Ralph's Weekly Legal What-If Scenarios: Contract Addendums - Who Signs What And Why?

By
Real Estate Agent with John Aaroe Group BRE #01708344
http://actvra.in/rnD

Ralph's Weekly Legal What-If Scenarios: Contract Addendums - Who Signs What And Why?

Each Monday, I'm going to post a "What If" Scenario that presents a legal issue in a real estate hypothetical situation.

Each Sunday, either the correct legal answer (or most likely legal resolution) to the situation will be posted.

These are great opportunities to keep your real estate legal chops honed and tuned as a real estate professional.  And I'm sure there will be some interesting discussions going on related to these hypothetical situations.  Some of you may also have had identical situations in the past that will bring some interesting light to the answers.

Here is this week's scenario:

Jane is the listing agent, and is representing her seller, Adam, in an escrow.  Steve is the buyer's agent, and he is representing his buyer Carol.

Things are going fairly well with the escrow, and the loan approval took a little longer than expected, thus creating the need to close escrow a few days later than what the contract states.  Carol is using her brother-in-law Derek as the loan broker to obtain the loan.

An addendum is drawn up to extend the closing date out 5 more days than the original contract states.  The addendum is drawn up using ZipForms C.A.R. form ADM (see sample below), and the principles and agents sign the form in the designated signature lines on the addendum.

About a year later, Carol, during her plans to add on a new wing to the home, discovers via her contractor that there was an old underground septic tank that was never disclosed to her by the seller.  The seller was aware of the septic tank, but did not disclose it, not even to Jane his listing agent.

It will cost Carol approximately $20,000 to excavate the septic tank and fill in the soil properly for the type of renovations she is making.

Carol is considering litigation to recover the damages she must pay to remediate the old septic tank.

If Carol decides to file a lawsuit, will anyone be be responsible for the damages?  And if so, why?

(Hint:  The answer may surprise you.....)

Post your definition of what the answer is, and the correct answer along with the relative laws that apply will be posted on Sunday.

Good luck!

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Comments 19 New Comment

Ambassador
2,267,331
Patricia Kennedy
For Your Home in the Capital
Evers & Company Real Estate, Inc.

Hey, Ralph! 

I included this post in Last Week's Favorites.  Have a great week.

January 29, 2012 08:53 PM
Rainmaker
253,308
Steve Warrene
The Warrene Team - Your Cranberry to Mars Experts
Keller Williams Realty

Ralph, I also never hear of that before but will also not forget the lesson.

January 29, 2012 09:57 PM
Rainer
177,469
Rosalie Evans
The Evans Group, Sioux Falls, SD Homes For Sale
Meritus Group Real Estate

And this is a good reason to have insurance over the regularly required E&O insurance. Isn't this litigious world great! Maybe if you are a lawyer!

January 30, 2012 02:18 AM
Rainmaker
312,685
Sandy Acevedo
RE/MAX Masters, Inland Empire Homes for Sale
951-290-8588

This is very interesting. I signed an addendum just last week. What if the buyer and seller signed it and not the agents?

January 30, 2012 11:18 AM
Ambassador
911,600
Ralph Gorgoglione
California Real Estate (800) 591-6121
John Aaroe Group

Sandy,

The binding agreement would be between buyer and seller, which is how it should be.  Your signature as a broker is not necessary even though there is a signature line.

For example, we can put a signature line on there for the President of the United States to sign, but that doesn't make it necessary for him (or her) to sign to make the document binding.

Also, the only time you want to sign an addendum, specifically form ADM as I have given an example of above, is when it accompanies the listing agreement if you are making special terms as part of your listing agreement.

Other than that, DO NOT SIGN this form if it pertains to terms having to do with the contract between buyer and seller.

February 04, 2012 10:20 AM
Ambassador
911,600

Ralph Gorgoglione

California Real Estate (800) 591-6121
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