Answer: The buyers' rights will depend on the wording of the inspection contingency clause. Generally, buyers have many options after the inspection. They can offer an addendum to the purchase agreement to have the seller fix the problems or reduce the purchase price. (Typically, the presentation of a proposed addendum does not alter the original purchase agreement and if the proposed addendum is rejected, the original purchase agreement is still binding.) They can exercise the contingency and notify the seller in writing that the purchase agreement is null and void. Or, they can choose to complete the purchase under the terms of the contract.
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Question #3:
If the sellers never lived in the property is it exempt from the Seller's Disclosure Act?
Answer: No. The sellers must fill out the Seller's Disclosure Form even if they have never resided in the property. In the case of nonresident sellers, many of the items may be marked unknown or not applicable. Sellers who do not reside at the property should also indicate that fact in the explanation section.
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Question #4:
Are sellers obligated to accept a full price and terms offer in response to an offer in an MLS?
No. The Michigan Court of Appeals recently held that an MLS listing does not constitute an offer which can be accepted. Thus, even if buyers come in with a full price and terms offer with no contingencies, the seller is under no obligation to accept the buyers' offer. The seller may owe a commission, but has no obligation to enter into a purchase agreement and sell the property.
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Question #5:
Can a listing agreement be canceled before it expires and if so how?
Yes. You cannot continue to act as the agent of the sellers when they have specifically stated that they no longer wish you to do so. However, this may not end your involvement with the sellers. If a sale is pending, in most instances you have earned the commission and are entitled to it. If there is not a sale pending, Michigan courts typically have held that sellers have not breached their contract by terminating it early, unless done in bad faith simply to avoid paying a commission.
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Question #6:
Six months ago the buyers refused to close on my sellers' home. The deal is dead, but the earnest money is still in dispute. Are my sellers prohibited from selling their home to someone else as long as the earnest money is is dispute?
No. The status of disputed earnest money has no effect on a seller's right to sell their home. The earnest money dispute does not create a lien upon the property, nor does it entitle the buyers to, in any way, prevent a subsequent sale. The seller should, however, contact an attorney if there is any chance that the buyers are still claiming a right to purchase the home.
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Question #7:
Is a seller's disclosure form required for commercial property?
The seller's disclosure form is required if the property contains form 1 to 4 dwelling units. Some commercial properties contain dwelling units and thus the disclosure would be required. Other commercial properties do not contain dwelling units and thus would not be required.
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Question #8:
Is a seller's disclosure form required for vacant land?
No. While there are some forms available for this purpose, there is no legal requirement for a seller's disclosure form for vacant land.
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Question #9:
The buyers are having difficulty coming up with a 20 percent down payment. Their mortgage broker has suggested increasing the purchase price by that amount and then entering into a second mortgage from the sellers for the difference. The second mortgage would be torn up after closing. Is this legal?
No. The parties should be advised that this is fraudulent. They are attempting to defraud the lender by making it appear that the sale price is higher than it is. The lender believes it is financing 80 percent of the sale, when, in fact 100 percent is being financed. For a more thorough discussion of this issue, see Greg McClelland's Legal Lines column in the July, 1998 issue of the Michigan REALTOR® magazine.
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Question #10:
I would like to offer a bonus or otherwise reward my clients. Can I do this and what are the limits on such bonuses?
Yes. You can offer bonuses or rebates of commission to your clients as long as they are generally available and not based on chance. The best way to protect yourself is to have written rules stating who is eligible for any offered bonuses.
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