Fiduciary Duties During Offers and Counteroffers Earnest Money Laws

1. Fiduciary Duties During Offers and Counteroffers Earnest Money Laws

2. Class Guidelines Turn off cell phones – PDAs, etcHonor break time

3. Objectives 1. Analyze earnest money red flags for collection, deposit and release. 2. Identify “red flags” of offers and counteroffers. 3. Analyze fiduciary duties during offers and counter offers.

4. No 1. Is earnest money necessary to create a binding contract? _____Yes _____No

5. 2. Does your broker allow you to accept cash for earnest money? _____Yes _____No Recommended…Don’t accept cash. It could be counterfeit.

6. _____No 3. Ohio law requires earnest money to be deposited within 24 hours of acceptance of the sales contract. _____Yes _____No

7. When does your contract saythe earnest money must be deposited? Upon receipt? Upon execution of an executory contract?

8. Agent failed to depositan earnest money depositinto the brokerage trust account within a reasonable time.

9. Fine - $4003 hours CE – Core Law class

10. 4. The buyers tell the agent that they are willing to write an earnest money check but “it won’t be good till the end of the month.” What should the agent do?

11. 1301:5-5-08 Handling of trust account funds. (A) No licensee shall accept any note, nonnegotiable instrument or anything of value not readily negotiable in a real estate transaction without the knowledge and written consent of the owner of the real estate.

12. NSF If the earnest money check is returned for Non Sufficient FundsNOTIFY the seller immediately!

13. Agent signed the receipt in a purchase agreement for an earnest money deposit, which in fact had NOT been received.

14. Suspended – 10 days Fine - $500Completion – 10 HourBroker Post Licensure Class

15. Agent named a false consideration in a document when she acknowledged receiptof earnest money in the purchase contract, on a particular date, when the money was NOT collected on that date.

16. Suspended – 5 days Fine - $50010 Post Licensure Sales Class

17. 5. Which broker is to “hold” the earnest money? Do whatever your contract stipulates!

18. 6. I am a commercial agent working with a Michigan commercial broker. If the buyer’s offer is accepted, can the earnest money be placed in the trust account in Michigan?

19. 4735.022 Nonresident commercial brokers and salespersons. (6) Deposits all escrow funds, security deposits, and other money received by either the out-of-state commercial brokeror Ohio broker described in division (A)(1)of this section in trust or special accountsmaintained by the Ohio broker;

20. FYI If the buyer is purchasing aBank Owned Propertythe bank may keep the earnest money.Read the contract and disclose to buyer.

21. FYI If the buyer is purchasing new construction, be sure the buyer understands that the builder may spend the earnest money.

22. ALWAYSCollect earnest money upon acceptance

23. ALWAYSLet the seller or seller’s agent know that the buyer has paid the earnest money upon acceptance.

24. ALWAYSRemit to broker within a reasonable timeafter it is collected.

25. What are the 4 circumstances where a broker may release money from the trust account?

26. 1. Transaction closes; 2. The parties provide signed, written instructions specifying how to disburse the earnest money; 3. A final court order specifies to whomthe earnest money is to be awarded; 4. The earnest money becomes unclaimed funds.

27. 1. Transaction closes; 2. The parties provide signed, written instructions specifying how to disburse the earnest money; 3. A final court order specifies to whomthe earnest money is to be awarded; 4. The earnest money becomes unclaimed funds.

28. ORC 4735.24Earnest Money Update PFD is found at the ODRE website.

29. NEVERForce parties to sign a releasewhich releases the broker from liabilityin order to get their earnest money back!

30. Proper Legal FormSales contracts will vary from broker to brokerand Board to Board. Use updated contracts!

31. Be sure to read the contract BEFORE discussingwith the buyer/seller.

32. Bank Owned PropertyBe sure to read carefully!

33. An agent wrote a contractand the contingency read, “Mother-in-law to inspect.” Writing contingencies is a practice of law! Took 3 years to settle the case.

34. Review Your Contract ContingencyA contingency means one party or the other MUST do something. The party required to do somethingmust perform the action in a timely manner.

35. Review Your Contract Contingency1. What is going to happen? 2. When is it going to happen? Timelines in contingencies must be specific.

36. Review Your Contract Contingency3. What are the possible outcomes? 4. What is the status of the contract and the earnest money based on the outcome?

37. If a contingency is not met, don’t assume that the contractwill be voided and the earnest money returned. The outcome must be included.

38. Suggest that your clientshave their attorney reviewthe document before they sign it.

39. Timing Issues Acceptance of offerBuyer to secure financingInspections Contingencies to be fulfilledClosing Possession

40. Make a checklist for each transaction to assure that the contingencies are being met in a timely manner.

41. Seller wants to know… Are the buyers financially qualified to purchase my property?

42. Buyer wants to know… Are these parties authorized to sell?

43. An offer is NOT a contract!The act of presenting something for acceptance.

44. Offers may be… Withdrawn Countered Assigned Ignored Accepted

45. Offers will terminateupon the deathof one of the parties. Sales contracts are bindingupon the deathof one of the parties.

46. Remember…if the agent dieswe send flowers! Listing Contractis still binding between thebrokerage and the owner.

47. Offer and AcceptanceMeeting of the MindsMutual Assent

48. Seller/s Buyers Must Pass the Mirror Test

49. Seller/s “I will take $150,000 for my property.” “I will pay $135,000.” Buyers No Deal

50. Seller/s “The ceiling fans are mine! ” “I am takingthe ceiling fans.” All terms must be agreed upon. Buyer/s