Tammy Truthful is a very experienced listing agent and represents a seller whose property is currently under contract with Buyer #1. The contract contains a General Contingency Exhibit (GAR form 92) making the deal contingent upon the buyer obtaining a 70% loan. The General Contingency Exhibit requires the buyer to give written notice to the seller that the contingency has been removed “on or before April 12, 2013”, a Friday. It goes on to say that if the Buyer hasn’t provided this notice, the contract terminates. Not that the seller may terminate the deal, but that the contract does, in fact, terminate. During the contingency period, Tammy received and helped the seller negotiate another acceptable offer from Buyer #2 which contains a Back-Up Agreement Contingency Exhibit (GAR form 91). This back-up contract nets the seller an additional $5,000. Realizing that Buyer #1 will not be able to deliver written notice removing the General Contingency by the deadline, Buyer #1’s agent begs and pleads with Tammy Truthful to help save their deal by whatever means necessary. What are Tammy Truthful’s options? 1. Help negotiate an Amendment to Agreement (GAR form 105) changing the General Contingency deadline to a later date to allow Buyer #1 more time to secure financing and remove the Contingency; 2. Allow the General Contingency to fail and declare the contract terminated, followed by immediate notification to Buyer #2 that their contract is now “promoted” to primary position; 3. Allow the General Contingency to fail and do nothing, hoping that Buyer #1 would continue to seek financing and be able to close. This includes not notifying Buyer #2 of the failure of the contingency and not promoting Buyer #2 into primary position. Tammy and the seller decide to give notice to the primary buyer that they are “out of the contract” on Saturday morning but NOT to notify Buyer #2 of any developments at this time. Tammy and the seller discuss the potential hazards of giving up on Buyer #1 who is trying to close a 70% loan at the end of the month versus turning to Buyer #2, whose offer is higher, but who hasn’t even begun the process of loan approval for his 95% loan. As much as the seller would like the extra money, he carefully weighs the possibilities that the property won’t appraise for the higher price and/or that Buyer #2 will have a much tougher time qualifying for the 95% loan. The seller decides to offer an Amendment to Buyer #1 with an extended contingency deadline and an agreement that the “automatic termination” of the General Contingency is extended through that new deadline. Based upon Par. 4 of Buyer #2’s Back-Up Agreement Contingency, Buyer #2 has no right to examine any terms of the contract with Buyer #1 or any Amendment to that contract. Buyer #2 is kept in the dark until Buyer #1 and the Seller completely terminate their contract, if that ever happens.
Posted on: Fri, 07 Jun 2013 13:27:41 +0000
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