Contract Forms CH 4
How does the seller inform the buyer and ensure that the hot tub does not remain with the property?
List it in the contract in 2D
The first three paragraphs in the 1-4 Family Residential Contract are:
Names of Parties, Legal Description, Sales Price
Who pays for the appraisal and credit report?
Normally the buyer pays for the appraisal and credit reports because it is part of their loan requirement.
During the option period in the 1-4 Family Residential Contract (Resale), the buyer has the unrestricted right to terminate the contract if they find a different house they would like to buy.
I think this is true but I'm not 100% sure.
Why do lender-required repairs take priority?
Lender required repairs take priority because the buyer will not get the loan unless they are done. If the lender requires certain repairs to be completed, this paragraph states that neither party is obligated to pay and allows buyer to terminate if repairs exceed 5% of the sales price.
PARAGRAPH E: LENDER REQUIRED REPAIRS AND TREATMENT
Lender required repairs take priority because the buyer will not get the loan unless they are done. If the lender requires certain repairs to be completed, this paragraph states that neither party is obligated to pay and allows buyer to terminate if repairs exceed 5% of the sales price.
The reason a buyer would want "shortages in area" covered under the title policy is that only the original person who paid for the survey has recourse.
True
If a buyer checks item 7D (2) under Property Condition, the buyer can only ask for specific repairs.
False. This section is subject to inspection because at this point in the contract the buyer has not been able to inspect the property.
What does it mean when a buyer checks item 7D (2) in paragraph 7?
7D (2): There is space to negotiate for items the buyer can already see in 7D(2). The important thing for the buyer to understand is that they are offering a certain price for the property in its "as is" condition plus the repairs agreed to in paragraph 7D(2). Remember, at this point, the buyer has not had the benefit of an inspection, thus, the only items that could be listed here are items seen during the visit or visits prior to writing the offer. During the option period, the buyer may submit an amendment to either 1 or 2. If the seller does not accept the amendment, the buyer may terminate the contract.
What does it mean when a buyer checks item 7D (1) in paragraph 7?
7D. ACCEPTANCE OF PROPERTY CONDITION: The first paragraph in 7D says, "Buyer accepts the Property in its present condition." It describes "as is" as with any and all defects and without warranty. When the buyer closes on the property, it is in its "as is" condition with all defects and no warranties. The buyer has an obligation to check everything t before closing. 7D (1): Is an acknowledgement that the buyer accepts the property "as is."
7C: SELLER'S DISCLOSURE OF LEAD-BASED AND LEAD-BASED PAINT HAZARDS.
A Lead-Based Paint Disclosure is required by federal law on all residential property built before 1978.
SURVEY
Box 1 allows Seller to furnish his existing survey and an affidavit (addendum #1, TAR Form 1907 - Residential Real Estate Affidavit) that nothing has changed on the property. TIP: The seller must provide BOTH the survey and the affidavit that the lender and the title company both agree to. If the seller does not furnish both items in the time specified and the lender requests a new survey, it will be the responsibility of the seller to pay for the new survey. A real property survey report is a legal document that clearly indicates the location of all improvements relative to a property's boundaries. The survey creates an official and permanent official record of land placement, property lines, easements, and boundaries; protects against property line disputes; and provides a point of reference in determining land value.
What is the buyer considered to be if he/she does not deposit the earnest money within the designated time?
Default
What is earnest money?
Earnest money is merely a gesture of the purchaser's good faith and is used only to make the offer more enticing to the seller.
TITLE COMMITMENT, TITLE POLICY AND ENDORSEMENTS PARAGRAPH 6: TITLE POLICY AND SURVEY: A. TITLE POLICY This paragraph explains that the seller will provide the buyer a policy of title insurance with eight exceptions.
It is the agent's responsibility to notify the buyer that he/she should have the abstract of title examined by an attorney or obtain a policy of title insurance. Item 6A (8) allows the exception to be amended to read "shortages of area" at the expense of either the buyer or the seller. Common examples of "shortages of area" coverage include: a. Coverage for anyone claiming the improvements are over a property line into a neighboring tract b. Coverage for an error in the survey with regards to the location of the boundaries. NOTE: The survey will need to be reviewed through the proper channels as set out by the title company providing the coverage.
SELLER'S DISCLOSURE NOTICE PURSUANT TO 5.008, TEXAS PROPERTY CODE (Notice):
Seller is required to disclose the condition of his property to the buyer.
What form can a seller use to disclose information regarding the property?
Seller's Disclosure form
Why do lender-required repairs take priority?`
The buyer cannot get the loan without these being done.
f 7B2 is checked and they buyer does NOT receive the disclosure, buyer can terminate up until When?
The day of closing, or if buyer does receive the notice, they can terminate within 7 days of receipt. The Seller's Disclosure is mandatory, the form to use is optional. The TREC Seller's Disclosure form includes only the things required by the Texas Property Code. All this required information is also on the Texas Association of REALTORS® (TAR) Seller's Disclosure form as well as other variations of the form. Some of the forms, including the TAR Seller's Disclosure, include many things of value, even though the property code does not require them. The intent is to protect sellers and agents by encouraging full disclosure to the buyer.
How many days does the buyer have to get the option money to the seller or seller's agent and why?
The option money must be in the hands of the seller or seller's agent within 3 days from the time the contract is effective (all parties agree on all elements of the contract). If not, the buyer does not have a valid option and has accepted the property in its present condition.
PARAGRAPH 7H: RESIDENTIAL SERVICE COMPANY
This informs the buyer of their right to choose a policy from a Residential Service Company and to negotiate for the seller to reimburse for the cost of that policy. The seller will either reimburse the buyer or pay for the service contract at a cost specified in that paragraph.
Wetlands
Wetlands are the link between land and water, and are some of the most productive ecosystems in the world. Some common names for different types of wetlands are swamp, marsh, and bog. Depending on the type of wetland, it may be filled mostly with trees, grasses, shrubs, or moss. To be called a wetland, an area must be filled or soaked with water at least part of the year. Wetlands have many important functions that benefit people and wildlife. • Wetlands provide habitat for a wide variety and number of wildlife and plants. • Wetlands filter, clean, and store water - in other words, acting like kidneys for other ecosystems! • Wetlands collect and hold flood waters. • Wetlands absorb wind and tidal forces. • Wetlands provide places of beauty and many recreational activities.
There are eleven (11) Sellers who are exempt from the requirements of Section 5.008 of the Texas Property Code. They are:
1. Seller of residential property consisting of more than one dwelling unit. 2. New home or builder exemption 3. Trustee or executor of an estate exemption 4. By a Trustee in a bankruptcy case 5. By an executor of a will selling the Property 6. Foreclosure Sale 7. Relocation Company, unless the Relocation Company is the Seller. 8. To or from any governmental entity 9. From one co-owner to one or more other co-owners 10. Made to a spouse or to a person or persons in the lineal line of consanguinity of one or more of the transfers 11. Between spouses resulting from a decree of dissolution of marriage or a decree of legal separation or from a property settlement agreement to such a decree. 12. Of real property where the value of any dwelling does not exceed five (5%) percent of the value of the property.
Earnest Money
Earnest money does not constitute consideration under a purchase and sale contract. Earnest money is a gesture of the purchaser's good faith and is used only to make the offer more enticing to the seller. This paragraph provides for the buyer to make a deposit at the time the offer is signed and allows for additional earnest money at a later date. The Texas Real Estate Commission (TREC) states that it is very important for buyers and sellers to agree on who is to be the escrow agent as part of the negotiating process. Most commonly the escrow agent is the selling broker, a title company, or an attorney. A "location" blank is included following the name of the escrow agent to show what specific branch office is holding the earnest money. The Commission also states that earnest money should be deposited with the escrow agent by the end of the second business day after the date the last party has signed the contract or initialed the last changes. The paragraph also states that if the buyer does not deposit the earnest money within the designated time, the buyer is in default.
If the buyer does not deposit the earnest money within the designated time, the buyer is considered to be:
In default
What are the reasons a buyer would want "shortages in area" covered under the title policy?
One of the reasons a buyer may want to check that they want to ask for the "shortages in area" be covered by the title policy is the practice of accepting an existing survey rather than requiring a new survey. If there is a mistake in the survey, only the original person who paid for the survey will have recourse. The cost of adding the "shortages of area" to the title policy currently is 5% of the cost of the title policy. The seller is to provide the buyer a copy of the title commitment within 20 days after the title company receives a copy of the contract.
RESIDENTIAL SERVICE CONTRACT DISCLOSURE OF RELATIONSHIP WITH RESIDENTIAL SERVICE COMPANY
Residential service providers are licensed and regulated by the Texas Real Estate Commission. That is why TREC has created the disclosure that inspectors use. The disclosure: 1. Explains in the first paragraph of the disclosure to the buyer and the seller what a "residential service company" is. 2. Explains that the cost of the service varies. 3. Recommends that the buyer or seller may choose any company they want as a residential service provider. 4. Explains that the purchase of the home warranty is optional and that the sale is NOT contingent on a buyer or seller purchasing the residential service contract. 5. There is a disclosure if the brokers or the agents (listing or selling) will receive any compensation from the residential service company. 6. If there is a fee paid to either the listing agent or the selling agent, the fee will be limited to "reasonable" value.
Title Commitment
A title commitment is not the actual title insurance. It spells out the terms and conditions on which the title insurance underwriter is willing to issue the title insurance. It includes: 1. Name of the insured party 2. Legal description of the property 3. The interest or estate covered 4. A schedule of any exceptions - encumbrances and defects found in the public records 5. Any conditions and/or stipulations under which the policy is issued. This gives the buyer (and buyer's agent) an opportunity to examine each and every outstanding interest against the title so that it is consistent with the expected purchase.
Some sellers are exempt from the requirements of section 5.008 of the Texas Property Code. They include:
A. New home or builder exemption B. Foreclosure sale C. Seller of residential property consisting of more than one dwelling unit D. All of the above
It is required by law that a seller disclose any information they have regarding their property. They may use any form or notice that they wish.
A. True B. False Not sure but I think true
The seller plans to leave some personal property for the buyer which form, if any, would the buyer include with the contract?
Any items not listed in paragraph 2 that the seller is going to leave should use the =Non-Realty Addendum
Objection
Buyer may object in writing to defects, exceptions, or encumbrances to title: disclosed on the survey or other items 6A (1) through (7) above; disclosed in the Commitment, Exception Documents other than items 6A (1) through (8) above; or which prohibit the following use or activity: [blank space available to add uses or activities]. Buyer must object the earlier of (i) the Closing Date or (ii) _______ days after Buyer receives the Commitment, Exception Documents, and the survey. Buyer's failure to object within the time allowed will constitute a waiver of Buyer's right to object; except that the requirements in Schedule C of the Commitment are not waived by Buyer. Provided Seller is not obligated to incur any expense, Seller shall cure the timely objections of Buyer or any third- party lender within 15 days after Seller receives the objections and the Closing Date will be extended as necessary. If objections are not cured within such 15-day period, this contract will terminate, and the Earnest Money will be refunded to Buyer unless Buyer waives the objections."
TITLE NOTICES
It is important to note that the broker is responsible for telling the buyer to obtain an abstract or title policy prior to closing. If the property is in a mandatory owner's association, the buyer is advised that he is obligated to be member and pay the required assessments. If the buyer fails to pay the assessments, it could result in a lien on and the foreclosure of the property.
Paragraph 6E (10), Title Notices
Notice of Water Fluctuations, was retitled "Notice of Water Level Fluctuations" and minor technical revisions were made to more closely follow the statutory language, as of November 2, 2015. This paragraph also requires the buyer to get from the seller the statutory notice from the MUD disclosing the tax rate, bonded indebtedness, or standby fee of the district. TIP: It is very important that these documents get to the buyer in a timely manner. If Buyer does not receive the documents within the time stated, buyer can terminate up to day of closing.
If the seller provides an existing survey do they also need to include a Real Property Affidavit (T-47)?
OH YEA. A title company may accept an existing survey regardless of the age of the survey, usually as long as they can read the date on the survey. Sometimes older surveys were notarized when the notary seal embossed the document. Those can flatten out over the years and be unreadable. The existing survey needs to be accompanied by a notarized Real Property Affidavit (a T-47).
PARAGRAPH 7: PROPERTY CONDITION A. ACCESS, INSPECTIONS, AND UTILITIES:
States that the buyer has the right to inspect the property. The seller will permit the buyer and the buyer's agent access at reasonable times and the seller will pay for turning on existing utilities and keeping them on during the time the contract is in effect
PARAGRAPH 8: BROKERS' FEES
The contract provides that the commission be paid as specified by separate written agreement (the listing agreement and the buyer representation agreement). The closing officer of the transaction should be provided with a copy of this agreement in order to pay the commission. No reference is made to the total fee on the contract between the buyer & seller. NOTE: Always remember there is no "standard" fee. All commissions are negotiable.
What rights does the buyer have during the option period?
To back out of the contract without pentalty
Earnest money is merely a gesture of the purchaser's good faith and is used to make the offer more enticing to the seller.
True
