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socrateaser
socrateaser, Attorney
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That is a great answer. I think you understood my question

Resolved Question:

That is a great answer. I think you understood my question exactly. I am thinking of doing what you described in the first scenario. I just have a follow up.

Should I have the seller sign a disclosure stating that, although I am a licensed broker, I would not be representing them in any kind of brokerage relationship and would this relieve me of any fiduciary responsibilities?

Thanks,

Jake
Submitted: 1 year ago.
Category: Business Law
Expert:  socrateaser replied 1 year ago.
Hello again...you asked:

Should I have the seller sign a disclosure stating that, although I am a licensed broker, I would not be representing them in any kind of brokerage relationship and would this relieve me of any fiduciary responsibilities?


A: An agency relationship may arise either expressly by agreement between parties, or implied by their mutual conduct or by operation of law. An acknowledgment by the seller that you are not the seller's agent will help avoid any express agreement to the contrary. But, it will not stop an agency agreement from forming if you actually act on the seller's behalf.

That is why I previously said that your contract must be a purchase offer that you cannot cancel merely because you cannot find an assignee. Because if you can terminate the agreement where no buyer can be found, then the agreement is no more than an exclusive agency "net" listing: i.e., an agreement to market the property in exchange for a commission based upon your ability to find a buyer who will pay a percentage more than you agree to pay the seller. And, since that agreement exactly follows what real estate agents ordinarily do, you would become the seller's agent due to your actual conduct with the seller.

There is a collateral issue here: Any lender who the ultimate buyer chooses to finance the purchase will want to know that the agent's commission is reasonable. If your assigned price is 25% higher than the seller's agreement with you, the lender may decide that this is not a fair market value transaction -- and the lender may refuse to apply the same LTV to the transaction as would be the case were the total sales commission only 5-6%. This doesn't make the deal illegal -- but it may make it harder to close.

Hope this helps.
socrateaser, Attorney
Category: Business Law
Satisfied Customers: 34854
Experience: Retired (mostly)
socrateaser and 2 other Business Law Specialists are ready to help you
Customer: replied 1 year ago.

Another great answer, thanks. I think I understand. So, I should disclose that I am a broker and not representing the seller in an agency relationship, but also, I can not have the option to cancel the contract if I can not find the buyer because that would equate to an exclusive listing agreement and I would be performing the functions of a broker.


 


Would it be ok if I were to set a closing date in the contract and if I do not close on the contract the seller would be entitled to retain an earnest money deposit provided to the seller upon execution of the contract? I am assuming that I would have a clause in the contract containing some language to the effect of "If the buyer or the buyer's assignee fail to close this transaction the seller's sole recourse is retention of the earnest money deposit of ____ which was provided to the seller upon the execution of this contract.". The way I see it is I (or the assignee) have not cancelled the contract but defaulted, and provided in the contract that the sole recourse is the seller keeps the deposit.


 


What do you think?


 


Thanks,


 


Jake.


 


 

Expert:  socrateaser replied 1 year ago.
What you describe is a "liquidated damages clause." I think it has some merit, because that's the sort of thing that would ordinarily appear in a typical purchase agreement. In effect, this is also a purchase option agreement, because you are offering to purchase by no later than date X, in exchange for $Y -- and the seller has an option of extending your option agreement without accepting additional consideration -- or calling the option expired and keeping $Y.

Works for me.
socrateaser, Attorney
Category: Business Law
Satisfied Customers: 34854
Experience: Retired (mostly)
socrateaser and 2 other Business Law Specialists are ready to help you

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