LEGAL HOTLINE ARCHIVE
Purchase Agreement

Q. Purchaser A is represented by Realtor A. Seller B is represented by Realtor B. Purchase A writes an offer to purchase a listed home from Seller B. Inserted in the additional terms and conditions are the following: "Seller and seller's broker authorizes purchaser and purchaser's broker to offer property for sale and accept an offer to purchase contingent on purchaser acquiring title to property and also authorizes purchaser's broker to accept a deposit on property prior to act of sale."

1) Is this contract legal?
2) Does this conform with securing permission from owners to offer property for sale?
3) Could Realtor A be in violation for soliciting the client of Realtor B?

A. 1) We are not aware of any law or rule which would prohibit an offer to purchase from containing language authorizing the purchaser to offer the property for sale or to accept offers contingent on the purchaser acquiring title to the property and accepting deposits in connection with such offers. As long as the seller is agreeable to such terms they may be included in a purchase offer.

2) The inclusion of the above mentioned terms and conditions in a purchase offer does not violate the rule that written consent of all of the owners of the property is required in order to offer real estate for sale. If the seller (owner) agrees to the terms and conditions authorizing the purchaser to offer the property for sale, etc. then the owner is in fact giving his written consent to offer the property for sale.

3) Inclusion of the above mentioned terms and conditions would not cause Realtor A to be soliciting the client of Realtor B. Such terms and conditions allows Realtor A's client to solicit offers for the subsequent sale of the property prior to actual ownership. The initial transaction between purchaser, represented by Realtor A, and seller, represented by Realtor B, would still take place; and would take place subject to the same basic terms as those that would be applicable if the property were sold pursuant to an offer to purchase which did not allow the purchaser to solicit offers. There should be no impairment to Realtor A, in terms of his representation of the seller, due to the inclusion of the terms and conditions allowing the purchaser to solicit offers.

Q. A woman has died with one brother, no children or husband, prior to her death she signed a listing on her property. Does the listing still remain in place or is it null and void once the signer dies?

A. The Listing and Marketing Agreement (the "Agreement") may be considered an executory contract if both parties thereto still owe performance under the Agreement. Clearly the Agent owes performance under the Agreement in the form of marketing the property and finding potential buyers. It is unclear if the Seller owes any performance under the contract, other than refraining from using the services of another broker. Generally payment to the Agent is due by the Seller under the Agreement upon the execution of a subsequent agreement of sale entered into with someone located by the Agent pursuant to the Agreement.

Regardless of whether or not the Agreement is an executory contract, it is clear that upon the death of the decedent her estate or succession becomes the owner of the property. Successions are viewed as legal entities under Louisiana law. Thus, all dealings with respect to the property after date of death should be with the representative of the succession, who is acting on behalf of the heirs of the succession. The decedent may have named a succession representative in her last will and testament. If she did not do so or died without a last will and testament, then the appropriate Court would have to appoint a succession representative. It is up to the succession representative and/or the court to determine if it is in the best interest of the succession to continue any contracts or agreements entered into by the decedent.

Until August 15, 2001 if a person died before performing an executory contract evidenced in writing, the succession representative had to petition the court for permission to carry out the contract. Similarly even if the listing agreement was not an executory contract, but the succession representative decided it was in the best interest of the succession to sell the property the succession representative would have to petition the court to list or offer the property for sale. The succession representative would also have to again petition the court to enter into the actual sale of the property.

Effective August 15, 2001 court permission to carry out executory contracts, to enter new contracts or to sell immovable property no longer has to be obtained if the succession undergoes independent, rather than regular administration (as discussed in the preceding paragraph). If the person who is named or appointed as the succession representative meets certain qualifications and the heirs of the succession agree to independent administration, then the court must order independent administration if it is petitioned for. In the case of independent administration the succession representative can take almost any action with respect to the property of the succession, including the sale thereof, without the delay and necessity of court approval. The succession representative must still act as a fiduciary and in the best interest of the succession and owes an accounting to the heirs of the succession for his or her actions. Independent administration can be revoked at anytime upon request of an heir or any creditor.

You should contact the succession representative to see if he or she in fact plans to sell the property. In this case the succession representative may be the brother, who may also be the sole heir. If he decides he does not want to continue the Agreement you do not have any real recourse. As of the date of death the succession owns the property on behalf of the heirs. At that point you no longer have an Agreement with the owner of the property.

It may also possible that no succession has been opened. In that case you are not in a position to force the succession to be opened or administered. In this case the ownership of the property is in limbo because without a succession the heirs do not become the legal owners. But again because the decedent has passed away you do not have an Agreement with the current owner of the property thus you have no enforceable rights.

We are not aware of any cases or rules which address the enforceability of a listing agreement with a decent. There are reported cases that have held that the proper remedy for a party claiming to have an executory agreement with a decedent for the purchase of immovable property is to petition the succession for specific performance of the agreement. But as noted above, an agreement to sell is different from a listing agreement, because listing agreements generally do not bind sellers to actually make an ultimate sale.

Q. We have signed a completed contract on another Broker’s property. The OB Seller is demanding 26 days from date of Loan Approval to the date of Act of Sale.

This was not addressed as an item in the contract, only a loan approval date, and an Act of Sale date.

Our Agent received a written loan approval within the date required, contingent only upon the receipt of the appraisal.

The Other Broker is now asserting that the contract is null and void, due to the fact that the loan approval date was not met.

We have known for years that all contingencies are seldom met for approval, the main contingency being the sale of the seller’s present home, which is done back to back with the new home sale in many cases. To my knowledge, if loan approval is given contingent upon the sale of present home, this has never voided a contract, but the sale must take place prior to the Act of Sale.

We have been advised by two different attorneys that the seller can not declare the contract null and void for approval date reasons, that this was in the contract to allow the buyer to obtain the loan - if loan could not be obtained at all, the Purchaser then could [be] released from the contract. But as long as the Purchaser went to an Act of Sale in a timely manner, the contract would remain until the Act of Sale date.

The Sellers are not planning on being out of the home by April, 1998, the Act of Sale date.

I would greatly appreciate an opinion on this, as the Purchaser is wanting to meet with me as well as with the Other Broker this evening.

A. A purchase agreement will be interpreted according to its terms. Substantial compliance with the terms is usually sufficient. Although we have not located a Louisiana case on point, if a buyer has obtained loan approval prior to the date provided in the purchase agreement, subject only to a sufficient appraisal, it is most likely that a court would interpret this as substantial reasonable compliance with the loan approval requirement in the purchase agreement. Rarely, if ever, would a bank issue a commitment letter for a loan with no contingencies contained therein. These loan approval contingencies may include items such as execution of proper documentation, verification of loan applications, appraisal, etc. If the buyer is moving towards closing and has a loan approval which contains customary contingencies, this would seem to be reasonable and substantial compliance with the purchase agreement.

Q. After March 1st Realtor A listed a property for a one time showing using the Greater Baton Rouge Listing Contract. Realtor A then showed the property to the buyer whom they also represented. The purchase agreement was entered into without a Dual Agency Form signed by the parties.

What status does the Purchase Agreement take at this time?

A. Failure to comply with the dual agency disclosure requirements can be cause for the Louisiana Real Estate Commission to suspend, censure, or revoke the license of a realtor. See La. R.S. §37:1455(a)(21) and §37:1467. Dual agency means an agency relationship in which a licensee is working with both a buyer and seller, or both landlord and tenant, in the same transaction, which is the fact set forth in your question. Specifically, though, you ask the result of the failure to provide the dual agency disclosure in regard to the validity of the purchase agreement. The purchase agreement is a valid, binding agreement if the requirements of "thing, price and consent" are met. Louisiana Civil Code article 2456. It is possible, though, that the buyer may claim that there was no "consent" because of the lack of disclosure regarding the dual agency.

Q. I have an "Agreement to Purchase or Sell" document on a piece of property. In the area of the document pertaining to borrowing money, the real estate agent has added the language "to be determined" in the space reserve for the amount of the loan.

"THIS SALE is conditioned upon the ability of Purchaser(s) to borrow upon this property as security the sum of money to be determined a Mortgage loan or loans at an initial (X) Fixed {}Adjustable rate of interest not to exceed 9.5% per annum payable in equal monthly installments, or on such other terms that may be acceptable to Purchase."

Is this a legal and enforceable contract?

A. The Agreement to Purchase or Sell which you have described is conditioned upon the ability of the Purchaser to borrow a sum of money to be determined, at an initial fixed rate not to exceed 9.5% per annum, etc. Generally, any obligation can be conditioned or made dependent upon an uncertain event, such as obtaining financing. See Louisiana Civil Code article 1767. Conditions that are unlawful or impossible make and obligation null or void. See Louisiana Civil Code article 1769. Also conditions that depend solely on the whim of the obligor make the obligation null or void. See Louisiana Civil Code article 1770.

The fact that the obligation is conditioned on obtaining financing of an indeterminable amount of money could be interpreted as either a condition subject to the whim of the obligor or obligee because it is not clear which party is to determine the amount of financing. The purpose of the article preventing conditions from being subject to the whim of the obligor is to prevent obligors from exercising mere unbridled discretion or arbitrariness; however, the article is not intended to prevent an obligor from exercising all judgment as long as the exercise of judgment is of a considered and reasonable discretion. See comments to See Louisiana Civil Code article 1770. The comments provide the following as an example:

On obligation to buy a house if the obligor moves to Paris is valid rather than null because it is assumed that moving to Paris or not will be decided according to serious reasons such as obtaining a position there or securing admission to a school in that city. It is assumed that the obligor will not decide not to move to Paris for the sole purpose of deceiving the other party.

Because it is not clear who is to determine the dollar amount for which financing must be obtained, it is uncertain how a court would interpret this condition and whether or not it would be deemed unlawful. Technically, the buyer or his agent could decide they did not really want to buy the property and determine the required financing amount to be several times the actual value of the property. In such a case a court might interpret the condition as void, unlawful and against public policy or subject to the whim of the buyer. It would be advisable to at least limit the price to be determined so that it could not exceed the fair market value of the property.

Q. If a buyer does not secure financing within the specified period, can the seller terminate the purchase agreement?

A. The Purchase Agreement is basically an Agreement on the part of the buyer to purchase and the seller to sell if the conditions therein are met. Attainment of financing within a specified time is one of the conditions of the Agreement. Under Louisiana law an obligation exists when one person is bound to render a performance in favor of another (i.e., seller is bound to sell to buyer). See Louisiana Civil Code article 1756. Obligations can be conditional. An obligation is conditional if it is dependent on an uncertain event (i.e., the attainment of financing). See Louisiana Civil Code article 1767. If an obligation is conditional the person bound to render performance in favor of another upon the happening of the uncertain event is not bound to render such service until the happening or failure to happen of such event. This is referred to as a suspensive condition because it suspends the obligation to perform.

Louisiana law provides that if the condition is that an event occur within a fixed time and that time elapses without the occurrence of the even, the condition is considered to have failed. See Louisiana Civil Code article 1773.

Therefore, once the specified time for financing lapses without actual financing the condition upon which the obligation of the seller is based fails and the seller is no longer obligated to sell the property to the obligee (buyer) pursuant to the terms of the Purchase Agreement.

In conclusion, the closing date specified in lines 37 and 38 does not limit the sellers ability to revoke the offer because financing cannot be obtained. However, because the contract specifies a time within which it must be accepted, the contract cannot be revoked until the time so specified in Lines 126 and 127 has lapsed.

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