Jul. 24, 2006
Dear George: My wife and I signed a contract to purchase some land for $98,000. At the time of signing, we wrote a check for $1,000 of escrow money. We specifically asked a real estate agent, who is also the one of the sellers, if the money was in any way earnest money and if the money would be fully refunded if we had to back out of the contract for any reason. We were assured that it was not earnest money, would not be deposited by the escrow agency until closing, and would be returned if for any reason we need to back out. The termination option was never discussed nor suggested by the owner agent as a means of ensuring our right to the $1,000 if we terminated. However, the contract I have states that the $1,000 is earnest money (in Part 5 of the TREC Farm and Ranch Contract). This is obviously a fact that was never agreed upon and overlooked by us when we signed the contract.
We are now considering backing out of the contract. We don't have a contract signed by all the owners. Therefore, who is entitled to the earnest money? Also, is there any value to the verbal commitment that the owner agent made regarding the $1,000 as fully refundable?
Answer: To begin with, the seller/real estate agent did not represent you in the transaction, but rather only dealt with you as "customers" instead of as "clients." While this is permissible for a real estate licensee, the licensee is nonetheless required to "treat all parties to the transaction fairly," which apparently this real estate agent did not. However, you as buyers have a standard of care and are responsible for reading and understanding the meaning of any document you sign, which you apparently did not do. Paragraph 24 states in all upper-case letters: "CONSULT AN ATTORNEY: Real estate licensees cannot give legal advice. READ THIS CONTRACT CAREFULLY. If you do not understand the effect of this contract, consult an attorney BEFORE signing."
With the limited information you provided, it appears that the seller/agent did not disclose material facts regarding the property and the purchasing process and definitely misled you regarding the earnest money. Although, you did sign a contract which, if you had given it a cursory glance, stated plainly that the check you wrote was indeed earnest money. Additionally, the Statute of Frauds essentially requires that a contract to convey any real property in Texas to be in writing and signed by all parties to the contract. Nothing a seller or real estate licensee utters via spoken word or verbally affirms has any force or effect as far as the real estate contract. If it is any consolation, if all the sellers hold title to the property, then the contract is probably not valid and you should terminate it immediately. Spend a few dollars and hire an attorney for this purpose.
Dear George: I am a California resident who is selling an investment property in Austin. A Texas broker sent me a real estate listing agreement that included a "transaction fee" or "reimbursable expense" of $695 under "other fees." This charge was in addition to his brokerage fee. When I questioned the fee, the broker responded by stating that his commission and fees were more than fair in his market for the level of service and marketing he provides. I've never encountered anything like this before. Is this legal?
Answer: Yes, a fee for real estate brokerage services to which the consumer and a real estate broker agree in writing is legal in Texas. Increased operating costs of real estate brokerages, including salesperson commission splits, have caused a nationwide decrease in the profitability of brokerage operations. As one means of offsetting this, some brokerage operations charge "transaction fees" or "reimbursable expenses" (Section 5 D(3) Texas Association of REALTORS® Residential Real Estate Listing Agreement, Exclusive Right To Sell).
Of course, just as in any written agreement for real estate brokerage services, the fees, no matter what their names, are negotiable. If a seller does not see the value in a firm's fees, he is free to not sign the listing agreement and to choose a firm whose fees appear to be more reasonable for the services obtained.
Dear George: An elderly gentleman who sold his house two months ago is now being asked to pay for sheetrock and stud work for areas where termites were treated about six years ago. There is no active termite infestation now, and a termite inspection was done before closing. The new homeowner was in the process of remodeling and found that there had been prior damage. I don't think the disclosure was made about the termites, probably because the elderly homeowner may not have even thought about it; he's now in a nursing home. The new homeowner's attorney says it is the seller's responsibility to do the repair work, estimated at $11,000. Is the elderly gentleman responsible, or is it the new homeowner's responsibility?
Answer: I assume the seller answered "no" to his being aware of "previous treatment for termites or WDI," "previous termite or WDI damage repaired," and to "termite or WDI damage needing repair." If that assumption is correct, then the question is whether or not the seller answered truthfully. If the buyer has hard evidence that the seller did not answer those questions truthfully, despite the fact he is in a nursing home and is impaired, the seller's disclosure form would most likely be construed as a representation by the seller because the disclosure form is supposed to be filled out truthfully. The law does not tend to take such
E-mail a question to ask George & Chuck or fax it to 713-978-6684. The answers to questions in this column do not contain legal advice. If you wish to obtain legal advice, you should consult your own attorney.