BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
Not All Sellers Sign or Wrong Seller Signs
Q: I am a listing agent and we have a ratified contract. The property is in a trust and my “seller” signed as trustee of the trust. Just before close of escrow, the title company looked at the trust document and there are two trustees and both must sign. Does this second trustee have to go back and sign every document? Or is there a shorter way to do this?
A: This situation, and similar situations, occur frequently and must be addressed promptly.
NEW SELLER ADDED: To add a new seller, you can add an addendum to the Purchase Agreement which reads:
“___(Trustee B)__ has received and read all contract documents, addenda and counter-offers, and all disclosure documents, previously signed by ___(Trustee A)___, and, as trustee, hereby approves, affirms and ratifies those documents.”
WRONG SELLER: What if a wrong seller signs believing that they had the power to sign? Some examples include: (1) a person who signed pursuant to a revoked or invalid Power of Attorney; (2) a beneficiary of a trust who thought they were a trustee; or (3) a family representative who thought they were the executor or administrator of an estate who signs before they have court authorization to act for the estate. Use a clause such as:
“___(True Seller)__, has received and read all contract documents, addenda and counter-offers, and all disclosure documents, previously signed by ___(prior signer)___, and (as trustee for ________; as executor for the estate of ______; as attorney-in-fact for ________) hereby approves, affirms and ratifies those documents.”
Such a clause makes clear to all parties that this person is a new seller in the transaction and has agreed with all previously-signed documents and disclosures.
This same procedure can be used to add any other type of seller who was inadvertently omitted from the first signing of these documents.
PRACTICE TIPS:
1. Problems related to incorrect sellers can be avoided by, at the time of taking the listing:
A. Doing a public record check in available research materials, or having the title company give you a statement of title ownership. Be sure ALL sellers sign the listing agreement, purchase agreement and disclosures.
B. In the case of a trust, obtaining a copy of the Trust document, reviewing it and sending a copy of the Trust to escrow for their approval.
C. In the case of a probate, obtaining a copy of the “Letters Testamentary” or “Letters of Administration.” Executors and administrators of estates cannot act until these Letters are issued by the court.
D. In the case of a Power of Attorney, obtaining a copy of the POA and sending a copy to escrow for their approval.
2. Be sure that any new seller has been given a true copy of all contract and disclosure documents.
3. In addition, it is a good idea to have that person initial and date the various contract documents to make clear which documents they received, or at least have the new seller sign a document transmittal cover sheet identifying those documents which were delivered to the new seller.
4. DISCLOSURE DOCUMENTS: However, special precaution should be taken with seller disclosure documents such as the TDS. The additional seller(s) should review and initial those documents to assure that they agree with the prior prepared disclosures. If the new seller wants to add some information, that can be done on a separate addendum, or a whole new document if the additions are extensive.
WEEKLY PRACTICE TIP: DO NOT FORWARD TO CLIENTS. This Weekly Practice Tip is for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.
© Copyright Broker Risk Management 2013 07/12/13