8 of the Most Common Problems Buyers Encounter After the Contract is Signed...and How to Deal with Them

“The Real Estate Guys” Radio Broadcast
KFRC 610 AM
December 8, 2002

8 of the Most Common Problems Buyers
Encounter After the Contract is Signed…
and How to Deal with Them

#1	Problem:	You want to assign the deal (“flip”) to a third party but the Seller won’t agree.
	Solution:	An agreement is assignable by law unless it was intended to be nonassignable or an assignment would impair the seller’s chances of obtaining the buyer’s performance. Farmland Irrig. Co. v Dopplmaier (1957) 48 C2d 208, 308 P2d 732. Document your request and Seller’s response. Seller required to be reasonable, unless contract specifies otherwise.
	Planning tips:	Provide contract language allowing Buyer to assign to entity owned and controlled by Buyer, without Seller’s consent. Specify parameters upfront for Seller’s approval.
#2	Problem:	You’re running out of time to complete your due diligence and you’re worried about your deposit “going hard” before you are ready to waive your contingencies.
	Solution:	Ask for more time. Give conditional approval.
	Planning tips:	Include language in contract that your due diligence period does not start until you receive all the documents required from Seller. Include language that Seller is required to deliver to Buyer all documents reasonably requested by Buyer. Don’t deliver document request list until after escrow opened.
#3	Problem:	Your due diligence reveals actual net operating income less than was represented in the set-up.
	Solution:	Ask for reduction in price.
	Planning tip:	Include language in contract that providing for automatic reduction in price based on formula if it turns out the financials were incorrect.
#4	Problem:	Interest rates spike up and you can’t get the loan you pro forma’d the deal at.
	Solution:	Ask Seller if he is willing to carry back paper. Worst case: disapprove financing contingency. Real worst case (for Buyer): Buyer tries to disapprove financing contingency but Seller disputes Buyer’s good faith in doing so on grounds that financing available, only with higher points.
	Planning tip:	Make sure you include language in loan contingency that puts cap on rate and points.
#5	Problem:	You want to disapprove of a contingency, but the Seller disagrees.
	Solution:	Be reasonable. Document your position and Seller’s response. Implied covenant of good faith and fair dealing allows Seller to dispute if you are canceling on a whim so be careful.
	Planning tip:	Include language in contract to maximize your control and your ability to cancel within your sole, absolute and arbitrary discretion.
#6	Problem:	You disapprove of a repair item, Seller tries to repair, but you dispute the repair was done sufficiently.
	Solution:	Put your position in writing to Seller: that you believe Seller has not fulfilled its obligation to repair.
	Planning tip:	Include language in contract that gives you right to verify repairs done to your reasonable satisfaction.
#7	Problem:	During your due diligence, you or one of your agents gets injured and it’s Seller’s fault.
	Solution:	If you have standard hold harmless and indemnification language, could be problem.
	Planning tip:	In contract, include language that carves out from standard indemnification any problems due to Seller’s negligence or gross negligence.
#8	Problem:	You end up in a lawsuit, you win, and you want to collect your experts’ and consultants’ fees and costs.
	Solution:	Expert witness fees and other items not otherwise recoverable as court costs under Ca Civ Pro § 1033.5 arguably may be recoverable as special damages under a contract provision for recovery by the prevailing party of “all necessary expenses.” The Supreme Court has noted: “Our present analysis, which involves statutory construction, may not be dispositive in a matter involving the effect of a contractual agreement for shifting litigation costs, which turns on the intentions of the contracting parties.” [Davis v. KGO-T.V., Inc. (1998) 17 Cal.4th 436, 446-447, 71 Cal.Rptr.2d 452, 457, fn. 5 (emphasis added)] If claimed as contract damages, however, the fees and other expenses must be specially pleaded and proved, rather than claimed as court costs after judgment. [First Nationwide Bank v. Mountain Cascade, Inc. (2000) 77 Cal.App.4th 871, 877-878, 92 Cal.Rptr.2d 145, 149, 150]
	Planning tip:	Include specific language in contract that prevailing party entitled to recover “all necessary expenses (including, without limitation, all consultants and experts).