Improve Your Business With Contract Knowledge

For Texas REALTORS® instructor Reba Saxon, contract knowledge is everything. It helps listing agents close more agreements, buyer’s agents write better offers, and everyone get to the closing table quicker.

As a way to organize a course covering contracts, Saxon began looking for all the ways buyers could get out of them. The course and related book are billed as guides for listing agents to close contract outs and loopholes, but they’re also a step-by-step walk through the TREC contract and related addenda—information every agent could use.

You can win multiple-offer situations without having the highest dollar amount but by writing the best offer. It tells the seller who’s most likely to close.

For listing agents, the benefit is being able to credibly sell contract knowledge as a reason potential clients should work with you over other agents.

“That’s what they really want,” Saxon says of sellers, “someone who can take care of their interests and knows what they’re doing.”

Buyer’s agents can employ a better understanding of contracts to write offers that are more likely to be accepted. “It’s the only impression of you that’s being presented to the listing agent and the sellers.” Saxon says she’s won multiple-offer situations without having the highest dollar amount but by writing the best offer. “You’re telling them who’s most likely to close.”

Here are some contract areas that Saxon says many agents overlook or should learn more about.

Communicate about third party financing

The buyer approval section of the Third Party Financing Addendum (TAR 1901, TREC 40-7) is a common source of questions, Saxon says. When she asks students how many days to write in the blank, they often answer with a common number they’ve used before, like 21. “Wrong,” Saxon says. “You’re losing deals.” The choice of lender and effective communication can allow your client to specify fewer days for buyer approval, according to Saxon, making the offer more competitive than those that use longer, common periods.

Learn about loan assumptions

Most of the agents Saxon has in her classes have never dealt with a loan assumption. The ’90s was the last time it was common, she says, but it could become appealing again if mortgage rates continue to rise. According to Saxon, low-rate FHA loans that were originated when mortgage insurance wasn’t required for the life of the loan could be one future source of loan assumptions.

Don’t get countered

Don’t write an offer that you think will generate a counter offer, Saxon says. “When you counter, no one is in control,” she says. “What if they get a better offer in the meantime?” Saxon says she wants to engage the seller enough to get the property under her buyer’s control. With access to property information online and through their agent, sellers aren’t going to take 20% less than their property is worth. “I want the number where the seller says ‘Oh, alright,’” Saxon says. “I want my first offer to be accepted begrudgingly.”

Submit backup offers

More agents should get in the habit of writing backup offers, Saxon says. “I’ve won over a quarter of my sales from second place,” she says. As the listing agent, Saxon says she’s been in multiple-offer situations where no agents submitted backup offers and the property went back on the market multiple times when deals fell apart.

Go beyond the required HOA information

“We have a false sense of security about getting what our clients need to know about HOAs,” Saxon says. The Subdivision Information, Including Resale Certificate for Property Subject to Mandatory Membership in a Property Owners’ Association (TAR 1923, TREC 37-5) form includes a number of items that property owners should know about the HOA. However, Saxon says, there are situations where it helps to ask for meeting minutes, such as when the current budget cycle is almost over or there is information that hasn’t yet been incorporated into official documents.