THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Saturday, September 7, 1996 TAG: 9609050278
SECTION: REAL ESTATE WEEKLY PAGE: 12 EDITION: FINAL
COLUMN: About The Outer Banks
SOURCE: Chris Kidder
LENGTH: 96 lines
Last week, I wrote about the new Offer to Purchase and Contract form (Standard Form No. 2) recently introduced by the North Carolina Association of Realtors and the North Carolina Bar Association.
After reading the column, a reader called with a related question. What if a buyer and seller want to handle the offer to purchase and contract without a real estate agent or an attorney? Is this new offer form available to the general public?
There are two versions of Standard Form No. 2. One version, distributed to area Realtors (Realtor is the trademark name for members of the National Association of Realtors and its affiliates), is a copyrighted form for use by Realtors only. A second version is distributed to N.C. Bar Association members, probably with the same sort of copyright restriction.
But sample Offer to Purchase and Contract forms are available in many consumer guides for do-it-yourself real estate transactions. You can find a reproduction of the old standard form in the state's real estate text books.
Some office supply stores also carry ``stock'' legal forms which may be adequate for simple real estate transactions
Buyers and sellers may draft contracts for their own use. In fact, if you're drawing up your own contract, you don't even need a form. You can state the proposition briefly in plain language and, as long as it meets some fairly simple requirements, it may be as valid as the two-page Standard Form No. 2 and its 10 pages of standard addenda.
To be valid, a real estate contract must be written; be agreed upon by legally competent parties; and include an offer, acceptance of the offer, and the consideration for which the offer was made. This ``consideration'' can be money, an exchange of property or an action given in exchange for the promise to be bound by the terms of the offer.
The contract should identify both the seller and buyer, the subject of the contract (preferably an exact, legal description), and all material terms and conditions.
Be aware that in North Carolina, only attorneys can prepare contracts on behalf of other parties. Anyone who drafts a contract for someone else without a license to practice law has broken the law. That's why real estate agents cannot draft a contract; they may only fill in the blanks on Standard Form No. 2 or another contract form prepared by an attorney.
This same reader wanted to know if her homemade contract could then be taken to an attorney for closing and whether she would really save any money.
I called Robert Hobbs, a board-certified real estate law specialist with the Nags Head office of Hornthal, Riley, Ellis & Maland. The practice of buyers drafting their own offers to purchase and contract is uncommon - but not unheard of - on the Outer Banks. ``I have two or three of these cases in my office right now and that seems to be more than usual,'' said Hobbs. ``In my practice, most closings come through real estate brokers.''
The only reason buyers have to prepare their own Offer to Purchase and Contract forms is when the desired property is for sale by owner. Sellers in a FSBO transaction are often trying to cut expenses; buyers are usually trying to find a bargain. What both give up is service.
In the typical real estate transaction, the real estate agent handles the preparation and presentation of the offer to purchase. The agent prepares the contract, gathers necessary documentation and coordinates the closing with an attorney.
Buyers determined to buy a FSBO property must be willing to handle many of the details required to seal the deal and close the purchase themselves: It's no easy task for the novice. If the buyer decides to pay a buyer's broker or attorney to handle these chores, then part of the savings of the FSBO transaction are lost.
FSBO sellers will sometimes forgo using an attorney altogether. Except in the case of seller financing, they have little to lose since getting rid of the property is their goal. This puts the burden of discovering any legal problems with the transaction on the buyer.
Buyers should resist the temptation to follow the FSBO seller's lead with regard to using an attorney. Buyers need a trained legal eye to review the purchase contract, to check the title and deed and to explain any liens or restrictions that may affect ownership.
One of the most common problems with homemade contracts is that they're easier to break than those prepared by a lawyer. Sometimes they have flaws that make them legally unenforceable.
But these flaws create problems only if there is a dispute in the transaction: As long as both sides agree to the terms, enforceable or not in a court of law, once the transfer of the deed is complete, the deal is done.
Your attorney will generally review the contract as part of the closing fee. Unless you've really goofed or the seller has pulled a fast one, the fee probably won't be any different whether the contract is a Realtor-prepared Standard Form No. 2 or a typed-at-home agreement.
If problems arise, as with any do-it-yourself project that requires a professional's help to undo, fixing the damage could cost more than you saved by not having your attorney prepare the contract in the first place.
Hobbs doesn't recommend that consumers write their own contracts but was optimistic about FSBO deals. ``People do it,'' he said. ``When it comes into your office, you make the best of it.''
In his experience, most do-it-yourself deals close without problems because the parties who enter into this kind of transaction are usually in agreement about the terms. MEMO: Send comments and questions to Chris Kidder at P.O. Box 10, Nags
Head, N.C. 27959. Or e-mail her at realkidd(AT)aol.com by CNB