Today's Topic...Ambiguous Contracts

Question: What makes an Ambiguous Purchase Agreement?

Answer: All managers and brokers have a supervisory duty to review all contracts their respective agents have written on behalf of the buyer, or has received for review when representing the seller. One of the very first things I look for in a purchase agreement contract is, to see if it's binding. "No loopholes." The most common mistake I find is the contract has ambiguous language or the some components were left unanswered.
There are many components and clauses that make up the California Real Estate Purchase Agreement and Joint Escrow Instructions today. Let's look at several of the basic elements that help to create a purchase agreement (contract).

1. Names of the parties
2. Dates and performance dates
3. Address or legal description
4. Agency (who represents whom)
5. Price
6. Time frames
7. Financing
8. Outside services, etc.

There are many more elements to a purchase contract, as well as the language of the Counter Offer(s). Every contract is as different as the people buying and selling. However, back to the question..."What makes an Ambiguous Purchase Agreement?"

1. The definition of ambiguous is having more than one possible meaning or interpretation.
2. The definition of contract is a formal or legally binding agreement (e.g. for the sale of property), or a document that records a formal or legally binding agreement.

The most common error agents make when writing a purchase contract is the use of "Best Prevailing Rate." What is the best prevailing rate? Who knows? It could be 4% or 15%. This cannot be left for interpretation.

On the front page of the purchase agreement, Item #3, C, 1 provides spaces to be filled in (rate, term and cost) and if it's a government insured loan, who is to pay and how much.

Another common ambiguous error agents make is the use of "Seller Choice" in lieu of the specific service. The lack of naming specific services - such as, Escrow, Title, Natural Hazards Report, Home Warranty and Termite Companies.

The listing agent can easily correct this on the counter offer by writing the specific names of the vendors to be selected. Once the buyer signs the counter offer, the buyer has agreed to the services and the contract is tight and binding.

The best written purchase agreements and counter offers address all of these items. There are 30 items contained within the California Purchase Agreement and Join Escrow Instructions and more if a Counter Offer or Addendum are incorporated into the contract.

For more information on Ambiguous Contracts or any other real estate topics, give me a call! 714.626.8880