Chapter 20: Agreement of Sale

Earnest Money Deposit

Not mandatory, but it's important to the seller, given that she/he will be taking the property off the market. Deposit sometimes needs to be negotiated. The seller would like to have an amount of deposit that would: 1. discourage the buyer from defaulting on the agreement 2. compensate the seller if the buyer does default

Parol Evidence Rule

States that a written contract takes precedence over oral agreements of promises.

Common Types of Contingencies:

1. Mortgage 2. Inspection 3. Insurance 4. Property Sale

Standard Agreement for the Sale of Real Estate- Pages 7 & 8

All of page 7 and the top half of page 8 deals with the types of inspections that the buyer can elect to perform. The licensee will circle the word Elected if the buyer agrees to the inspection or circle the word Waived to indicate the buyer has declined. The inspections are: 1. Home/Property Inspections and Environmental 2. Hazards (mold, etc.) 3. Wood Infestation 4. Deeds, Restrictions and Zoning 5. Water Service 6. Radon 7. On-lot Sewage (if applicable) 8. Property and Flood Insurance 9. Property Boundaries 10. Lead-Based Paint Hazards - Sellers with homes built prior to 1978 are required to provide a buyer with the pamphlet titled, Protect Your Family from Lead in Your Home and a separate form informing the buyer of any lead-based paint on the property Notice Regarding Property & Environmental Inspections contains information regarding different types of possible property hazards, including exterior building materials, asbestos, environmental hazards, wetlands, mold, fungi, and indoor air quality.

Commingling

An illegal act where a real estate broker mixes his/her client's funds with the broker's own personal funds. It can then turn into the act of conversion when the broker spends the client's funds on personal or business expenses. Fraudulent act or crime that can be punishable with prison time, fines, and license revocation.

Escrow Regulations

Brokers and agents are required to provide to their clients, escrow, title, attorneys, and / or with groups of people as designated in their real estate contracts some sort of an estimated cost list of potential expenses as highlighted below in Section 35.334. Before an agreement of sale is executed, the brokers involved in the transaction must provide each party with a written estimate of reasonably foreseeable expenses associated with the sale that the party may be expected to pay, including, but not limited to: 1. the broker's commission 2. the mortgage payments and financing costs 3. taxes and assessments 4. settlement expenses Licensees should note that this requirement is mandatory, even if the lender is providing an estimate of costs to the buyer. It is not sufficientto include in the file a copy of the lender's estimated costs, even one signed by the borrower. The licensee must prepare one. Sometimes, the estimated costs from the broker include fees the lender does not have, such as a fee to purchase a home warranty, or a transaction fee the brokerage is charging.

Closing Date

Every purchase and sale agreement sets a date for the closing of the transaction. The closing date is the day that the sellers receive the proceeds from the sale, the buyers get the deed, and all the documents relating to the transaction get recorded. When working with the buyers to set a closing date, a licensee needs to keep in mind the amount of time that will be needed to meet any contingencies that are part of the agreement. For example, any agreement that is contingent on financing needs to build in time for the buyers to apply for their loan and have their credit checked, etc. If the parties find that they need more time to accomplish some tasks, the closing date can be extended by a written agreement. On the other hand, if the parties get things cleared up more quickly than anticipated, the closing date could be moved up - also by executing a written addendum to the original agreement.

Section 35.323 of PA Law

Has rules about who assumes responsibility for the earnest money in a co-brokerage transaction. 1. If the buyer gives the deposit to the listing broker rather than the selling broker, the listing broker will handle the escrow. 2. If the buyer gives the deposit to the selling broker knowing that the selling broker will deliver the deposit to the listing broker, the listing broker will handle the escrow. The buyer must acknowledge in writing, prior to signing the agreement of sale, that the selling broker provided the following information: a. the name of the listing broker b. that the selling broker's acceptance of the buyer's deposit is on behalf of the listing broker as subagent for the listing broker c. that the listing broker is a licensed real estate broker who is required to hold the deposit in escrow d. that the listing broker will be designated as payee, if the buyer's deposit is in the form of a check 3. If the buyer gives the deposit to the selling broker without the buyer having notice described above, the selling broker will handle the escrow.

Section 35.327 of PA Law

If there is a dispute between the parties over who should receive the money being held in escrow, the broker must keep the money in escrow until the dispute is resolved. If it appears that there is little chance of resolving it without legal action, the broker, after giving 30 days' notice to the parties, can petition the county court to take over the funds and distribute the money to the rightful claimant.

Selling Agent

If you are the selling agent, take time to go over the entire offer with the listing agent to be sure he or she understands exactly what the buyers are offering. If the buyers have some special circumstances that you think would be important for the sellers to know, you might want to ask to go along to the presentation meeting with the listing agent. If you are present at the meeting, you can answer any questions the sellers may have about the buyers or the offer. Once the offer is presented you can leave the meeting, allowing time for the sellers to discuss the offer with the listing agent in confidence. Once the sellers decide what they want to do, it will be up to you to communicate the decision to your buyers.

Making Recommendations

If you believe for whatever reason that the offer is not in the sellers' best interests, you should not recommend its acceptance. You must tell the sellers how you feel and what you think about the offer. This is even more critical when you are dealing with sellers who don't have much experience in the real estate market and are relying on you to be their expert advisor. You owe your sellers a fiduciary responsibility. The sellers' best interests takes precedence over your commission. An offer or a counteroffer may be withdrawn at any time before it has been accepted, even if the person making the offer or counteroffer has agreed to keep it open for a set time period. It's important to make it clear to the sellers that a counteroffer is in effect a rejection of the original offer and submitting a counteroffer gives the buyers a way out.

Possession

In most transactions, possession transfers on the day of closing. However, sometimes the buyers will want to take possession earlier than closing. Other times the sellers want to remain for a few days after closing - especially if the sellers are moving to a new home and they could not manage to get the closing on their new home in sync. Transferring on a date other than the closing date could hav a serious impact on the parties.

Property Owned by Married Couples

In states known as community-property states, whenever property that is held by spouses is sold, both the husband and wife must be a party to the contract. So, in those states, if the buyer or seller is married, the signatures of both spouses should be on the contract. On the other hand, even in community property states, if a married person owns property separately from his or her spouse, that person can sell that property without the spouse's permission. However, it's not the licensee's job to determine if the property is separate property or community property. The determination of whether a property is separate or community is best left to a legal professional. To be on the safe side, both spouses should sign any agreements, notices or other documents that relate to the sale. Attorneys and title companies in Pennsylvania routinely require spouses to join in the conveyance deed, even if they are not owners in title. An example is two sisters who inherited their mother's house. Although the deed followed the will, and listed only the two sisters as owners, the title company representing the buyer had their spouses join in the deed. Most attorneys and title companies will tell you this is to protect against someone who is anticipating a divorce hiding an asset from their spouse.

Unauthorized Practice of Law

Licensees are not authorized to practice law. A licensee should never give any kind of legal advice or try to interpret provisions in the agreement of sale unless he or she is also a licensed attorney. The consequences of giving legal advice to a client are severe: 1. criminal prosecution, punishable by up to one year in prison and a $2,500 fine 2. disciplinary action by the Real Estate Commission, which could result in a fine, license suspension or revocation 3. lawsuit filled by the injured party, which could result in a monetary damages award

Using Preprinted Forms

Many real estate boards have preprinted contracts that licensees can us when preparing an agreement. That law allows licensees to use these forms, but they must be filled out correctly. In Pennsylvania, licensees can fill out preprinted forms such as leases and agreements of sale, as long as they do not charge a fee for completing the forms.

Sales Agreement

Must be entered into by persons who are competent. The parties must consent - that is there must be an offer and then an acceptance of that offer. The objective of the contract must be a legal one and there must be consideration - in this case, the seller promises to sell and the buyer promises to purchase.

Price and Method of Payment

Of course, the offering price stated in the contract is very important to the buyers and the sellers. But HOW the price will be handled is equally important. Unless the buyers are doing a full cash purchase with no financing from other sources, you can almost be certain that the purchase will be contingent on financing. That means if the buyers cannot obtain the financing, they need to make the purchase, the agreement will terminate. In many states financing contingencies are described in a separate addendum to the purchase and sale agreement. In Pennsylvania, financing contingencies are handled in the standard agreement of sale, which we will cover shortly. Sometimes sellers agree to finance all or part of the sale. When something like this happens, the sellers must specify the terms of the financing, such as the interest rate and monthly payment amount. This is also typically outlined in a separate addendum called a payment terms addendum. PA license law has specific requirements for the mortgage contingency clause. The law says that an agreement of sale that is conditioned upon the ability of the buyer to obtain a mortgage must contain: 1. the type of mortgage 2. the mortgage principal 3. the max interest term of the mortgage 4. minimum term of the mortgage 5. the deadline for the buyer obtain the mortgage 6. the nature and extent of assistance that the broker will render to the buyer in obtaining the mortgage

Written Agreements

PA law says that all contracts, commitments and agreements between a broker and a principal or a consumer who is required to pay a fee commission or other valuable consideration must be in writing and contain certain information.

Property Sale Contingency

States that the purchase is contingent on the sale of the buyer's home. This helps the buyer by assuring that he/she will not end up owning two homes, but it's not always beneficial to the seller. Often a seller will agree to this contingency with the stipulation of a "kick-out" or "back-out" clause. This clause allows the seller to keep the property on the market and, if he/she gets a more favorable offer, the seller will give the original buyer the option to remove the contingency or to void the contract.

Sales Agreement Signatures

Pennsylvania has enacted the Uniform Electronic Transactions Act (UETA). The UETA applies to real estate sales contracts and allows e-signatures to be as legally binding as pen-and-ink signatures, often referred to as a wet signatures. The UETA states the following regarding legal recognition of electronic records, electronic signatures and electronic contracts, so long as both parties have agreed to conduct transactions by electronic means. 1. Form- a record or signature may not be denied legal effect or enforceability solely because it's in electronic form 2. Formation- a contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation 3. Writing- if a law requires a record to be in writing, an electronic record satisfies the law 4. Signature- if a law requires a signature, an electronic signature satisfies the law

Gaining Acceptance

Price is only one aspect of the total picture. So be sure you go over the offer carefully with your sellers, addressing the positive aspects of the other terms. If the offer has a number of other positive terms for the sellers, you can put the issue of price into a more favorable light. Other things to look at include: 1. Earnest money amount- Does the deposit amount show that the buyers are very serious? 2. Type of financing- Does the buyer have a large down payment or, even better, is it a cash sale? 3. Contingencies-Is the contract contingent on the sale of another home or an appraisal amount or is it free of those potential stumbling blocks? 4. Closing. possession date- Do the dates give the sellers the flexibility they need to find their next home?

Section 35.326 of PA Law

Prohibits commingling or misappropriation of funds. 1. A broker must not commingle the principal's money or other property with his own. However, a broker may deposit money into his or her escrow account to cover any service charges the bank may assess to this account. 2. A broker must never allow any advance payment of funds to be deposited in his or her business or personal account or to be commingled with any funds he or she may have on deposit. 3. A broker may not misappropriate money that is required to be held in escrow—or interest earned on an escrow account—for business, personal or other purposes.

Article 13 of the REALTORS Code of Ethics & Standards of Practice states that:

REALTORS® shall not engage in activities that constitute the unauthorized practice of law and shall recommend that legal counsel be obtained when the interest of any party to the transaction requires it.

Statute of Frauds

Requires that contracts for the sale of real estate be in writing and signed by the seller to be enforceable in a court of law.

Section 604 of PA Code

Rules that apply to earnest money and escrow accounts: 1. a broker must account for all earnest money deposits in the full amount at the time a transaction is consummated or terminated 2. evert salesperson and associate broker who receives an earnest money deposit must give the deposit to the broker promptly

Section 35.324 of PA Law

Set deadlines for when a broker must deposit earnest money into an escrow account. Must deposit the money into the account by the end of the next business day following its receipt in the real estate office where the escrow records are maintained.

Property Belonging to an Estate or Trust

The executor of the estate must be the one to sign the purchase and sale agreement and other documents when the property being sold is part of an estate. If the property being sold is part of a trust, the trustee must be the one to sign all the appropriate documents. The file for an estate should include a copy of the death certificate, which will be requested by the attorney or title company representing the buyer, as well as the 'short form', which is called this because it is a smaller than typical piece of paper. The 'short form' is the form given to the executor when the will is probated, giving the executor authority to conduct business on behalf of the estate.

Condition of the Title

The purchase and sale agreement will have a clause that states the sellers will provide a marketable title and a title insurance policy with standard coverage. The sellers will pay off any liens at or before closing, unless the buyers have agreed to assume or take title subject to an existing lien. It's important to note however, that if the sellers have a pending legal action, such as a divorce, a bankruptcy or a foreclosure, they may not be able to convey a clear title. Any pending legal actions MUST be disclosed to the buyers. If the buyers have questions about how a legal action could affect the sale, they need to consult with a legal professional.

Closing Costs

The purchase and sale agreement will state which of the parties is responsible for paying which of the fees. Typically, the escrow fees are split between buyers and sellers. The agreement states which party will pay the fees that pertain to the buyers' loan and will set out how other expenses are divided up. Expenses such as taxes, insurance and homeowner association fees are usually prorated as of the closing date.

Time is of the Essence

This phrase emphasizes the requirement that events related to the contract must be performed on time. Technically speaking, if a deadline for some performance is not met by the specified date, the party not meeting the deadline is in default. However, since in most cases both parties want the transaction to move forward, this problem can usually be solved by a written agreement to accept the late performance or to extend the deadline.

Pre-Settlement Possession Addendum to Agreement of Sale (PRE)

This two-page form is used when the seller allows the buyer use of the property prior to the actual closing date. It is not a lease. It is recommended that the PRE covers up to 14 days of occupancy only. Following are the main sections: 1. Purpose- Explains the purpose and intent of the PRE. The PRE is designed to allow the buyer to move in personal property and/or make repairs to the property. 2. Possession Date- This gives space to indicate the date upon which the buyer will have access to the property. Buyer must exit the property and remove all personal property if the settlement does not take place on the date agreed upon. 3. Occupancy Fee- Buyer will pay, in advance any fees that the buyer charges per day, for the privilege of early occupancy. Space is provided to write in the daily access fee. If settlement does not occur, any unused fees will be returned to the buyer. 4. Deposits- In addition to occupancy fees, the buyer will pay the seller a deposit fee (space to enter amount) which will be added to the amount credited to the seller upon closing. If settlement does not occur, any unused deposit monies will be returned to the buyer as agreed upon. 5. Property Inspection- The buyer indicates if he or she will not make a pre-settlement inspection. 6. Utilities- In this section the buyer indicates what utilities he or she will pay for during the pre-settlement period. 7. Pets- This section indicates if pets are allowed on the property during the pre-settlement period. 8. Maintenance- The buyer agrees to maintain the property in acceptable conditions during the pre-settlement period. 9. Changes to The Property- Buyer agrees not to make any property changes, unless approved by the seller. 10. Property Insurance- This section deals with property insurance coverage during pre-settlement period. Buyer and seller are advised to contact an insurance professional for proper coverage. Essentially, the Buyer is responsible for coverage and the seller is not responsible for loss. 11. Entry- The buyer is given key/combination door access. The seller and agent are allowed access, provided proper notice is given to the buyer in advance. 12. Buyer's Default- If the buyer defaults on the agreement, the seller can remove the buyer immediately and has the option to keep deposit monies. 13. Assignment- The buyer isn't allowed to assign or lease the property to a third party. 14. Indemnification- Buyer will indemnify and hold harmless the seller, and all brokers, their licensees, and employees. 15. Survival- Terms of the agreement survive settlement.

Notice of Termination of Agreement of Sale (TER)

Used by the buyer or seller to terminate an agreement of sale. The licensee must write in the seller's property address and the names of the seller and buyer on the lines provided at the top of the form, followed by the date of the agreement. There is a check box to indicate which applicable party is terminating the agreement. The buyer or seller notes what part of the agreement or terms have become problematic. Parties are advised to seek legal counsel before termination, to determine liability, if any. The next paragraph explains the role of the broker holding the deposit money and the dispersal method according to state law. This is followed by a notice which states that the termination is not contingent on the parties signing an Agreement of Sale Release or an agreement regarding the distribution of the deposit money.

Property Owned by Businesses

When one of the parties to a real estate transaction is a partnership, the licensee should enter the names of all the general partners and their spouses into the contract. The name of the partnership should also be in the contract. In the case of a corporation, the name of the corporation should be identified in the contract. The contract should also show the partnership's or corporation's address and the state in which the partnership is organized or the corporation is incorporated. When dealing with a business entity, that entity must have the legal authority to complete the transaction. For this reason, the closing agent should require documentation from the business that a partner or a company officer can sign the documents on behalf of the business. This documentation could be either a power of attorney or a resolution of the company's board of directors.

Property Owned by Joint Tenants or Tenants in Common

When property is held by joint tenants or tenants in common, all owners must sign the purchase and sale agreement if the entire property is being sold. However, nothing could stand in the way of a single joint owner or tenant in common selling his or her own interest in the property. He or she would not need the consent of the other owners.

Legal Case Summary - Escrow Deposit Exception

"Where a deposit from a prospective purchaser was never entrusted to a real estate agent and the prospective purchaser, with knowledge, enters into an agreement to pay a deposit directly to the builder, there is no duty to deposit those funds into an escrow account." Ramalingam v. Keller Williams Realty Group, Inc., 121 A.3d 1034 (2015). According to section 35.322 of the law, a broker's escrow duty may not be waived or altered by an agreement between the parties to the transaction, broker and the parties, or the broker and other brokers who may be involved in the transaction.

Organize your Presentation to Cover:

1. A brief review of what has happened over the life of the listing, including advertising efforts, open houses, showings, responses to showings, and any previous offers received on the property 2. Information about the buyers - This is the time to raise the sellers' comfort level that they will be selling their home to people who will appreciate it. This is particularly important since selling property is so emotional. Be sure that when you talk about the buyers, you say nothing that could be a violation of fair housing laws. Remember that you should never discuss the buyers' race, national origin, religion, handicap or other characteristics that could lead the sellers to discriminatory behavior or be viewed as discriminatory behavior on your part. 3. The offer itself

Escrow Account Rules (Section 35.321 of the law)

1. A broker must deposit the earnest money he or she receives into an escrow account in a federally or state-insured bank or depository. The funds must be held until the transaction is consummated or it results in a non-disputed termination. If the transaction results in a non-disputed termination, the broker will pay over the full amount to the party entitled to receive it. If a broker is a partnership, association or corporation, its broker of record is the person responsible for ensuring that the escrow duty is performed. 2. A broker is not required to hold in escrow rents that he receives as a property manager for a lessor. Instead, the broker should deposit those monies into a rental management account that is separate from the escrow account and general business accounts. 3. If a broker receives earnest money under an agreement of sale involving cemetery property, the transaction will be considered consummated when the buyer receives a copy of the agreement of sale. 4. If a broker receives a security deposit under a lease agreement, the broker will have the duty to pay back the deposit when the tenancy ends. 5. If a sale or a change in the property management contract occurs during the term of the tenancy, the broker may transfer the security deposit from his own escrow account to the escrow account of the lessor or the lessor's broker. He must notify in writing all tenants from whom he received deposits telling them the name and address of the bank where the deposits will be held and the amount of the deposits.

Seller's Reply to Proposed Agreement of Sale for Buyer's Property or Buyer's Financial Ability to Proceed (SRA)

1. Buyer's Agreement of Sale provides space for the seller to accept or reject the buyer's requires for acceptance of a property sale contingency 2. Buyer's Financial Ability to Proceed provides space for the seller to accept or reject the buyer's proof of financial ability to proceed with the transaction

Standard Agreement for the Sale of Real Estate- Page 2

1. By this Agreement- The licensee will insert the date of the contract on this line. 2. Purchase Price and Deposits- This is the line where the licensee will write in the amount of the purchase price. This paragraph also includes the amount of any money initially deposited by the buyer within what timeframe and any subsequent deposit amounts along with the timeframe for those deposits indicated on the blank line. Personal checks will not be accepted within 30 days of actual settlement. Payment must be made in U.S, Funds using cashier's check or wired funds. 3. Seller Assist- If the seller is providing funds towards the buyers' cost for the purchase, this is where the licensee will insert the amount or percentage in the space provided. 4. Settlement and Possession- There are several subsections in this paragraph. a. settlement date b. location in county where property is located unless parties agree otherwise c. list of prorated charges, such as taxes, water, and sewer fees, with seller paying up to and including the settlement date and buyer paying for all days after settlement unless otherwise stated on the line provided d. description of the periods covered for purposes of prorating real estate taxes. please note the fiscal years for different tax bills in this paragraph e. conveyance will be fee simple deed of special warranty unless otherwise stated on the line provided f. transfer taxes divided equally unless otherwise stated on the line provided g. possession will be delivered on the day and time of settlement unless the seller has indicated in writing (before signing this agreement) that the property is subject to a lease h. if seller has indicated the property is subject to a lease, possession will be delivered by deed, keys, and assignment of existing lease at the day and time of settlement. There is a box to check to indicate if the property is now tenant-occupied and a PAR Form Top Addendum should be attached and made part of this agreement 5. Date/time is of the Essence- This paragraph has a space to insert the acceptance date of the contract by all parties. In addition, this paragraph explains the importance of all parties meeting agreed upon contract dates, that all changes must be initialed and dated, and any extension of the settlement date must be by mutual written agreement of all parties.

Standard Agreement for the Sale of Real Estate- Page 5 & 6

1. Change in Buyer's Financial Status- Buyer agrees to inform the seller and mortgage lender in writing of any changes in financial status, such as loss of employment or changes in capital assets. 2. Seller Representation- This section requires the seller to describe the services provided to the property and to note any land use restrictions. a. status of water- check boxes for applicable service- public, community, on-site b. status of sewer- check boxes for who services the property and notices pursuant to the PA Sewage Facilities Act c. historic preservation- Any use restrictions are to be noted in the space provided d. real estate disclosure law- describes property disclosures required by law e. public and/or private assessments- says there are no outstanding notices or assessments unless indicated in the space provided f. highway occupancy permit- states that access to a public road may require a permit from the Department of Transportation 3. Waiver of Contingencies- This paragraph explains that if the buyer fails to inspect and/or repair the condition of the property in the time allowed, the buyer waives his or her rights. 4. Buyer's Due Diligence/Inspections- This paragraph sets-up the parameters for property inspections. The following points are covered. a. Seller will provide access for inspection and will have utilities turned on during inspections. The buyer may make two pre-settlement walkthroughs of the property to be sure the property condition is as the agreement requires. Both the buyer and seller will have access to inspection reports. b. All inspections are non-invasive, unless otherwise agreed in writing. c. For all elected inspections, the buyer will complete the inspections in the contingency period, obtain the reports, and then accept the property, terminate the agreement, or submit a written corrective proposal to the seller.

4 Other Commonly Used Addenda:

1. Change in Terms Addendum to Agreement of Sale (CTA) 2. Notice of Termination of Agreement of Sale (TER) 3. Pre-Settlement Possession Addendum to Agreement of Sale (PRE) 4. Post-Settlement Addendum to Agreement of Sale (POS)

Standard Agreement for the Sale of Real Estate- Pages 12 & 13

1. Default, Termination and Return of Deposits a. The buyer is entitled to all deposit money if the agreement is terminated in accordance with the contract. b. The broker cannot determine who is entitled to receive deposit monies when a settlement does not occur. The broker will disperse said deposit money as outlined by state law. c. In the event of a dispute between buyer and seller, broker will distribute the funds as determined by the outcome of litigation or mediation. d. The buyer and seller agree not to hold the broker liable for any litigation fees and/or unpaid deposit funds. e. Seller is entitled to deposit funds, if the buyer (through the buyer's fault) fails to comply with the terms of the agreement. f. Unless otherwise indicated in section G, seller may elect to keep certain sums paid by the buyer to be applied to seller's damages or as liquidated damages for the buyer's default. g. A check box is included to limit the seller's claim to actual deposited monies. h. If the seller keeps all funds paid by the buyer as liquidated damages, both the buyer and seller are released from further liability or damages and the Agreement is void. i. Brokers and licensees are not responsible for unpaid deposits. 2. Mediation- In this section the buyer and seller agree to mediation to settle any disputes, prior to taking legal action. Any mediation agreement is final and binding. 3. Release- This section releases all parties from any property condition liabilities claimed by the buyer after the purchase, provided the terms of all disclosures were properly followed 4. Real Estate Recovery Fund- This section informs all parties that they may seek reimbursement from the Fund in the event of being awarded a civil judgement against a licensee and not being able to collect said judgement from the offender. 5. Communication with Buyer and/or Seller a. if the buyer is obtaining a mortgage, the buyer must deliver to the buyer's broker a copy of all Loan estimates and Closing Disclosures upon receipt b. any communications between the buyer and seller can be done thru their represented brokers. if a party doesn't have broker representation, communication must be done directly with the party

The Written Agreement of Sale:

1. Establishes the buyer's right to enforce the interest in the property by court action if necessary. 2. Obligates the buyer to complete the sale as agreed upon. 3. Obligates the seller to convey the property.

Standard Agreement for the Sale of Real Estate- Page 12

1. Governing Law, Venue and Personal Jurisdiction- This section states that the agreement conforms to all Commonwealth of Pennsylvania laws and any disputes will be filed in the state or federal courts of Pennsylvania. 2. Foreign Investment in Real Property Tax Act of 1980 (FIRPTA)- This section states that the sale complies with the FIRTPA and that certain buyers of property held by foreign entities must withhold 15% of the sale proceeds for federal tax payments. Failure to do so may hold the buyer liable for the tax fees. 3. Notice Regarding Convicted Sex Offenders (Megan's Law)- Buyers are encouraged to contact local police to determine the location of sex offenders in the surrounding property area. 4. Representations a. The ASR does not contain property marketing agreements. b. Before signing the Agreement, buyer states that he or she has performed at least a cursory inspection of the property and agrees to purchase the property in its present condition. c. Any repairs required by the Agreement will be completed in a workmanlike manner. d. Brokers have provided or may provide assistance to unrepresented parties in complying with the Agreement.

Standard Agreement for the Sale of Real Estate- Page 14

1. Headings- This section informs the parties that the ASR headings and sections were designed for convenience, not to determine legal rights. 2. Special Clauses a. checked boxed spaces for indicating the attachment of the most often used agreement addenda b. space to write in any other terms By signing the Agreement: 1. buyer and seller acknowledge receipt of the Agreement at the time of signing 2. the parties understand that counterparts to the agreement make up the entire agreement 3. buyer and seller acknowledge that it becomes a binding legal contract 4. return of the agreement bearing the signatures of all parties constitutes acceptance by the parties At the bottom of page 14 are signature blocks for the buyers and sellers to sign and date the Agreement. It's important that all buyers and sellers sign with their legally given full name

Standard Agreement for the Sale of Real Estate- Page 8 & 9

1. Inspection Contingency- This section begins on page 8 and continues onto page 9. It establishes terms for inspections and re-inspections. a. establishes the contingency period (10 days if not specified differently) b. describes the process for what happens if the buyer finds the results satisfactory versus if the buyer finds the results unsatisfactory and allows the buyer to indicate a period of days for negotiation of repairs or changes c. states the parameters for the seller to submit a proposal to the buyer regarding the need to expand or replace the existing on-lot sewage system. Seller may provide a report to the buyer which outlines which company will perform the work as needed. If the buyer fails to respond or terminate the agreement, the buyer accepts the property as-is. It is important for the buyer and seller to follow all the terms exactly as stated. If the buyer and seller do not reach an agreement, and the buyer does not terminate the agreement in writing, the buyer is required to accept the property. 2. Titles, Surveys and Costs- Following are the key sections of this paragraph. a. within a designated timeframe, the Buyer will order and pay for title search b. buyer encouraged to obtain an owner's title insurance policy c. buyer will pay for title search; title insurance; flood, fire, hazard and mine subsidence insurance; appraisal fees; and customary settlement costs d. seller will pay for any survey as required to locate legal boundaries; buyer will pay survey fees for any survey wanted by the buyer or required by the lender e. seller will provide a marketable title with restrictions as noted f. if seller's financial status changes, he/she must inform the buyer in writing g. buyer may terminate the agreement if marketable title is not given h. oil, gas mineral rights addendum (PAR Form OGN) is attached as needed i. coal notice describes third-party coal rights to the buyer, if applicable j. property is not a "recreational cabin" unless otherwise described in the space provided k. property is not subject to a Private Transfer Fee Obligation unless indicated in the space provided. This licensee must include PAR Form (PTF) is required

Sale & Settlement of Other Property Contingency (with Right to Continue Marketing) Addendum to Agreement of Sale (SSP-CM)

1. It states that the sale is contingent upon the settlement of the buyer's property and gives space to write in the buyer's current property address. 2. Buyer acknowledges that the seller can continue to market his or her property to other prospective buyers. 3. If the seller accepts an offer from another buyer, the first buyer's agreement is terminated and deposited funds are returned. 4. The sellers right to market the property ends if the seller approves in writing the terms and conditions of an agreement of sale for the buyer's contingent property. 5. Space is provided to write in a date by which the buyer's property must be under a contract that is acceptable to the seller. If the date is not met, the seller may terminate the contract with the buyer. 6. As with the other contingencies we have looked at, the terms of this addendum change and prevail over the provision of the Mortgage Contingency clause giving the seller the right to terminate the Agreement if the buyer's mortgage commitment is conditioned upon the sale and settlement of the buyer's property.

Sale & Settlement of Other Property Contingency Addendum to Agreement of Sale (SSP)

1. It states that the sale is contingent upon the settlement of the buyer's property and gives space to write in the buyer's current property address. 2. It goes on to inform the seller that if the seller accepts the ASR, the buyer will list his or her property for sale (if it's not already listed). 3. It provides space to write in the listing price and term for the contingent property. 4. The buyer will provide the seller with a copy of the agreement of sale for the buyer's property and the seller must inform the buyer if the seller accepts or rejects the buyer's sale agreement. If the seller rejects the agreement, he or she must give the buyer the specific reasons for the rejection so that the buyer has the opportunity to renegotiate the agreement. The section also details what the buyer may do if the seller rejects the buyer's agreement of sale. 5. Space is provided to write in a specific date. If the buyer's property is not under contract with acceptable terms by the indicated date, the seller can terminate the ASR. If the terms of the addendum cannot be met, the buyer will receive all deposit monies back. 6. The addendum also states that the terms of this addendum change and prevail over the provision of the Mortgage Contingency clause giving the seller the right to terminate the Agreement if the buyer's mortgage commitment is conditioned upon the sale and settlement of the buyer's property.

Sale & Settlement of Other Property Contingency (with Right to Continue Marking and Timed Kickout Clause) Addendum to Agreement of Sale (SSP-TKO)

1. It states that the sale is contingent upon the settlement of the buyer's property and gives space to write in the buyer's current property address. 2. It goes on to inform the seller that if the seller accepts the ASR, the buyer will list his/her property for sale (if it's not already listed). 3. It provides space to write in the listing price and term for the contingent property. 4. Buyer acknowledges that the seller can continue to market his or her property to other prospective buyers. 5. The buyer will provide the seller with a copy of the agreement of sale for the buyer's property and the seller must inform the buyer if the seller accepts or rejects the buyer's sale agreement. If the seller rejects the agreement, he or she must give the buyer the specific reasons for the rejection so that the buyer has the opportunity to renegotiate the agreement. The section also details what the buyer may do if the seller rejects the buyer's agreement of sale. 6. Space is provided to write in a date by which the buyer's property must be under a contract that is acceptable to the seller. If the date is not met, the seller may terminate the contract with the buyer. 7. If the seller receives a good offer from a different prospective buyer with acceptable terms, the seller will notify the first buyer of the acceptance of the new offer and the intent to terminate the existing buyer's offer. a. The buyer then has a short time period to give the seller written proof that he or she has the financial capability to proceed with the sale without selling the buyer's property or provide a copy of an agreement of sale for the buyer's property. If buyer fails to respond, the agreement is terminated and the buyer will have the earnest money refunded. b. If the buyer sends the seller proof of financial ability to proceed or a copy of a viable contact for the sale of the buyer's property, the seller (within a designated number of days) can choose to accept either condition or terminate the Agreement of sale. c. If the seller doesn't respond in the designated time frame, the seller accepts the Agreement of sale for the Buyer's property. 8. Seller right to continue marketing the property ends when the seller accepts the buyer's proof of financial ability to proceed or acceptance of the buyer's agreement of sale for the buyer's property. 9. If there is a conflict between the Mortgage Contingency paragraph and the terms of this addendum, this addendum prevails.

Standard Agreement for the Sale of Real Estate- Pages 3 & 4

1. Mortgage Contingency- This paragraph starts on page 3 and continues onto all of page 4. It deals with the terms of the buyer's mortgage, if any. If there is no mortgage, the licensee will check the Waived box and move on to page 5. If there will be a mortgage, the licensee will check the Elected box, which is followed by several subsections. a. The licensee will indicate the amount and terms of a first and second mortgage as needed, including lender's name and interest rates. b. The buyer must provide written lender's approval documentation before a specified date or the seller (in writing) may choose to terminate the contract. All deposit monies will be returned to the buyer; however, the buyer is still responsible for any fees incurred for inspections and the like if the contract is terminated due to the buyer's failure to acquire funding. c. Loan-to-Value ratio is explained based on value as determined by an appraiser. d. Interest rates are explained based on a lock-in date agreement between the buyer and the lender. e. Buyer must complete a mortgage application upon seller's acceptance within the time period indicated (7 days is the default period). Also, brokers for the buyer and seller are given permission to check with the mortgage lender to determine the status of the loan process. f. Buyers will be in default if they provide false information to the lender or otherwise causes the lender to refuse a loan commitment. g. If a mortgage lender or property insurer requires property repairs, the buyers and sellers must agree on which party will make the repairs and the time required. If the seller refuses to make the repairs, the seller must notify the buyers who will then decide whether to make the repairs themselves or terminate the contract. If the buyers fail to respond within the timeframe or fail to terminate the contract in writing within the timeframe, they accept responsibility to make repairs at their own expense. Subsections H, I, and J deal with FHA/VA loans, if applicable. In this block, the licensee will enter the purchase price of the property as stated in the agreement in the space provided. There is also a box to check indicating that the buyer has received a copy of the For Your Protection: Get a Home Inspection booklet.

Standard Agreement for the Sale of Real Estate- Page 10

1. Notices, Assessments and Municipal Requirements- This paragraph deals with local government housing compliances. a. The seller has the responsibility to inform the buyer of any such notices that he or she receives after signing the Agreement but prior to settlement. The seller will inform the buyer as to whether or not the seller will comply with the notices/assessments or not. If the seller chooses not to comply, the buyer can terminate the agreement. However, if the buyer fails to respond to the written notice and does not terminate the agreement, the buyer accepts the property as-is. b. If required by law, the seller has a set time within which he or she must order a certification from the appropriate municipal departments disclosing notice of any uncorrected violations of zoning, housing, building, safety or fire ordinances and/or a certificate permitting occupancy of the property. The seller must notify the buyer in writing within a designated timeframe as to whether or not he or she intends to make the repairs. 2. Condominium/Planned Community (Homeowner Associations) a. This section states that the property is NOT a condominium or planned community unless one of those two boxes is checked. b. Discusses the provisions for the initial sales of properties that are part of a condominium or planned community. c. This section, found at the top of page 11, outlines the parameters that apply to the resale of properties that are part of a condominium or planned community. If the association has right-of-first refusal and makes the purchase, the seller will reimburse the buyer for any incurred costs, such as for title search and insurance, flood or hazard insurance, and appraisal fees paid in advance to the lender.

A Few Simple Rules to Following to Avoid Liability and Legal Issues:

1. Only use preprinted contract forms. 2. Only enter information as needed in the blank spaces that are provided. 3. Don't scratch out or darken out any words on a preprinted form. 4. Don't reword a section of a preprinted form. 5. Don't make changes to a sales contract; use an addendum form.

Contingency

A condition that must be satisfied before the agreement is fully enforceable. Contains 3 aspects: 1. the actions that will satisfy the contingency 2. the time frame in which the actions must be performed 3. who will pay the costs, if any

Earnest Money

A deposit that accompanies an offer the buyer makes. Also known as "hand money." Usually given as a check, but occasionally a buyer will give a cash deposit or some other form of valuable. It's a good faith gesture that shows the seller that the buyer is serious about the offer and intends to carry out the terms of the contract.

Standard Agreement for the Sale of Real Estate (ASR)- Page 1

1. Parties- The licensee will insert the names and mailing addresses of the parties to the transaction. 2. Property- The licensee will write in the address, municipality, county, and school district, where the property is located, in addition to the property's Tax ID number and/or its identification - parcel #, lot, block, deed book, page, and recording date. 3. Buyer's Relationship w/ PA Licensed Broker- The licensee will check the provided box if the buyer is not represented by a broker. If the broker has a business relationship with the buyer, the licensee will fill in the indicated Broker's company information and the licensee's information in the spaces provided. There are also boxes provided to check the agency relationship the broker has with the client. 4. Seller's Relationship w/ PA Licensed Broker- The licensee will check the provided box if the seller is not represented by a broker. If the broker has a business relationship with the seller, the licensee will fill in the indicated Broker's company information and the licensee's information in the spaces provided. There are also boxes provided to check the agency relationship the broker has with the client. 5. Dual and/or Designated Agency- This section explains dual or designated agency and states that by signing the agreement, the buyer and seller each acknowledge having been previously informed of and consented to dual agency if applicable.

Parties Use the Agreement of Sale to Agree on Such Items:

1. Purchase price 2. Deposit or escrow money 3. Closing date 4. Personal property to be included or excluded from the sale 5. Financing 6. Inspections 7. Any contingencies with their associated dates

Standard Agreement for the Sale of Real Estate- Page 11

1. Real Estate Taxes and Assessed Value- This section informs the buyer that property taxes may change at any time. 2. Maintenance and Risk of Loss- This section explains the responsibility of property maintenance until settlement occurs. a. The seller must maintain the property in its condition as of the time of the contract signing. b. The seller is responsible for any damage that occurs to the property while under contract. If there is damage the seller must either repair the damage or inform the buyer in writing of how the seller will handle the issue. If seller does not make the repair of credit the buyer, the buyer can terminate the contract or accept the property as is. c. The seller bears the risk of any loss due to fire or other casualties. If the property is destroyed and not replaced prior to settlement, the buyer can accept the property in its current condition along with insurance proceeds or terminate the contract and have the earnest money refunded. 3. Home Warranty- This section explains the coverage and limits of a Home Warranty. Either the buyer or seller may elect to purchase coverage. 4. Recording- This section explains that the ASR is not to be part of any public record. If the buyer allows release of the ASR, the seller may terminate the agreement. 5. Assignment- This section explains that the agreement is binding and isn't transferable unless consent is given by the seller.

Change in Terms Addendum to Agreement of Sale (CTA)

1. Repairs- repairs that the seller must make 2. Seller Assist- a change to the amount of funds provided by the seller for the purchase 3. Purchase Price- a change in the listing price 4. Acceptance & Settlement- changes to the acceptance and settlement dates 5. Mortgage Terms- lists changes to terms of the mortgage that the buyer is seeking from a lender; this includes the type of mortgage, mortgage amount, name of the mortgage lender(s), loan-to-value ratio, and date for the buyer to deliver documentation 6. Time Periods- date changes to any part of the ASR 7. Other- this section allows the buyer to write-in additional changes

5 Addenda That Deal With Property Sale Contingency:

1. Settlement of Other Property Contingency (SOP) 2. Sale & Settlement of Other Property Contingency Addendum to Agreement of Sale (SSP) 3. Sale & Settlement of Other Property Contingency (with Right to Continue Marketing) Addendum to Agreement of Sale (SSP-CM) 4. Sale & Settlement of Other Property Contingency (with Right to Continue Marketing and Time Kickout Clause) Addendum to Agreement of Sale (SSP-TKO) 5. Seller's Reply to Proposed Agreement of Sale for Buyer's Property or Buyer's Financial Ability to Proceed (SRA)

Settlement of Other Property Contingency (SOP)

1. The sale is contingent upon the settlement of the buyer's property and gives space to write in the buyer's current property address. The addendum goes on to say that the buyer's property is under contract and that a settlement date will occur on or before the settlement date listed. Buyer should attach a copy of the existing Agreement for Sale. 2. If the buyer's settlement does not occur by the indicated date or if the buyer's Agreement of Sale terminates, the seller has the option to terminate the agreement and return the deposit monies to the buyer. Buyer and seller can extend the contract if both agree. 3. The addendum also states that the terms of this addendum change and prevail over the provision of the Mortgage Contingency clause giving the seller the right to terminate the Agreement if the buyer's mortgage commitment is conditioned upon the sale and settlement of the buyer's property.

Standard Agreement for the Sale of Real Estate- Page 3

1. Zoning- The licensee must insert the zoning classification in the space provided. Failure to do so makes the contract voidable at the buyer's option. 2. Fixtures and Personal Property- This paragraph has three subsections. a. states that all attached items go with the sale of the property, unless otherwise noted; there is a space to write in items the are included in the sale but not in the purchase price b. there is space to describe any leased items that are not owned by the seller, such as propane tanks, satellite systems, or security systems c. space is provided to list any items excluded from the sale

Once you present an offer, the seller can take one of three actions:

1. accept the offer exactly as it is written 2. reject the offer totally 3. reject the offer and submit a counteroffer to the buyer for his/her consideration

Section 35.325 of PA Law, an Escrow Account Must:

1. be maintained in a federally- or state-insured bank or recognized depository 2. designated the broker as trustee 3. provide for the withdrawal of funds without prior notice 4. be used exclusively for escrow purposes A broker who is a sole proprietor or broker of record may give an employee written authority to deposit money into an escrow account and may give a licensed employee written authority to withdraw funds from the escrow account for payments that are properly chargeable to the account. If money is expected to be held in escrow for more than 6 months, the broker is encouraged to deposit the money into an interest-bearing escrow account. Interest earned on an escrow account will be held and disbursed, pro rata, in the same manner as the principal amount, unless the parties to the transaction direct otherwise by agreement. A broker may not claim the interest earned on an escrow account, unless that broker is a lessor. A broker must provide to the Commission or its authorized representatives, upon written request or under an office inspection, a letter addressed to the bank or depository where the escrow account is maintained authorizing the release of records pertaining to the account.

Other Important Terms the Sellers Should Consider Include:

1. closing costs 2. fixtures and appliances 3. furniture 4. move date and leaseback deals 5. repairs 6. financing contingencies 7. home warranty

Every broker must keep records of all funds that he /she deposits. The record must clearly indicate:

1. date received 2. from whom the money was received 3. date deposited 4. dates of withdrawals 5. other pertinent information concerning the transaction

Real Estate Agents Cannot:

1. explain potential legal outcomes of a dispute 2. evaluate a legal issue and give advice on the best way to proceed 3. file a lawsuit for their client 4. make arguments in court on the client's behalf 5. draft legal paperwork

A purchase and sale agreement must also do the following:

1. identify the parties to the contract 2. describe the property to be transferred 3. give the offering price 4. state the method of payment 5. describe how utilities will be paid 6. provide for settlement of taxes, insurance and any liens 7. state the type of deed and condition of the title 8. list any liens or encumbrances that the buyer will assume 9. outline and explain any contingencies 10. set a time for delivery of title and possession

Important Provisions of Presenting the Offer:

1. proposed closing date 2. proposed possession date 3. included items list- this includes personal property that transfers with the sale 4. contingencies- financing, inspections, sale of buyers' home or other contingencies 5. seller actions prior to closing- repairs, trash cleanup, etc.

Negotiation Process

1. several buyers could make offers on the same property at the same time 2. a buyer could bring an offer during the negotiation process of another buyer's offer or counteroffer on the same property 3. a buyer could bring an offer on a property after the seller has accepted another offer Licensee must present all offers and counteroffers in a timely manner! However, PA law states that a licensee is not obligated to seek additional offers when his/her client its subject to an existing contract.

According to the UETA, the Signature Must Be:

1. unique to the signer 2. capable of being verified 3. under the signer's sole control 4. linked to the record in a way that it can be determined if anything in the document was changed after the signature was applied 5. created by a reliable method for the purpose in which the signature was used

Post-Settlement Possession Addendum to Agreement of Sale

A POS is the opposite of a PRE in that in applies to the seller rather than the buyer. The POS is a one-page document which allows the seller to remain on the property after the closing date. The following sections are covered: 1. Purpose- This is not a lease and it is recommended that the post-settlement occupancy does not extend past 30 days. 2. Vacating Date- The date which the seller must move out is written in the space provided. 3. Occupancy Fee- Seller will pay the buyer a per-day fee for occupancy as noted. 4. Deposits- Seller will pay the buyer a per-day fee for occupancy, with the amount indicated in the space provided. 5. Property Inspection- Buyer will inspect the property within two day of seller vacating the premises. 6. Utilities- Seller will pay for the checked utilities as noted during the occupancy period. 7. Pets- Seller is allowed to have pets on the property as indicated. 8. Maintenance- Seller agrees must maintain property in the same condition as at the time of settlement. 9. Changes to Property- Seller agrees to not make any property changes. 10. Property Insurance- Seller must maintain property insurance during occupancy. The buyer isn't responsible for loss. 11. Entry- The seller is given key/combination door access. The buyer and agent are allowed access, provided proper notice is given to the seller in advance. 12. Seller's Default- If the seller defaults on the agreement, the buyer can remove the seller immediately and has the option to keep deposit monies. 13. Assignment- The seller isn't allowed to assign or lease the property to a third property. 14. Indemnification- Seller is pledging to hold harmless any parties to the sale agreement during the seller occupancy. 15. Survival- Terms of the agreement survive settlement.

Default

A purchase and sale agreement will address what happens in the case of a default. It will state what remedies are available to each of the parties. It also usually addresses how the earnest money deposit will be handled. Often when a default occurs, it is decided that the sellers will keep the earnest money deposit as damages. Some states put a cap on the amount of liquidated damages, so it's important for you to find out if your state has such a cap, and if so, what that amount is.

PA Code 35.333

Agreements of sale identifies the minimum information that must be recorded for a viable real estate contract. However, each broker uses a different set of standard forms in a sale transaction that meets and exceeds state law requirements. As a licensee, you should become familiar with each of those forms and be able to explain each contract and supporting documentation to your client. It is suggested that you have a paper file copy and a digital copy of each form readily at your disposal. Project an image of professionalism by having your work organized, so that you and your clients can process through each document without a flurry of paper overtaking your workspace. When you fill out a contract form, you must take great care. If you make a mistake on the form, you could ultimately be held liable for any harm the buyers or sellers suffer because of that mistake. Many times, the preprinted language on a form does not exactly meet the needs of one or the other of the clients. It's important to remember that, although you can fill in the blanks, you cannot write any special clauses to attach to the forms or give your buyers any advice about the legal implications of any of the provisions on the form. If you do so, you could be guilty of the unauthorized practice of law.

Inspection Contingency

Allows the buyer time to get and study inspections of the property. The buyer could order inspections for termites, pests, hazardous substances, mechanical systems, sewage systems or structural defects.

Addenda

An addendum to a real estate contract or purchase agreement is a document attached to and made a part of the original contract at the time it's prepared and submitted to the principals. Has the ability to overrule the original terms of the agreement. Can be very powerful because they override the language that was in the contract before the addendum was attached.

PA Specific Components of the Agreement

An agreement of sale, other than for a cemetery lot, mausoleum, or cremation space or opening, must contain the following: 1. The date of the agreement 2. The names of the buyer and seller 3. A description of the property and the interest to be conveyed 4. The sale price 5. The dates for payment and conveyance 6. The zoning classification of the property, except if the property (or each parcel within if subdividable) is zoned solely or primarily to permit single-family dwellings, together with a statement that the failure of the agreement of sale to contain the zoning classification of the property will render the agreement voidable at the option of the buyer. If voided, the deposits tendered by the buyer must be returned to the buyer without a requirement of court action. 7. A statement identifying the capacity in which the broker, or a licensee employed by the broker is involved in the transaction and whether services have been provided to another party in the transaction 8. A provision that payments of money received by the broker on account of the sale - regardless of the form of payment and the person designated as payee - will be held by the broker in an escrow account pending consummation of the sale or a prior termination of the transaction. 9. The statement: "A Real Estate Recovery Fund exists to reimburse any person who has obtained a final civil judgment against a Pennsylvania real estate licensee owing to fraud, misrepresentation, or deceit in a real estate transaction and who has been unable to collect the judgment after exhausting all legal and equitable remedies. For complete details about the Fund, call (717) 783-3658." 10. A statement that access to a public road may require issuance of a highway occupancy permit from the Department of Transportation.

Common Provisions- Parties to the Contract

As you well know, many transactions have more than one buyer and/or more than one seller. In order to avoid any future, potential problems with the transaction, everyone who has ownership interest in the property must sign the contract. A more common issue today is buyers, who may or may not be married to each other, who may be married but have different last names, and who may be otherwise related. If you are selling a house to a married couple with different last names, specify this as in: "Robert Jones and Mary Smith, husband and wife." This is because married couples can own real estate in Pennsylvania as tenants by the entireties. This is reserved only for married people. If you should have two people with the same last name who are not married, specify that relationship as well: "Robert Jones and Mary Jones, brother and sister." Licensees should be aware that they cannot practice law! Giving buyers advice about how to take title amounts to the unauthorized practice of law. Buyers should consult with an attorney about how to take title.

Mortgage Contingency

Designed to protect the buyer's earnest money until he/she has a loan commitment from the lending institution. PA requires this type of contingency to state the: 1. type of mortgage 2. mortgage principal 3. maximum interest rate of the mortgage 4. minimum term of the mortgage 5. deadline for the buyer to obtain the mortgage 6. nature and extent of assistance that the broker will render to the buyer in obtaining the mortgage It's not a separate document, but rather is contained in the ASR document.

Proof of Homeowner's Insurance

Documentation (usually requested by a lender) that indicates that the buyer has secured a homeowners' insurance policy that will cover the property being purchased from the date of the transaction close.

Property Description

Even though most contracts have a line on which to write the street address for the property, this type of identification is rarely sufficient. Many states require the attachment of a legal description of the property. The legal description should be descriptive enough so that the particular parcel of land can be both located and identified, for example, a reference to a recorded plat map or deed. If the legal description of the property is very complicated, it's best to get a photocopy of the description from a title company or a photocopy of the seller's deed.

Listing Agent

If you are the listing agent, you will be receiving offers from other agents to present to your sellers. As soon as you receive an offer, you should arrange to meet with your sellers as soon as possible. By law, you must present all offers you receive as soon as possible. Sometimes when calling to set the appointment, the sellers get anxious and want to hear the offer price over the phone. This is not a good idea. Price is only one aspect of the total picture. Often the other terms, along with the offering price, make the offer much more acceptable than price alone would indicate. Or alternatively, the offer viewed as a whole could be the jumping off point for a good counteroffer. If the sellers still insist on hearing the offer, tell them that they deserve to hear a thorough explanation of all the terms and ask them if they are available to meet with you immediately. Sellers cannot accept an offer over the phone, but they can certainly reject one. Do whatever it takes to avoid a telephone presentation.

Presenting the Offer

Make sure your sellers fully understand every provision of the offer. Provide a copy of the offer to every seller present at the meeting, so that they will not have to look over one another's shoulders. Go through the offer one line at a time and answer the sellers' questions as they come up. If any of the questions involve legal matters, be sure to advise the sellers to consult a lawyer. You should never attempt to answer any legal questions yourself. Once you have explained every paragraph, ask the sellers to approve the agreement by signing it. If it's' a full price offer, it should be easy to process through the purchase and sale agreement and obtain the signatures. If the offering price is less than the listing price, but you believe it is a fair and reasonable offer, you'll need to defend it to the sellers. Try to explain the buyers' reasoning in offering the price they did. If the sellers understand the motivation behind the offer, they may be more willing to accept it. And promoting mutual respect between the buyers and sellers will increase the likelihood that the sale will move through escrow and closing successfully. If you believe that the offer you are presenting is a reasonable and fair offer, your goal should be to seek the sellers' acceptance rather than a counteroffer.

Preparing an Offer

Must be in writing and signed by the buyers. You will write up the offer on a standard pre-printed form available through your broker or your local Board of REALTORS®. The form will have all of the important terms - including purchase price, amount of earnest money deposit, how the buyers will pay the price, and the date they want to close. It's critical to include ALL the buyers' terms in the original purchase and sale agreement, because once the document is signed by both buyers AND sellers, the purchase and sale agreement becomes a binding contract.

Presenting Offers

Must be presented to the sellers for their consideration. The listing agent, in most cases, will present the offer to the sellers, but both agents are involved in the process.

Negotiation of Agreement Terms

Negotiations start once the seller receives a written offer. Since everything is negotiable, agents for the buyer and seller go back and forth until the parties reaching a meeting of the minds. Sales price is the most important aspect of the agreement but not the only one. Always inform your clients of possible negotiable items. This type of service is part of your fiduciary duties and increases the likely hood of you being recommend to others.