will explain below).

Escalation clauses are used to shore up an offer by the buyer and try to guarantee that the seller will pick their offer over all others. By putting a monetary figure in there, the buyer is essentially making their offer look better than all others, because they are willing to pay more than anyone else.

The Dangerous Game of an Escalation Clause

While it may seem like a good move to secure the buyer their dream home, an escalation clause has a dangerous side to it that many don’t consider. By agreeing to pay an amount higher than other offers, the buyer is locking themselves into a potential disaster. What if the seller suddenly gets an offer that is $10,000, $20,000, $100,000 more than the buyer’s original offer price? Now the buyer is on the hook for their offer price, plus the other offer’s increase in price, and whatever amount they used in their escalation clause (in our example above, $1,000). That’s a lot of money. Hopefully the buyer elected to have an option period so that they could terminate the contract if they don’t want to spend that much. We’ve even heard of cases where offers were made by friends of the seller in order to bump up the price, even though the friends making the offer have absolutely no intention of buying the home.

The other danger in escalation clauses, is the unlicensed practice of law. In Texas, real estate agents are forbidden from practicing law without a license and the wording of these clauses can be construed as practicing law. This can land an agent in a lot of hot water with the Texas Real Estate Commission. The Texas Association of REALTORS® has even made a video about it so that agents don’t forget.

If you are a buyer and find yourself in a multiple offer situation, the best way to deal with it is to make what we call “your highest and best” offer. It will keep you from being pushed to a higher price than you might be ready for and it will keep your agent from breaking the law.

image courtesy of Nick Harris1

Remnants of a Different World of Real Estate

November 28, 2012 by khproperties Leave a Comment

While doing some property research yesterday at the office, we came across an old deed from 1953. In the deed was a section regarding the racial and national status of the residents allowed to live in Hill Country Estates. As you can see from the photo to the left, some of it was a bit shocking to see.

Despite what you may think, there are actually quite a lot of these notations in deeds and home owner association documents. Of course, real estate has changed (as has the country) a lot over the years and language like this and refusal to sell or rent to someone based on their race or nationality is illegal thanks to the Fair Housing Act which was first adopted in 1968.

I’m glad that times have changed as I can’t imagine living in a world with such segregation and blatant racism. The Fair Housing Act made it illegal to discriminate against people with regards to race, color, religion, national origin, sex, disability, or familial status. The NAR Code of Ethics also adds sexual orientation to the list.

Although some of these discriminatory paragraphs still exist in current documents, they are superseded by the Fair Housing Act. Much like “blue laws” they are left in the language of many documents, despite them being ignored because of newer laws such as those regarding fair housing. Overtime, as documents are rewritten and amended, the offending language is often removed, but because of the nature of the slow processes of the law, they often linger much longer than they should.

Homeowner Association (HOA) Laws Changed in Texas

March 15, 2012 by khproperties 1 Comment

So how many of you have heard about the new laws regarding Texas Homeowners Associations (HOAs for short) effective the first of the year? Many of the changes were long overdue and most Texas homeowners will be happy for them. The changes now allow more freedoms when it comes to outdoor displays (flags, religious items) and installation of environmentally friendly systems (solar panels, rain barrels). The changes also make it harder for HOAs to foreclose on homeowners because of unpaid fees and allow for foreclosure protections for active military personnel.

Many of these changes came about after the press shed light on stories of HOAs making over-the-top, heavy-handed or arbitrary enforcement of their rules on homeowners. Recent examples in Texas are the Marine veteran in Houston who was sued by his HOA for flying the American flag, a Jewish couple who’s HOA threatened them with fines over their display of a mezuzah on their doorway, and a National Guard officer in Frisco who had his HOA foreclose on his home when he fell behind in his payments while deployed to Iraq. It’s amazing we have to regulate what many believe to be common sense, but we do–kind of like why HOAs exist in the first place—to protect the interests of a community in maintaining a high standard of living and home values. HOAs have become a basic reality of community life in Texas—especially in the Stone Oak area. However, HOAs often get a bad rap so let’s remember the benefits HOA’s provide to their communities.

First, HOAs provide homeowners a level of certainty their neighborhood will remain attractive over time. Residents don’t have to worry about their neighbor parking a boat, RV, or commercial vehicle for a lengthy period time outside their home. They also don’t have to worry about bad home paint jobs or overgrown lawns. The second good thing HOAs do is provide neighborhood recreational amenities such as a pool, tennis courts, a park or playground, and community centers many residents could not afford on their own. Finally, HOAs are beneficial in providing a variety of services to their communities, including maintenance on common areas and management of the recreational amenities.

No two HOAs are the same and many neighborhoods have more than one. They can be more or less restrictive, run by the property management company or the homeowners themselves. Whenever considering buying a home in a HOA community, read the HOA restrictions keeping in mind the rules imposed on your neighbors will also be imposed on you. Most importantly, know your rights.

image courtesy of Lars Ploughmann