The Best of the Legal Hotline: Last Details


 Tracy Rucka  |    March 08, 2017
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Good preparation, good communication and good planning can facilitate smooth closings. However, sometimes it is the last details that can confuse the closing process.  

"Missing" appliances

Prior to closing, the buyers did their pre-closing walk-through, and they reported to the agent that the washing machine, dryer and refrigerator were removed by the seller. The buyers showed the agent the MLS spec sheet, which stated that these items were included in the purchase price. What is the best course of action to handle the missing appliances? 

The broker and buyers may refer to the terms of the offer, specifically the items included in the provisions as well as the following note and the definition of fixtures.

NOTE: The terms of this Offer, not the listing contract or marketing materials, determine what items are included/excluded.

By definition, appliances are not fixtures, so they must be specifically listed as additional items included in the purchase price in order to be included in the sale. The MLS data sheet only reflects what property is available, and the offer establishes the parties‚Äô agreement about personal property. When drafting the offer, the prudent drafting agent would ask the buyers if they want to include any or all appliances and draft the offer accordingly. Unless the buyers included the washer, dryer and refrigerator in the purchase price section or in the additional provisions section of the offer, the items would not be included. Conversation about inclusions and review of the note at lines 21-22 when drafting will assure the buyers understand that the offer ‚ÄĒ not the MLS sheet ‚ÄĒ determines what is included with the property.

Seller hasn't moved out

The closing is scheduled for Tuesday. The buyers have a loan commitment, and everything is in place and the final walk-through scheduled on Monday. Upon the buyer’s arrival, the seller has not started to pack and/or move out yet. The seller told the listing agent that he has no intention of moving out and will refuse to close on the house even though he has an accepted offer to purchase. What can the buyers do?

If the seller needs more time to vacate the property, and both parties are agreeable, an amendment could be signed postponing the closing date or establishing a post-occupancy arrangement; see WRA Addendum O. Alternatively, if the seller simply refuses to close, the buyers and seller should be immediately referred to their attorneys to discuss their options and contractual obligations. The brokers can discuss with the parties the default provisions and remedies on lines 278-297 of the WB-11 Residential Offer to Purchase. The listing broker may, if possible, attempt to determine the seller‚Äôs reason for refusing to meet the terms of the offer. Once determined, it may open possibilities to negotiate a mutually agreeable solution. If not, the parties may consult with legal counsel regarding their next steps. See the January 2010 Legal Update, ‚ÄúUpdating Addendum A, Addendum O and Property Condition Reports,‚ÄĚ at www.wra.org/LU1001 for more information regarding Addendum O. For additional discussion of contract remedies and issues, see Legal Update 13.09, ‚ÄúContract Construction and Remedies,‚ÄĚ at www.wra.org/LU1309 and the September 2006 Legal Update, ‚ÄúContract Law Basics,‚ÄĚ at www.wra.org/LU0609.

Changing the time and place of closing

The offer was negotiated, including the time and location of closing based on the buyer's preference. The buyer and seller have talked, and they want to close the transaction early. Since the parties are talking and they agree, they don’t feel an amendment is necessary. What do the agents need to say to their clients? 

Upon the request of the buyer, the real estate licensee working with the buyer would draft an amendment to the offer to reflect modification to the time, date or location of the closing. Likewise, upon request of the seller, the listing agent would draft an amendment reflecting the change in closing. The value of the written amendment is that it documents the verbal agreement of the parties. If the parties choose to proceed without their new agreement reduced to writing, it may result in a successful closing if all parties show up at the mutually agreed upon time and location. In the event the parties do not comply with the new agreement, it may result in confusion and misunderstanding. The brokers may discuss the potential risk and benefits of each scenario and draft an amendment if instructed by the respective party. 

Fixture or not? 

An agent has a closing, and the buyers did a final walk-through. The built-in hot tub in the basement was listed on the MLS as an interior feature. The buyers now say they do not want the hot tub. The tub would need to be cut apart to be removed from the property. The sellers planned on the tub staying in the home. Is this tub considered a fixture?

The three-prong test can be helpful for handling a disagreement between the parties when items are not explicitly listed as included or excluded. For any item in question, first check the definition of ‚Äúfixture‚ÄĚ at lines 185-192 of the WB-11 Residential Offer to Purchase, and if the item is not specifically listed, apply the three-prong test. Given the sometimes subjective nature of items, the three-part test, created by the courts, is built into the offer to help parties and REALTORS¬ģ characterize items as fixtures or personal property. The three-prong test includes these three key questions:

  • Is the article physically attached and not easily removable without damage?
  • Is there a special adaptation between the article and the premises?
  • Are there general community ‚Äúcustoms‚ÄĚ?

If the answer is yes, the item would be considered a fixture and remain with the property. The offer is clear to say the MLS or marketing materials are only what is being offered with the property and are not determinative. When viewing a property with potential buyers, it is prudent to identify any items they wish to include or exclude and draft those items into the offer intentionally to avoid later disagreements. 

Broken washer goes MIA

The offer states the washer is included with the property. The buyers remember seeing the washer during their walk-through. The transaction closed the next day, and when the buyers returned after closing, they called their agent and said the washer was gone. The listing agent said the seller removed the washer because it was not working, and the seller was going to fix it but he didn't. How should the parties proceed?

In the event the washer was included in the offer, it should remain on the property. The buyer may ask the seller to return the washer per the terms of the contract. Alternately the buyer and the seller may agree to a monetary settlement regarding the seller’s removal of the washer. 

The secondary question relates to the condition of the washer. At the time of drafting the offer, the seller makes property condition representations in the offer. Specifically, line 82 of the WB-11 Residential Offer to Purchase and item C.13 of the Real Estate Condition Report prompt the seller to disclose ‚Äúdefects in mechanical equipment included in the sale either as fixtures or personal property.‚ÄĚ Had the washer not been working prior to the acceptance of the offer, that information should have been disclosed, allowing the parties to negotiate based on the condition of the washer.¬†

Vandalism repair, delay or escrow? 

The buyer has an offer on a vacant property. During the walk-through the day before closing, the buyer discovered evidence of vandalism on the property, including broken windows and doors as well as other damage. The seller was unaware of the damage as he had previously moved out of state. The buyer does not want to complete the transaction unless the damage is repaired before closing, or there is assurance the work will be done. The broker has an escrow agreement from a previous deal. Can that agreement be used? 

The parties should review the ‚ÄúProperty Damage Between Acceptance and Closing‚ÄĚ provision on lines 206-215 of the WB-11 Residential Offer to Purchase. The seller is obligated to maintain the property in materially the same condition it was in when the offer was written. If the condition of the property has been damaged in an amount that is less than five percent of the purchase price, ordinary wear and tear excluded, the seller must repair and restore the property. Alternatively, the buyer and seller may negotiate and amend the offer to allocate the costs and responsibility for repairs in a different manner. Another choice is for the parties to agree to postpone closing, allowing the seller time to have the property restored.¬†

If the parties wish to negotiate for funds to be placed in escrow to have the repairs done after closing, they may do so with an escrow agreement. A well-written escrow agreement will minimize difficulties in fulfilling the terms of the post-closing escrow. Real estate licensees, however, are not authorized to draft escrow agreements, therefore, the broker may recommend the parties use the services of an attorney or draft their own agreement. Paying an attorney to draft the agreement may be money well spent to assure the agreement adequately identifies the intent of the parties and covers both the fulfillment of obligations and noncompliance by either or both parties. Because an escrow agreement should be drafted for the specific needs of parties in that transaction, agreements from other transactions should not be copied for use in subsequent transactions. If the parties do not amend the offer and the seller does not repair the damage, the parties may need to consult with their attorneys.

Tracy Rucka is Director of Professional Standards and Practices for the WRA.

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