by Nora Spero

Created on: January 02, 2009   Last Updated: January 09, 2009

Avoiding Jeopardy in Real Estate Transactions Today

In today's volatile Real Estate marketplace, there is no such thing as a "simple contract" or a "sure thing." Anytime a buyer puts a deposit in escrow to purchase a property, it can be potentially in jeopardy. Even experienced, savvy investors working with trusted, seasoned Realtors are well advised to consult with a trained legal mind well-versed in Real Estate law before signing a purchase and sale agreement. The proverbial ounce of prevention is definitely more than worth the pound of cure when it comes to entering into a Real Estate transaction.

While it's true that most states' Real Estate commissions or boards have adopted boiler-plate contract forms which are generally geared to protecting the consumer's (Buyers) deposits, current market and lending conditions can create previously-unheard-of and often-unforeseeable situations that may lead to expensive and lengthy litigation after the fact. The astute Real Estate attorney can often spot and prevent potential trouble at the contract stage, and heighten buyer's and seller's awareness of what not to do, before it happens. Certainly if there is no licensed Realtor involved, or if the transaction is a commercial venture or has some complex aspects to it, having the contract drawn up by a Real Estate attorney is mandatory.

Let's examine a few situations that have been newsworthy lately. Someone puts down a sizeable deposit on a property for a mutually agreed-upon price, sets a date to close the transaction in sixty or ninety days, has their inspections done or plans approved while they are going through the lending institution's process. The lender issues a letter of commitment (bank approval), which is subject to the property appraising for the purchase price; then, two days before the closing is due to take place, the lender says the property is not worth that agreed-upon price. What happens to the buyer's deposit? Remember, the deposit was made in good faith to induce the seller to remove the property from the active marketplace, which has been done. Is the seller entitled to the deposit? Not if the contract specified that the property had to appraise for the purchase price. At that point there are still several options available to both parties, including renegotiating the price, but the important point is that the contract was specific about the escrow and the purchase price. Without the proper wording in the contract, it could get expensive for both parties

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