Earlier this year the following scenario occurred:
- Buyer made an offer.
- Seller accepted the offer but added a term imposing a $5,000 penalty if the closing was delayed. Seller initialed the new term.
- Buyer refused the $5,000 penalty by scratching out the added term. Buyer initialed next to the scratched out term.
- Closing was delayed due to a buyer issue.
- At closing Seller demanded the $5,000 penalty. Buyer said no stating he had marked out the penalty term.
- The copy of the contract in the possession of the closing attorney showed the term marked out with two sets of initials.
While this seems pretty clear cut, it was not. On its face, the contract appeared to be properly executed. However, the marked out provision should have had three sets of initials. The seller initialed when the term was added. The buyer initialed when the term was denied. However, the Seller should have initialed again acknowledging that the term was not accepted. The lack of dates certainly played a role in the dispute. Since neither side would relent, one of the agents reduced the commission in order to get the deal closed.
State law requires the licensee to ensure that all changes or modifications are in writing, initialed and dated. As an agent in a transaction you need to pay very close attention to what is happening during the contract negotiations and make certain that every time an item is modified, deleted or added that both parties initial and date. Your money and reputation are at stake.
Photo by scottfeldstein