Real Estate Course Level 7
Game Level 7 b) Co-op sales contract.
* May include a board approval clause. * May include a flip tax clause. a) Contract for deed. b) Co-op sales contract. c) Lease-purchase agreement. d) Lease-option agreement.
Game Level 7 d) Lease-option agreement.
* The tenant has the choice to buy the property they have been renting. *The tenant pays a nonrefundable deposit which gives them the choice of purchasing the property before the end of their lease. a) Contract for deed. b) Co-op sales contract. c) Lease-purchase agreement. d) Lease-option agreement.
Game Level 7 c) Lease-purchase agreement.
* The tenant is required to purchase the property at a certain point. *Buyers are generally advised to avoid this type of agreement. a) Contract for deed. b) Co-op sales contract. c) Lease-purchase agreement. d) Lease-option agreement.
Game Level 7 a) Contract for deed.
*Also known as a land contract. *Also known as an installment sales contract. a) Contract for deed. b) Co-op sales contract. c) Lease-purchase agreement. d) Lease-option agreement.
Answer: The selling broker, or buyer's broker, is Julie Cohen. You should have marked that the Broker is representing the Buyer as a client. The listing broker is Tom Smith. You should have marked that the Broker is representing the Seller as a client. You didn't see anything about any material (business, familial, or personal) relationships between the broker and client in the story. So, you can put N/A in the blank.
10. Brokerage Relationships in this Transaction. a. Selling Broker is _Julie Cohen_ and is: i. (X) representing Buyer as a client ii. ( ) working with Buyer as a customer iii. ( ) acting as a dual agent representing Buyer and Seller iv. ( ) acting as a designated agent where ________ has been assigned to represent Buyer exclusively. b. Listing Broker is _Tom Smith_ and is: i. (X) representing Seller as a client ii. ( ) working with Seller as a customer iii. ( ) acting as a dual agent representing Buyer and Seller iv. ( ) acting as a designated agent where ______ has been assigned to represent Seller exclusively. c. The material relationships required to be disclosed by either Broker are as follows: _N/A_ Based on the information from the story, how should you fill out the blanks in the Brokerage Relationships Clause?
Game Level 7 a) Contract for deed.
Also known as a land contract. a) Contract for deed. b) Lease-purchase agreement. c) Co-op sales agreement. d) lease-option agreement.
Lease-Purchase Agreement
A lease-purchase agreement only differs from a lease-option agreement in that the tenant is required to purchase the property at a certain point. Buyers are generally advised to avoid this type of agreement and opt for a lease-option agreement instead. Which Rent-to-Own Agreement Is Safer?: Both types of rent-to-own contracts appeal to people who cannot qualify for financing to buy a home outright. They may choose this option in hopes of "locking in" their desired home and taking a couple of years to improve their credit before buying it. The lease-purchase path can be a good course of action for some, but the flexibility of the lease-option is safer for buyers and still advantageous to sellers. Get an Attorney: Should you become involved in a potential lease-purchase or lease-option transaction, your best bet is to send the clients to a real estate attorney to work out the details and complete the documents.
Exam Level 7 These are properties which the seller decides beforehand that they will not agree to any repairs and that it will be sold in its present condition.
A property is sold "as is." What does that mean?
Exam Level 7 communicates to parties of a contract that they must perform their contractual duties by a specific date and time in order to avoid breach of contract. This phrase communicates to parties of a contract that they must perform their contractual duties by a specific date and time in order to avoid a breach of contract.
A purchase and sale agreement includes the clause, "Time is of the essence." This phrase:
Game Level 7 a) Contract for deed.
Also known as an installment sales contract. a) Contract for deed. b) Lease-purchase agreement. c) Co-op sales contract. d) Lease-option agreement.
Exam Level 7 He must deliver it in person. Note that the person delivering or sending the written notice can be someone other than the notice-giver. Delivery counts, even if it wasn't one of the signing parties who dropped it off!
An agent needs to give notice of the binding agreement date. All of the following are true EXCEPT:
Exam Level 7 William Robert Snorton III Whoever is drawing up the contract should make sure that all parties' full legal names are entered.
Billy Bob Snorton is buying a house. His full, legal name is William Robert Snorton III. As his agent, how should you advise he sign his name to the purchase agreement?
Answer: Per the story, the day of the contract signing is October 1, in the year 2018.
Binding Agreement Date: The Binding Agreement Date in this transaction is the date of __October 1__, 20 _ 18_. Based on the information from the story, how should you fill out the blank in the Binding Agreement Date?
Answer: Julie Cohen Yonathan Caduri (your name) Aceable Realty 2328 Summer Lane Athens, GA 30612 (888) 888-8888 and marked cell [email protected] The MLS Office Code is ABC12. The firm's license number is 333333.
Buyer Agent ___Julie Cohen___ Broker ___Yonathan Caduri___ Print or Type Name of Agent ___Aceable Realty___ Agent's Address for Receiving Notice ___2328 Summer Lane, Athens, GA 30612___ __(888) 888 - 8888___ Agent's Phone Number ( )Cell ( )Home ( )Work [email protected]___ Agent's Email Address __ABC12_________________ MLS Office Code ___333333________________ Broker Firm License Number Based on the information from the story, how should you fill out the blanks in the Buyer Agent Information?
Answer: Devon and Christine Jones, a married couple 1504 Center Court, Apartment 1001Athens, GA 30601 (111) 111-1111 and marked [email protected] Did you remember to put "Christine," and not "Chrissy"? Use legal names, not nicknames. You could have also put "Devon Jones" and "Christine Jones" as two separate buyers.
Buyer's Acceptance and Contact Information ___________________ Buyer's Signature ___Devon and Christine Jones, a married couple____ Print or Type Name ____1504 Center Court, Apartment 1001_____ Buyer's Address for Receiving Notice ___Athens, GA 30606______ ___(111) 111 - 1111___ Buyer's Phone Number (X)Cell ( )Home ( )Work [email protected]___ Buyer's Email Address
Game Level 7 b) Lease-purchase agreement.
Buyers are generally advised to avoid this type of agreement. a) Contract for deed. b) Lease-purchase agreement. c) Co-op sales contract. d) Lease-option agreement.
Exam Level 7 A lease in which the tenant eventually has the option to purchase the property at a certain time and at a certain price.
Define a lease-option agreement:
Exam Level 7 present all offers to her client. Listing agents must disclose all offers to their clients. They can give professional advice and insight, but they must present all offers.
Elsie, a listing agent, just received three offers. What should Elsie do?
Exam Level 7 Fernando should present the offer, unless his client has explicitly told him not to present offers below a certain price.
Fernando is a listing agent. He receives an offer that he thinks his client will reject for being too low. What should Fernando do?
Exam Level 7 The sales contract can include a section for listing any personal property that will be transferred with the real property.
How can personal property be conveyed along with real property?
Exam Level 7 A lease-purchase agreement requires that the tenant purchase the property at a certain point.
How does a lease-purchase agreement differ from a lease-option agreement?
Exam Level 7 when the buyer has paid the entire balance of the contract In a contract for deed, the seller must convey the legal title to the buyer when the buyer has paid off the entire balance on the contract.
In a contract for deed, when must the seller convey a valid and legal title to the buyer?
Quiz Level 7 c) Jared can rent the house for a period of time and then have the option to buy the property. A lease with option to buy, or lease-option agreement, is a contract in which the buyer can lease a property for a period of time (usually a year or two) and then have the option to buy the property.
Jared signs a lease-option agreement for a small house. What does that mean? a) Jared can rent the house month-to-month. b) When Jared decides to move, he gets first option on who will move into the house after him. c) Jared can rent the house for a period of time and then have the option to buy the property. d) Jared can buy the house, but if he can't pay the mortgage payments, he can change the agreement to a rental agreement.
Lease-Option Agreements
Let's move on to rent-to-own arrangements. You've probably seen those rent-to-own stores where you can lease furniture or electronics. If you make enough rental payments or pay off the item in a lump sum, that big-screen TV is yours forever! 📺 These "no credit check" arrangements often attract consumers who are in poor financial standing, and they can pose some risks to the buyer. Knowing this, imagine how careful a consumer must be if they're going to rent-to-own a whole house! Lease-Option Agreements A lease with option to buy, or lease-option agreement, is a contract in which the buyer can lease a property for a period of time (usually a year or two) and then have the option to buy the property. The lease contract will spell out when the property can be purchased and at what price. The sales price can be "locked-in" at the time of the parties entering the contract, or it can be based on market value at the time of the sale. The contract should also specify how much of the rent payments can be applied to the purchase of the property. Remember when we talked about options before? In the case of a lease-option agreement, the buyer has the option to buy the property they have been renting. So, the optionor (or seller) extends the option to the optionee (or buyer, if they choose to exercise the option). So, since it's an option, the tenant does not have to buy the property if they don't want to. (But the seller is required to sell if the buyer chooses to buy.) The buyer can walk away from the deal, but may forfeit any up-front option fee they paid to the seller at the start of the agreement. If the tenant does not exercise their option to buy, the landlord also gets to keep any other payments that would have been applied toward the down payment. Executory Contract: A lease-option agreement is a type of executory contract. The obligations of the contract are ongoing, not fulfilled immediately as with a straightforward sale. Unilateral...Until It's Not: An option agreement is unilateral, as only one party is obligated to perform. However, once the option has been exercised (i.e., the optionee (Buyer) chooses to buy), it becomes a bilateral sales contract, where both parties need to perform.
Exam Level 7 Disclosing a material relationship A material relationship is one of a familial, business, or personal nature between a broker and a client that would impair the ability of the broker or affiliated licensees to exercise fair and independent judgment relative to another client.
Mallory, a broker, is representing her childhood best friend, Jessi, in a real estate transaction. Mallory discloses this fact when filling out the contract. What is this called?
Game Level 7 c) Co-op sales contract.
May include a board approval clause. a) Contract for deed. b) Lease-purchase agreement. c) Co-op sales contract. d) Lease-option agreement.
Game Level 7 c) Co-op sales contract.
May include a flip tax clause. a) contract for deed. b) Lease-purchase agreement. c) Co-op sales contract. d) Lease-option agreement.
Exam Level 7 an escalation clause. An escalation clause is a clause in an offer stating that the buyer will automatically increase their offer price by a certain increment if the seller receives a better offer on the same property.
Oanh, a buyer's agent, includes a clause in an offer stating that the buyer will automatically increase their offer price by a certain increment if the seller receives a better offer on the same property. What is this clause called?
Answer: Robert Strassman 1233 Tree Lane Athens, GA 30606(222) 222-2222 and marked cell [email protected] How did we get his address? Remember that the story says that Mr. Strassman is still living on the property.
Seller's Acceptance and Contact Information ___________________ Seller's Signature ___Robert Strassman____ Print or Type Name ____1233 Tree Lane_____ Seller's Address for Receiving Notice ___Athens, GA 30606______ ___(222) 222 - 222___ Seller's Phone Number (X)Cell ( )Home ( )Work [email protected]___ Seller's Email Address
Co-op Sales Contract
Remember co-ops from earlier in the course? Cooperative apartments (co-ops) are owned by a corporation, so buyers don't receive a deed when purchasing a cooperative apartment. Instead, the buyer is technically buying shares of the cooperative. These shares are considered personal property, not real property. And through buying the shares, they are given a proprietary lease to the apartment. Because the buyer of a cooperative apartment isn't buying real property, they won't use a mortgage for financing. Instead, the buyer takes out a loan regulated by the Uniform Commercial Code, which is a uniform act (a state law enacted by all 50 states) that regulates the sale or transfer of personal property. The sales contract for a cooperative apartment will include much of the same information as a regular real estate sales contract. There might be some additional charges outlined in the contract, including a flip tax. The flip tax is a fee paid by a seller during a housing co-op transaction. One of the most important differences is that purchasing cooperative shares requires the approval of the corporation. So the sales contract includes a section detailing what the buyer must do if they hope to gain the corporation's approval (usually called board approval). Often this includes personal interviews and references.
Answer: Tom Smith 7575 Pawnee Road Athens, GA 30622 (999) 999-9999 and marked cell [email protected] The MLS Office Code is XYZ89. The firm license number is 666666.
Seller Agent ___Tom Smith___ Broker ____________ Print or Type Name of Agent ___7575 Pawnee Road___ Agent's Address for Receiving Notice __Athens, GA 30622___ __(999) 999 - 9999___ Agent's Phone Number (X)Cell ( )Home ( )Work [email protected]___ Agent's Email Address __XYZ89___ MLS Office Code ___666666___ Broker Firm License Number Based on the information from the story, how should you fill out the blanks in the Buyer Agent Information?
Problems in Lease-Option Agreements
Seller Problems: Some of the issues that come into play with these contracts include things like determining who will maintain the property during the "lease" period of the lease-option agreement. With a typical lease, the landlord maintains the property because they own it and are motivated to keep it in good condition. But with a lease-option agreement, the seller doesn't have that motivation as they are trying to divest themselves of the property and, therefore, don't want to put any more money into it. The seller might also grow concerned if the tenant isn't caring for the property. The tenant may be creating repair issues that they can simply walk away from at the end of the lease. Another common concern for the seller in these situations is that the typical lease-option tenant is not in a financially sound position. Therefore, the seller is knowingly entering into an agreement with someone who might never qualify for financing, which would put the future sale at risk. This prospect is doubly bad if the market is deteriorating. Buyer Problems: On the buyer's side, there are a couple of issues to consider with lease-option agreements. The first has to do with the overall cost. For unqualified buyers, the cost of getting an opportunity to purchase property shows up in the price they end up paying. Option fees can be steep. Rental rates may be higher to account for the portion of rent contributing to the down payment. It's a considerable amount of investment on the buyer's part for a deal they may not ever be able to close. Also, the property itself may not be all that desirable if it couldn't attract a regular sale. Additionally, a buyer could attempt to exercise their purchase option only to find that the seller can't issue a good title, or the property doesn't appraise for the agreed-upon price.
Letter of Intent
Speaking of condos, I want to mention the letter of intent. We talked about these before, but let's reframe them in the context of condos. The sponsor of a condo project may ask a prospective buyer to sign one. Usually, the broker will draft this letter. The letter of intent signifies an agreement to do business together, but is not binding. Often, a buyer signs the letter when they want to reserve a specific unit. A letter of intent has benefits for both a seller and a developer. A letter of intent shows the seller that the buyer is willing to enter a transaction. Meanwhile, a developer can show letters of intent to their lender to persuade the lender to fund the development. Lots of letters of intent show the lender that the development is not a financial risk. After submitting the letter of intent, the potential buyer will put down an initial deposit and have the right of first refusal. In this context, it's the buyer who gets first dibs on buying the unit before it can be offered to anyone else - that is, right of first refusal. From there, the buyer has two options: . Terminate the agreement and get their deposit returned . Move forward with the sale and sign a binding contract The actual contract will be more detailed than the letter of intent.
How Lease-Option Agreements Work
The Option Fee: The optionee (Buyer) pays the optionor (Seller) a nonrefundable deposit. This is an option fee that is usually applied to the purchase price of the property. The option fee gives the optionee (Buyer) the choice of purchasing the property before the conclusion of their lease. Rent Credit: Once the optionee (Buyer) has paid the option fee, they must then pay the optionor (Seller) a monthly rent to compensate them for their use of the property. A fraction of that monthly payment is usually applied towards the purchase price or down payment of the property. The optionee has the option of purchasing the property (according to the fixed terms in the contract) during the term of the lease. However, once the lease expires, the option to purchase ceases to exist. The Lease-Option Environment: The lease-option became very popular in stagnant markets with sellers who were extremely frustrated with the fact that they couldn't sell their property. As an incentive, they offered prospects a lease with an option to purchase at a pre-determined future date. As further enticement, the landlord-seller would also offer to apply a percentage of each lease payment towards the buyer's down payment (if they were to ultimately purchase the property). And with the passage of time in the lease, the hope (for the seller) was that a tenant with a lease-option would accumulate enough down payment credit that, at a certain point, they would find it very hard to walk away. And in that way, the sale could be accomplished — even if it required extra patience on the part of the seller.
Exam Level 7 Executory The contract is executory. Both parties have yet to perform their duties.
The contract for Mrs. Smith to sell her home has been signed by both her and the buyer, but the sale will not close for another two weeks. This contract is:
Exam Level 7 purchase contract, purchase agreement. Some call the sales contract a purchase agreement, purchase contract, or purchase and sale agreement.
What are other terms for "sales contract"?
Contract for Deed
The next type of contract I want to cover is the contract for deed. It's a sales contract in which the buyer pays the seller for the property in multiple installments for a pre-determined length of time, and the seller holds the title until the property has been fully paid for. It's also known as an installment sales contract or land contract. It sounds similar to a lease-option, but the difference is that the contract stays in effect until the property is fully paid off with enough installment payments. There isn't a specific date on which the tenant must decide whether or not to pay in full for the property. A contract for deed works kinda like a layaway plan. The buyer pays the seller for the property in pre-determined chunks for a pre-determined length of time, and the seller holds the title until the property has been fully paid for. In an installment sale, the seller only pays taxes on the money they have already received in the year that they receive it. Contract for Deed Details: . The purchase price is paid over a specified time period in regular payments. . The seller keeps the title. . The buyer gets possession. . When all payments are paid, the buyer gets the title. . The seller is responsible for any original loan payments. . If the seller does not pay the original mortgage, the buyer has no rights. The lender will then foreclose, and the buyer will be evicted. . The seller can take out additional liens against the property. . The buyer may use, possess, or profit from the property. . The buyer must make timely payments and maintain the property. . The seller can sue for specific performance or damages and may foreclose on the property. . Contract for Deed Features: The contract for deed has many of the same features as a standard real estate sales contract. One unique feature of this contract is the purchase price section, which, differing from most other sales contracts, would detail the buyer's payment plan to the seller. Equitable Title Interest: In an executory contract, the buyer's interest in the property is referred to as an equitable title interest. This means that although another party holds the legal title, the buyer has the right of possession and an insurable interest in the property. So, a sales contract, before it has been fully executed, falls into this category. So, too, does a contract for deed! Essentially, during the period between the buyer and seller signing the contract and the seller delivering the deed, the buyer holds equitable title to the property.
Level Summary
The purchase contract is a contract used in the sale of real property that describes the responsibilities of the parties and the terms of the sale. An offer becomes a contract after the offer is accepted and that acceptance is communicated. Counteroffers are legally considered a rejection of the original offer. When a counteroffer is made, the original offer dies and the new offer takes place. Multiple offer is when more than one party submits an offer on a single property. If you're the listing agent when multiple offers come in, remember to present all offers to your seller, unless the client specifically tells you not to present offers below a certain price. A purchase agreement is also known as a sales contract, purchase contract, and a purchase and sale agreement, or PSA. Remember your job is to fill out the blanks of the sales contract. Don't give legal advice and don't write stipulations (a condition or requirement that is specified or demanded as part of an agreement.). Do not engage in the unauthorized practice of law. Other Real Estate contracts: 1) Co-op Sales Contract 2) Condominium Sales Contract 3) Lease-Option Agreement 4) Lease-Purchase Agreement 5) Contract for deed
Exam Level 7 Both the buyer and the seller Both the buyer and seller have rights and have obligations to meet under the sales contract. The contract protects both parties by ensuring that both parties uphold their promises.
Who has rights and obligations under the sales contract?
Game Level 7 d) Lease-option agreement.
The tenant has the choice to buy the property they have been renting. a) Contract for deed. b) Lease-purchase agreement. c) Co-op sales contract. d) Lease-option agreement.
Game Level 7 b) Lease-purchase agreement.
The tenant is required to purchase the property at a certain point. a) Contract for deed. b) Lease-purchase agreement. c) Co-op sales contract. d) Lease-option agreement.
Game Level 7 d) Lease-option agreement.
The tenant pays a nonrefundable deposit which gives them the choice of purchasing the property before the end of their lease. a) Contract for deed. b) Lease-purchase agreement. c) Co-op sales contract. d) Lease-option agreement.
Condominium Sales Contract
There are special contracts used for the purchase of condominiums, as well. Since there are common areas and other condominium-specific features that need to be accounted for, a condominium sales contract can include provisions that address this. The main point is that a condominium contract needs to be very specific about what the buyer will own, won't own, and will co-own with their neighbors in the complex. Right of First Refusal: Another subject you may see on a condo contract is the "right of first refusal." With condominium sales, the condominium association has the right of first refusal. This means that if the owner of the condominium decides to sell the unit, the association has the first chance to buy or lease the property. The condo association might want to buy the property for various reasons, whether it's to convert it to the superintendent's apartment or make it an office for the condo association. Sometimes, the condo association has to waive this right before the owner of the unit can sell their unit to an outside party. Other times, the right expires automatically after a month or so. The condo association rules and the sales contract should stipulate the exact details around the right of first refusal.
Exam Level 7 This is revocation, and Trudy has the right to do this. Revocation is withdrawing the offer before acceptance has been communicated. Trudy has the right to do this.
Trudy, a buyer's agent, communicated an offer to the listing agent. Trudy's buyer then changed their mind about the home, so Trudy withdrew the offer. During all of this, the listing agent never communicated acceptance of the offer. Evaluate.
Exam Level 7 A survival clause states that even after closing, certain things will still be required or remain true.
What is a "survival of agreement" clause?
Exam Level 7 a contract that can serve as Plan B if the original contract falls through for some reason. A back-up contract is what it sounds like: a contract that can serve as Plan B if the original contract falls through for some reason. When a seller receives multiple offers, they may choose to accept one offer and accept their second choice as a backup offer.
What is a back-up contract?
Exam Level 7 The co-op sales contract includes a section detailing what the buyer must do if they hope to gain the corporation's board approval. One of the most important differences is that purchasing cooperative shares requires the approval of the corporation. So the co-op sales contract includes a section detailing what the buyer must do if they hope to gain the corporation's approval (usually called "board approval").
What is one way a co-op sales contract differs from the sales contract for a single-family home?
Exam Level 7 the right of a party to be the first one to have the opportunity to buy or lease a property, if the owner decides to sell or lease the property Right of first refusal is the right of a party to be the first one to have the opportunity to buy or lease a property, if the owner decides to sell or lease the property.
What is right of first refusal?
a) In a lease-option agreement, the renter has the choice to buy the property after a certain point. With a lease-purchase agreement, they are obligated. In a lease-option agreement, the renter has the option to buy the property after a certain point. With a lease-purchase agreement, they are obligated to do so.
What is the difference between a lease-option agreement and a lease-purchase agreement? a) In a lease-option agreement, the renter has the choice to buy the property after a certain point. With a lease-purchase agreement, they are obligated. b) They are the same thing. c) In a lease-option agreement, the renter is obligated to buy the property after a certain point. With a lease-purchase agreement, they have the choice. d) In a lease-option agreement, the renter can choose to sub-lease, In a lease-purchase agreement, they are obligated.
Quiz Level 7 b) If the owner of the condominium decides to sell the unit, the association has the first chance to buy or lease the property. With condominium sales, the condominium association has the right of first refusal. This means that if the owner of the condominium decides to sell the unit, the association has the first chance to buy or lease the property.
What is the right of first refusal? a) The owner of a condominium can refuse to sell the unit to whomever they want, no explanations needed. b) If the owner of the condominium decides to sell the unit, the association has the first chance to buy or lease the property. c) If the owner of a co-op unit decides to sell the unit, the owner of the most shares in the co-op has the first chance to buy or lease the property. d) If a seller of a condominium gets multiple offers, they have the right to a back-up contract.
Exam Level 7 Sale of another property contingency The sale of another property contingency is meant to protect the buyer from owning two homes at once and to ensure the buyer has enough funds for closing.
What type of contingency is meant to protect buyers from owning two homes at once?
Exam Level 7 It is important to make sure there is a proper amount of time allowed for performance (the fulfillment of contractual obligations).
When choosing a closing date, what should a license holder be aware of?
Exam Level 7 Earnest money should always be held in a special trust or escrow account.
Where should earnest money be held?
Exam Level 7 You must make all buyers aware of the details of best offer made so that they can revise their original offer if they wish to. You do not have to make all buyers aware that multiple offers have been made, and the level of detail you choose to reveal is up to the seller.
Which of the following is NOT a key point to keep in mind regarding multiple offers?
Exam Level 7 An offer can be revoked at any time as long as the offeror has not signed the acceptance of the offer. An offer can be withdrawn any time prior to the proper communication of the offer's acceptance — even if a previously stated deadline for acceptance has yet to expire. Once the offeror has been notified of the offeree's acceptance, the right to revoke the offer has passed.
Which of the following is NOT true about offer revocation?
Quiz Level 7 c) Upon completion of the sale, the seller keeps the title; the buyer gets the title after making a certain amount of payments over a period of years. A contract for deed is an executory contract where the seller keeps the title upon completion of sale. The buyer gets the title after a certain amount of payments over a period of years.
Which of the following is the BEST description of a contract for deed? a) Upon completion of sale, the seller conveys the title to the buyer. b) A promulgated form is used to document all real estate sales of land. c) Upon completion of the sale, the seller keeps the title; the buyer gets the title after making a certain amount of payments over a period of years. d) The title is given to a third party to hold until
Exam Level 7 Time is of the essence A phrase used to communicate when a party to a contract must perform their contractual duties by a specific date and time in order to avoid a breach of contract is "time is of the essence."
Which of these is a phrase used to communicate when a party to a contract must perform their contractual duties by a specific date and time in order to avoid a breach of contract?
Quiz Level 7 d) because cooperative shares are considered personal property. Because the buyer of a cooperative apartment isn't buying real property, they won't use a mortgage for financing. Instead they will take out a loan regulated by the Uniform Commercial Code, which regulates the sale and transfer of personal property.
Why does the Uniform Commercial Code regulate loans for cooperative shares? a) because cooperative mortgages require more down payment. b) because cooperative shares cannot be bought with cash funds. c) because the UCC deals with higher purchase prices. d) because cooperative shares are considered personal property.
Exam Level 7 "Sorry, pal. Offers don't need to be presented in the same order in which they are received." Offers don't need to be presented in the same order in which they are received (although that's usually how it ends up happening in practice). Simply present all offers and counteroffers as objectively and promptly as possible.
You are a buyer's agent. Your buyer says, "The seller must answer my offer first because it came in first!" What should you say?
Legal Description Clause
b. Legal Description (check on of the below). _ Attached as exhibit hereto. _ Same as described in Deed Book ___. :Page ____ of the land records of the above county. _ Land Lot ________ of the ________ District, _______ Section/GMD, Lot ________, Block _______, Unit ______, Phase/Section _______ of _______ Subdivision/Development, according to the plat recorded in Plat Book _______ Page _______ of the land records of the above county. _ Described below if Property is a condominium unit and a full unit legal description is to be used: Unit ____ of ______ Condominium ("Condominium") located in Land Lot of _____ of the ______ District of ______ County, together with its percentage of undivided interest in the common elements of the Condominium, and its interest in the limited common elements assigned to the unit ("Unit"). The Condominium was created pursuant to the Declaration of Condominium for any Condominium ("Declaration") recorded in Deed Book ______. Page ____, ____ County records, and shown and delineated on the plat of state records, and on the floor plans filed in Condominium Floor Plan Book _____, Page ______, ______ County , records. Every contract needs a legal description. As you know from earlier in the course, this is a description of a property that is distinct and precise enough to distinguish it from all other properties. Why Legal Descriptions?: If you are the listing agent, having space in the purchase agreement for the seller to provide a legal description ensures that you: . Market the right property . Ensure the deed has a legal description when it's conveyed. Four Options The legal description clause gives the seller four different ways to give a legal description. Sellers can do any of the following. . Attach an exhibit: In this instance, "exhibit" is referring to an attachment to the purchase agreement. The seller is agreeing to include a separate document to the purchase agreement. . Describe the property: Use the county's land records to describe the property by either its: . Deed book and page number . Lot and block numbers Give condominium unit information: This option is obviously only for condominiums, Yoni. Legal Descriptions in Georgia 🍑: Here are the guidelines for legal description in good ol' Georgia: . The rectangular survey method is not used in Georgia. Instead, the methods used are metes and bounds or the recorded plat (short form). . The street address alone is not enough. You need that legal description! Without it, a sales contract can't be enforced. . As a license holder, you can compose a short form description from a recorded subdivision plat. However, only surveyors, attorneys, or other qualified people should make a metes and bounds description. There are a few situations where the existing legal description should not be used: The seller is not selling the entire tract. Get a new survey! . The seller has previously sold part of the land. Get a new survey! . A recent survey conflicts with the deed. Agent Pro Tip 1: Don't ever use a contract that says things like, "legal description to be provided within two weeks of signing" or "legal description to be provided before closing." Language like this can void the contract. Get that legal description in the contract! Agent Pro Tip 2: Legal description information is stuff that the seller will probably not know off the top of their head. If you are the listing agent, you can make their lives easier (and impress them) by giving them helpful tips on how to look up their legal descriptions before the purchase agreement signing. Legal descriptions can often be found on the internet. If you can't find it there, go to the county courthouse.
Completed Purchase Agreement
refer to 12 page sales contract (Purchase and Sale Agreement)
Time Limits Clause
11. Time Limit Offer. The Offer set forth herein expires on the 5th day from delivery. The Time Limit of the Offer shall be the date and time referenced herein when the Offer expires unless prior to that date and time both of the following have occurred: a. the Offer has been accepted by the party to whom the Offer was made; and b. notice of acceptance of the Offer has been delivered to the party who made the Offer. An Offer Isn't Good Forever: The contract will have a time and date at which the offer expires. If the seller does not accept the offer before that time, then the contract is null and void, and a new one will have to be created. Remember, it's still an offer until all parties have accepted and signed it and communicated proper acceptance. If a seller, for example, lets the offer sit around for six days without signing, then it expires, and the whole contract process has to start over. If the offer is accepted and notice of the acceptance has been delivered prior to the time and date expressed here, then that time and date become the new "time limit of offer" date.
Brokerage Information Clause
If brokers are used in the transaction, then there will be a section of the sales contract that acknowledges the brokerages involved in the sale. Later in the course, you'll learn all about agency principles. For now, I'm going to tell you enough so you'll understand the upcoming clauses. First, some definitions: . Selling Broker - Represents the buyer, also known as buyer's agent. . Listing Broker - Represents the seller. . Client - Anyone who has an agency relationship with a license holder. . Customer - A party to the transaction with whom the license holder does NOT have an agency relationship. A broker works for a client. A broker works with a customer. The fiduciary obligations owed to clients are significantly higher than the lesser duties of fairness and honesty owed to customers and third parties. . Dual Agent: License holder works for a brokerage that represents both buyer and seller; license holder provides a limited range of fiduciary duties to both . Designated Agent: Only named agent represents buyer or seller; offers full range of fiduciary duties to the client Selling Broker: 10. Brokerage Relationships in this Transaction. a. Selling Broker is _______________ and is: i. ( ) representing Buyer as a client. ii. ( ) working with Buyer as a customer. iii. ( ) acting as a dual agent representing Buyer and Seller. iv. ( ) acting as a designated agent where _____________ has been assigned to represent Buyer exclusively. This clause describes the relationship between the selling broker (or buyer's agent) and the buyer. Listing Broker: b. Listing broker is ____________ and is: i. ( ) representing Seller as a client. ii. ( ) working with Seller as a customer. iii. ( ) acting as a dual agent representing Buyer and Seller. iv. ( ) acting as a designated agent where __________ has been assigned to represent Seller exclusively. This clause does the same work as the previous clause, only now for the Listing Broker. Essentially, these two clauses are spelling out the brokerage relationships (and resulting levels of fiduciary duties) between all the parties. Important stuff!
Quiz Level 7 a) True. True: In Georgia, one must present all offers until the transaction is closed - including verbal offers!
In Georgia, verbal offers have to be presented. a) True. b) False.
Binders
In some areas, particularly in the Northeastern United States, binders are used when presenting offers. A binder is a preliminary agreement for the sale of a property secured by a valuable deposit from the potential buyer. It binds the seller to a good faith agreement to sell the subject property, provided that a sales contract meeting the conditions determined is executed within the prescribed period. A binder may also be called a letter of intent (LOI). A binder stops the seller from negotiating with anyone else for a specified period of time. Binder Advantage: A seller can look at the binder to see if they want to accept the offer. If the offer in the binder is accepted, then the parties can commit to a full sales contract. The advantage is that this way, a buyer doesn't have to get a lawyer to draw up a contract every time they want to make an offer. Instead, they can just whip out a binder. A binder is usually only one page long and looks like an abbreviated contract. Keep in Mind: Binders aren't customary in all areas, though. Depending on where you work, it may be more customary for contracts to be filled out when an offer is made, rather than to present a binder.
Best practices on offers received for your clients
It's Their Offer, Not Yours: Even if an agent knows (and maybe they don't) what kind of offer a client will accept or reject, it's simply not their place to make that call. The key is to PRESENT ALL OFFERS — even those you think your client will reject. (Sorry for shouting. It's just that important.) The Only Exception: The only exception to the "present all offers" rule is that you may turn down offers on your client's behalf if they give you explicit permission to do so. For example, a seller may have a specific bottom line for their selling price or a certain concession that they refuse to make for offerors. The seller may essentially ask you to NOT waste their time with offers that fall below their communicated minimum requirements. Don't encourage your client to set a limit like this, but accept it if they choose to have one. Respect their request and, ideally, get this agreement in writing. Make Their Decision an Educated One: While you won't be accepting or rejecting offers on your clients' properties for them, you can certainly give them the tools to make those decisions. A good place to start would be getting your clients to consider not only price, but also other factors that could be important to them... factors that might tip the scales in favor or against offer acceptance. Flexibility on closing date, buyer financial strength, earnest money amount, willingness to pay closing costs, and contingencies that could derail the agreement are just a few of the things your client might not think to consider. You've Got Options: Make sure your client knows that their options are to accept, reject, ignore, or counter the offer.
Quiz Level 7 a) This means that the "good faith money" that Jill paid will get returned to her if the seller does not perform their contractual obligations. This means that the "good faith money" that Jill paid will get returned to her if the seller does not perform their contractual obligations.
Jill is buying a house. The purchase contract states that earnest money will be disbursed to her if the seller defaults. What does that mean? a) This means that the "good faith money" that Jill paid will get returned to her if the seller does not perform their contractual obligations. b) This means that the listing agent's commission will be given to Jill if she wins any kind of lawsuit that results from the transaction. c) This means that the money the seller put towards closing costs will be given to Jill if the seller does not perform due diligence. d) This means that the money she and the seller used to finalize the offer will be split between her and the seller if they fail to sign the contract.
Purchase and Sale Clause
Let's get started with the purchase and sale clause. 1) Purchase and sale. The undersigned buyer(s) ("Buyer") agree to buy and the undersigned seller(s) ("Seller") agree to sell the real property described below including all fixtures, improvements and landscaping therein ("Property") on the terms and conditions set fourth in this Agreement. This clause is the agreement in a nutshell. The buyer is buying and the seller is selling, according to all various conditions which the contract is about to spell out. Note About Capitalization: As you can see, this paragraph introduces some terms which have specific definitions for this listing agreement. For example, "Seller" is used in quotation marks to signify that use of Seller references the party who fills out the Seller portion of the contract.
Quiz Level 7 a) Sara needs to disclose the material relationship between her and Jerry. Sara needs to disclose the material relationship between her and Jerry.
Many years ago, Listing Agent Sara had a passionate affair with Jerry, a local shop owner. Now, she is representing him as a seller in a real estate transaction. Does she need to disclose their past relationship to the other parties? a) Sara needs to disclose the material relationship between her and Jerry. b) Sara can choose to disclose if she wants, but she doesn't have to. c) The burden is on Jerry to disclose. d) Sara doesn't have to do anything. She can take the secret to her grave.
Essential Elements and Categories of a contract
Remember, the five essential elements of a legally valid contract are offer and acceptance, consideration, legally competent parties, reality of consent, and lawful objective. And once a contract has been created, it falls into one of four categories: valid, void, voidable, or unenforceable. Executory vs. Executed: Executory contracts are contracts that have not yet been fully performed. Executed contracts are contracts in which all terms have been fulfilled by all parties. Once executed, all contracts cease to legally exist. Bilateral vs. Unilateral: Real estate sales contracts are bilateral contracts. Both parties have rights and reciprocal obligations. In unilateral contracts, only one party is obligated to perform. That's not the case for a sales contract! Addendum vs. Amendment: Addenda are attached to the original document BEFORE it is signed. Addenda are used to clarify and require agreement on items which are not part of the contract. An amendment is for the use of the buyers and sellers AFTER they have fully signed and accepted a contract and then later discover a change that needs to be made to one of the terms. Assignment vs. Novation: When one or more of the parties involved in a contract wants to withdraw from it without actually terminating the contract, the contracting parties may have the option of transferring their rights and duties to a third party. This is assignment. Novation is an alternative to assignment. Novation is a new contract substituting the obligations of an original contract. Legally, it is understood to be the exchange of one contract for another. Breach of Contract: Both the buyer and seller have rights and obligations under the contract. If either party partially or completely fails to fulfill their contractual obligations, it is referred to as breach of contract. When a breach occurs, the injured party has a number of options for remedying it: specific performance, rescission, forfeiture, and suit for damages. Types of Rescission: In unilateral rescission, one party decides to rescind, the other party is notified, and whoever needs to return payments does so. In mutual rescission, both parties agree to cancel the contract. Types of Damages: There can be liquidated damages, compensatory damages, or punitive damages.
Net Sheet for Seller
The specific terms of an offer or counteroffer can be just as important to the seller as the purchase price at the top of the page. Most clients are less concerned about the actual sales price of their home than they are with what they will net when it's all said and done. Obviously, the two are connected, but there are different ways to achieve the end goal. For example, if Buyer Antonio is willing to pay the full asking price of $250,000 for a home but refuses to pay any closing costs, that offer will net the seller less than Buyer Betty's offer to pay $245,000 plus all ($6,000 worth) of the closing costs. Likewise, a buyer who can close a month or two sooner might net the seller a couple of thousand dollars more than a second offer at the same sales price but with a pushed-out closing date request. That's why, no matter how many offers you have to present, you want to provide your client with a net sheet for every offer. A net sheet gives your client a good estimate of what they can expect to walk away with after all closing costs are considered. Net sheets also help agents educate potential sellers during the pricing conversation, and allow clients to see exactly what they'd be making depending on the offers they receive.
Quiz Level 7 a) buyer. Caveat emptor is a Latin phrase meaning "let the buyer beware." It is used to mean the buyer is expected to do their due diligence when purchasing property.
Which of these parties is advised to take precaution by caveat emptor? a) buyer. b) seller. c) agent. d) title agent.
Answer: a. Property Identification. Address:__ 1233 Tree Lane__ City__ Athens__ . County__Clarke__, State__ GA__, Zip Code:__30606__ Tax Parcel ID Number: __3-104-567__. Did you fill everything out correctly? The address is 1233 Tree Lane. The city is Athens, the county is Clarke, the state is GA, and the zip code is 30606. The Tax Parcel ID number is 3-104-567.
a. Property Identification. Address __________ City ______________________. County _____________, State_____, Zip Code: ___________ Tax Parcel ID Number: ________________ Based on the information from the story, how should you fill out the blanks in the Property Identification Clause?
Property Identification Clause
a. Property Identification. Address:_______ City_______. County_______, State _____, Zip Code: _____ Tax Parcel ID Number: ________ Purchase agreements exist to facilitate a sale of property. So, every good purchase agreement needs to have a clause that properly identifies what is actually being sold. Agent Pro Tip: If the seller isn't sure what their Tax Parcel ID number is, they can look this up on their county clerk website. (And if the county clerk does not have a website, the seller can contact the county clerk for information.)
Closing and Possession: Extension of Deadline
b. Buyer or Seller may unilaterally extend the closing date for eight(8) days upon notice to the other party given prior to or on the date of closing if: Either the buyer or seller can extend the closing date if certain conditions are met. The amount of days for the extension varies by contract, but you might expect to see 7-10 days. Title Objections: i. Seller cannot satisfy valid title objections (excluding title objections that: (a) can be satisfied through the payment of money or bonding off the same; and (b) do not prevent Seller from conveying good and marketable title, as that term is defined herein, to the property); The closing date can be extended if the seller cannot satisfy valid title objections, except for those that: . Can be satisfied through payment or bonds . Don't prevent the title from being good and marketable EXAMPLE A title search revealed that a seller had unpaid property taxes and that a neighbor had a claim to part of the property. The seller quickly paid the taxes - he had no idea they were unpaid! - but realized it would take longer to resolve things with the neighbor, as he also did not know about the neighbor's claim. Together, the buyer and seller decided to extend the closing date. Mortgage Lender and Closing Attorney: ii. Buyer's mortgage lender (even in "all cash" transactions where Buyer is obtaining a mortgage loan) or the closing attorney is delayed and cannot fulfill their respective obligations by the date of closing, provided that the delay is not caused by Buyer; or The closing date can be extended if the buyer's mortgage lender or the closing attorney haven't finished their tasks by closing, as long as the buyer isn't to blame for their delay. EXAMPLE The mortgage lender hasn't been able to turn in final paperwork because the buyer has been late with their documents. Because this is the buyer's fault, the closing date will not be extended. Estimates and Disclosures: iii. Buyer has not received required estimates or disclosures and Buyer is prohibited from closing under federal regulations. The party unilaterally extending the closing date shall state the basis for the delay in the notice of the extension. If the right to unilaterally extend the closing date is exercised once by either the Buyer or Seller, the right shall thereafter terminate. The closing date can be extended if the buyer has not yet received estimates or disclosures that they need in order to close. The buyer and seller only get one extension of the closing date each!
Answer: b. Legal Description (check one of the below). ( ) Attached as exhibit hereto. (X) Same as described in Deed Book _15_. :Page _70_ of the land records of the above county. How'd you do on the legal description? You should have marked the box for Same as described in Deed Book. The story told you that the legal description of the property is found in Deed Book 15, page 70.
b. Legal Description (check one of the below). ( ) Attached as exhibit hereto. ( ) Same as described in Deed Book ____. Page ___ of the land records of the above county. ( ) Land Lot _______ of the ______ District, ________ Section/GMD, Lot _______, Block______, Unit______, Phase/Section ______ of ______ Subdivision/ Development, according to the plat recorded in Plat Book _______ Page __________ of the land records of the above county. ( ) Described below if Property is a condominium unit and a full unit legal description is to be used: Unit _____ of ___________ Condominium ("Condominium") located in Land Lot of _________ of the ________ District of ________ County, together with its percentage of undivided interest in the common elements of the Condominium, and its interests in the limited common elements assigned to the unit ("Unit"). The Condominium was created pursuant to the Declaration of Condominium for any Condominium ("Declaration") recorded in Deed Book __________, Page _____, _____ County records, and shown and delineated on the plat of state records, and on the floor plans filed in Condominium Floor Plan Book ______, Page ______, _____ County, records. Based on the information from the story, how should you fill out the blanks in the Legal Description Clause?
Closing and Possession: Keys 🔑
c. At time of possession, Seller shall provide Buyer with ll keys, door openers, codes and other similar equipment pertaining to the Property. If Buyer's possession is after closing, Seller shall provide Buyer with one set of keys to the Property at closing and all keys at the time of possession. The seller's gotta give the buyer access to the property: keys, garage door openers, gate codes, and what have you. If the closing date is the same as the possession date, the buyer gets all goodies at closing. 🔑 🗝 If possession happens after the closing date, the buyer gets one set of keys then and everything else at possession. 🔑
Brokerage Information: Material Relationships
c. The material relationships required to be disclosed by either Broker are as follows: ________________. This can be state specific, but generally, a material relationship is one of a familial, business, or personal nature between a broker and a client that would impair the ability of the broker or affiliated licensees to exercise fair and independent judgment relative to another client. . Familial: This is your child, step-sister, cousin, partner, etc. . Business: This is anyone you (or your partner) have done business with (including past clients), or are currently doing business with. This can be real estate business, a separate or past career, or any current or past side hustle. . Personal: This last category is a bit vaguer. This is a college roommate, a friend from high school, a former fling, etc. Agent Pro Tip: Some REO and Short Sale Banks void the buyer's brokerage commission if it is disclosed in the purchase agreement that a material relationship exists between the buyer's agent and the buyer.
Notices Clause: Authority to Accept
c. When Broker Authorized to Accept Notice for Client: Except where the Broker is acting in a dual agency capacity, the Broker and any affiliated licensee of the Broker representing a party in a client relationship shall be authorized agents of the party and notice to any of them shall for all purposes herein be deemed to be notice to the party. Notice to an authorized agent shall not be effective unless the written notice is sent to an address, facsimile number or e-mail address of the authorized agent set forth herein (or subsequently provided by the authorized agent following the notice provisions herein). Except as provided for herein, the Broker's staff at a physical address set forth herein of the Broker or the Broker's affiliated licensees are authorized to receive notices delivered by a Delivery Service. The Broker, the Broker's staff and the affiliated licensees of the Broker shall not be authorized to receive notice on behalf of a party in any transaction in which a brokerage engagement has not been entered into with the party or in which the Broker is acting in a dual agency capacity. In the event the Broker is practicing designated agency, only the designated agent of a client shall be an authorized agent of the client for the purposes of receiving notice. Notice to Broker = Notice to Client: Delivering notice to the license holder representing the client is the same thing as delivering notice to the client. This does not apply in a dual agency situation. Along similar lines, with designated agency, delivering notice to the license holder who has been designated to represent the client is the same thing as delivering notice to the client. Personal delivery can only be to the client or to their agent. A license holder cannot receive notice on behalf of a customer, only a client. Delivery to the license holder must be to the address specified on the signature page of the contract, unless subsequently provided according to all notice requirements.
Earnest Money: Disbursement
d. Holder shall disburse the earnest money upon: i. the closing of Property; ii. a subsequent written agreement of Buyer and seller; iii. an order of a court or arbitrator having jurisdiction over any dispute involving the earnest money; or iv. the failure of the parties to enter into a binding agreement (where there is no dispute over the formation or enforceability of the Agreement). The holder of earnest money can disburse under any of these conditions: . The property closes. . There is a written agreement subsequent to the contract about the earnest money. . Any arbitration over the earnest money is settled. . The parties fail to enter into a binding agreement (in these cases, the agreement itself is a good one-no one disputes its formation or enforceability-but for some other reasons, the parties decide against the agreement.) Who gets the earnest money (buyer or seller) depends on which of the above situations happens. Reasonable Interpretation: e. In addition, Holder may disburse the earnest money upon a reasonable interpretation of the Agreement, provided that Holder first gives all parties at least ten (10) days notice stating to whom and why the disbursement will be made. Any party may object to the proposed disbursement by giving written notice of the same to Holder within the ten (10) day notice period. Objections not timely made in writing shall be deemed waived. If Holder receives an objection and, after considering it, decides to disburse the earnest money as originally proposed, Holder may do so and send notice to the parties of Holder's action. The earnest money can also be disbursed if the holder make a "reasonable interpretation" of the agreement. The holder first needs to give notice to all parties about why they are disbursing the money and who gets that money. This needs to be done within the number of days specified in the contract. If a party takes issue with the proposed disbursement, they have a specified number of days to let the holder know. If they object outside that time period, the objection is waived. The holder can decide to ignore the objection and disburse as originally planned. The holder needs to send notice in this case, too. Modification of Disbursement: f. If Holder decides to modify its proposed disbursement, Holder shall first send a new ten (10) day notice to the parties stating the rationale for the modification and to whom the disbursement will now be made. If the holder chooses to modify the disbursement, they need to send a new notice with their reasoning. Disbursement to Seller: g. Holder shall offer to disburse the earnest money to Seller by check in the event Holder: i. makes a reasonable interpretation of the Agreement that the Agreement has been terminated due to Buyer's default; and ii. sends the required ten (10) day notice of the proposed disbursement to Buyer and Seller. If Seller accepts the offer and Holder issues a check to Seller which is deposited by Seller, it shall constitute liquidated damages in full settlement of all claims of Seller against Buyer and the Brokers in this transaction. Holder may require Seller to sign a W-9 before issuing a check to Seller for liquidated damages $600 or more. Such liquidated damages are a reasonable pre-estimate of Seller's actual damages, which damages are difficult to ascertain and are not a penalty. Nothing herein shall prevent the Seller from declining the tender of the earnest money by the Holder. In such event, Holder, after giving Buyer and Seller the required ten (10) day notice of the proposed disbursement, shall disburse the earnest money to Buyer. The holder will disburse the earnest money to the seller if they make a reasonable interpretation that the buyer has defaulted, and the holder sends the required notice. In this case, once the holder has disbursed the earnest money, it becomes the liquidated damages and fully settles all claims of the seller against the buyer. The liquidated damages amount is a reasonable estimate of what the actual damages would be. If the seller declines the earnest money, the holder can give the required notice, and then can disburse the money back to the buyer. Agent Pro Tip: The seller might decline the earnest money in case they want to reserve the right to sue the buyer for defaulting. Remember, the return of the earnest money counts as full settlement of all claims, and an aggrieved seller may want more than that.
Brokerage Information: Ministerial Acts
d. No Agency Relationship: Buyer and Seller acknowledge that, if they are not represented by Brokers in a client relationship, they are each solely responsible for protecting their own interests, and that Broker's role is limited to performing ministerial acts for that party. This clause basically ensures that the buyer and seller know that if they are not represented by a broker, that broker does not look out for their interests. Essentially, this clause ensures that a buyer or seller knows when they are a customer and not a client. A ministerial act is not, say, the broker performing a ceremony for the parties. ("Do you, seller, take thee buyer to be your lawfully obligated purchaser?") Instead, it means the actions of a license holder that do not require the exercise of the licensee's judgment or discretion. It can be things like processing, paperwork, coordinating, etc. In other words, the license holder can assist the customer in providing services, but it must be the customer who ultimately makes all decisions.
Warranties Transfer Clause
f. Warranties Transfer: Seller agrees to transfer to Buyer, at closing, subject to Buyer's acceptance thereof (and at Buyer's expense, if there is any cost associated with said transfer), Seller's interest in any existing manufacturer's warranties, service contracts, termite treatment and/or repair guarantee and/or other similar warranties which, by their terms, may be transferable to Buyer. This clause states that the seller will transfer any relevant warranties or contracts to the buyer. This includes things like warranty for the washing machine, warranty for the air conditioning system, contract with the exterminator, etc. If there is any cost involved with the transfer, the buyer needs to pay it.
Counteroffers
Remember, a counteroffer is a contract proposal submitted in response to a previous offer, modifying the terms of the original offer. A counteroffer is considered a rejection of the original offer, meaning the original offer dies with the submission of a counteroffer. Like original offers, a counteroffer can be accepted, rejected, ignored, or countered again. It can also expire, and terminate in all the ways that an offer can terminate. A counteroffer is basically a new offer! Sometimes a client will be reluctant to counter an offer that's not that far off from what they really wanted all along. Maybe they're not the haggling type and would be more inclined to say "yes" or "no" than to ask the buyer to meet them in the middle. This is where your finely tuned negotiation skills can come in handy. You can help your client craft a counteroffer that gets them closer to their ideal sales terms and you closer to your next commission! Get It in Writing!: To be valid, a counteroffer must be in writing. Sometimes the parties insist on trying to work out the details orally and then later finalizing it in writing. The problem with that is that people tend to forget what they said. If you are ever conveying what your client or the other agent told you orally, remember to always follow up with "subject to written confirmation." Without written confirmation, no one is locked into the offer. It would be disappointing for a buyer or seller to believe they have an offer locked down and then find out the other party will not put it in writing and the offer is no good. Contract rules apply to counteroffers because a counteroffer is a contract (or rather, it will become one once it's signed by the parties). While Countering: A party has the ability to cancel their offer or counteroffer, but only if this takes place before the other party accepts the offer. There is no commitment until that offer has both parties' signatures on it. If the seller has already sent a counteroffer to a prospective buyer and then receives another offer that is even better, they should withdraw the first counter before answering the new offer. License holders need to make buyers aware that while they are countering, the property is still available and the seller is free to sell it to someone else.
Time Is of the Essence Clause
18. Time of Essence: Time is of the essence of this Agreement. A contract could include the phrase time is of the essence. This phrase communicates to parties of a contract that they must perform their contractual duties by a specific date and time in order to avoid a breach of contract. (In the absence of this provision, "reasonable" delays may be considered acceptable.) All time limits in the contract, then, will be strictly applied. For example, if the contract states that the option period ends at 5:00 p.m. five days after the contract is signed, this means 5:00 p.m. on that fifth day and not a minute after. The buyer can't roll up at 7:00 p.m. and be all, "Sorry dudes, but I've decided I don't wanna commit to the purchase. I'm just trying to find myself right now, you know?" Too late! Failure to act within the specified time required would equal a breach of the contract. Agent Pro Tip: Let's talk a little more about the option period. When creating the offer, the option period is super important. Listing agents advocate for short periods of time, with some agents advocating five days or less. Buyer's agents, on the other hand, should be advocating more days, say 10. Here's a potential problem that may surface during a short option period. The buyer needs to hire an inspector, and let's say that the inspector they want to hire is busy for two of the five days in the agreed option period. On day three, there is an inspection and the written report is furnished on day four. The report calls out some issues (such as electrical wiring) that will take days to investigate — more days than what was originally negotiated. The buyer then has two choices. 1. Cancel the transaction. 2. Attempt to negotiate an extension of the option period. The seller might not want to extend the option period, or they might want a large sum of money to extend. The seller could even have a back-up contract in place. As this example shows, because there wasn't a reasonable or adequate amount of time to complete due diligence, the existing contract risks being terminated and at the very least creates an inconvenience for all parties. So this is why it's important when a creating an offer, make sure there is a proper amount of time allotted for performance.
Purchase Price of Property Clause
2. Purchase Price of Property to be Paid by Buyer. __$250,000.00__. The Purchase Price shall be paid in U.S. Dollars at closing by wire transfer of immediately available funds, or such other form of payment acceptable to the closing attorney. The purchase price is $250,000.00. Did you remember to use commas and decimal places for cents? Agent Pro Tip: When entering any dollar amount in a contract, it's a good idea to also include the decimal places as well, even if it's a nice round number like $250,000.00. When it comes to contracts, it's best to be as precise as possible.
Purchase Price Clause
2. Purchase Price of Property to be Paid by Buyer. $____. The Purchase Price shall be paid in U.S. Dollars at closing by wire transfer of immediately available funds, or such other form of payment acceptable to the closing attorney. Along with the purchase price, the sales contract may specify the method of payment. For example, how much of the purchase price is covered by the down payment, earnest money deposit, and so forth. Purchase Price in Georgia: Like the legal land description, the purchase price of the property and method of payment MUST be in a sales contract. It cannot say something like, "Purchase price to be determined."
Electronic Signatures Clause
21. Electronic Signatures: For all purposes herein, an electronic or facsimile signature shall be deemed the same as an original signature; provided, however, that all parties agree to promptly re execute a conformed copy of this Agreement with original signatures if requested to do so by, the buyer's mortgage lender or the other party. At the bottom of the contract, it should state that all necessary contractual information is included in the contract and its attachments. Then all parties will sign, including the brokers. And there you go, you've got a valid contract! This clause states that electronic or fax signatures are as good as "print" signatures. However, if asked to do so, parties will need to re-execute the contract with good old-fashioned handwritten signatures. Electronic Signatures: While we are on the topic of signatures, let's take a quick pit stop and talk about electronic signatures. Handwritten signatures are all well and good, but parties now have the option to sign documents digitally. An electronic signature can be defined as an electronic sound, symbol, or process attached to or logically associated with an electronic record and adopted by a person as their signature. As with ink signatures, an e-signature MUST be submitted by the intended signer themselves. Are E-Signatures Legal?: In 1999, the National Conference of Commissioners on Uniform State Laws created the Uniform Electronic Transactions Act, or UETA. The UETA says that electronic signatures are just as legal as handwritten signatures, and therefore have legally binding status. Another act, the Electronic Signatures in Global and National Commerce Act (E-SIGN) of 2000, further asserts the validity of electronic signatures.
Quiz Level 7 c) The buyer, after receiving notice from seller of damage, can take the time specified in the contract to decide if they want to continue the purchase. The buyer, after receiving notice from the seller of the damage, can take the amount of time specified in the contract to decide if they want to continue with the purchase.
A hurricane destroys a large portion of a house prior to closing. The sales contract has a "risk of damage to property" clause. What can the buyer do? a) The buyer can ask the Holder to disburse the earnest money back to them. b) The buyer can ask the seller for time to decide if they want to continue the purchase, but the seller does not have to grant it. c) The buyer, after receiving notice from seller of damage, can take the time specified in the contract to decide if they want to continue the purchase. d) This clause mandates that a sale must go through even in the event of damage, so the buyer has no recourse.
The Sales Contract
A sales contract is a contract used in the sale of real property that outlines the responsibilities of the parties and terms of the sale. It can also be called a purchase agreement, purchase contract, or purchase and sale agreement. I'll use the terms interchangeably to get you used to them. A sales contract is the blueprint for the completion of a real estate transaction. A contract should be complete and should provide for all possibilities to avoid misunderstandings that could delay or even prevent closing of the sale. The sales contract is often the most important document in a real estate transaction because it establishes the details of the agreement between the buyer and seller and identifies their legal rights and obligations. Types of Sales Contracts: There's a lot of variety when it comes to sales transactions. Some common real estate sales contracts are: . Residential Contract of Sale . Commercial Contract of Sale . Foreclosure Contract of Sale . Contract of Sale for New Construction . Contract of Sale for Land . Exchange Agreement The most common transaction you'll probably deal with is a residential sale, so that's the contract we'll focus on most. No Promulgated Sales Contracts in Georgia 🍑: Sales contracts are drawn up by lawyers, NOT real estate agents. It's important to note that Georgia does not promulgate contracts. What I mean by that is, there is no standard sales contract that all real estate transactions must use. Often a sales contract is prepared based on local customs and practices, so it's important for a real estate agent to be familiar with how contracts are used in the market in which they are doing business.
More on Listing Agents
All Offers Must Be Presented: I know I've said this before, but the main principle to remember is that you are legally and ethically required to present all offers to the seller. It doesn't matter if someone offers $20 and a stick of chewing gum for your client's modern downtown condo. You must present every offer. It's the seller's decision to make, not yours. And as the listing agent, it is your fiduciary duty to present all offers to the seller. That means the good, the bad, and the ugly. Let's say your client wants to sell a home for $150,000. You get three offers: 1. An offer for $150,000 2. An offer for $147,000 3. An offer for $135,000 Which of these are you presenting to the client? If you guessed "all of them," you're right! And I'm proud of you. 😊 The Only Exception, Revisited: Remember, the only exception to the "present all offers" rule is that you may turn down offers on your client's behalf if they give you explicit permission to do so. Submit All Offers in a Timely Manner: Offers don't need to be presented in the same order in which they are received (although that's usually how it ends up happening in practice). Simply present all offers and counteroffers as objectively and promptly as possible. Decisions, Decisions: There are many misconceptions about what a seller must do with an offer. The seller usually does not have to do anything. A buyer's agent might argue that: . "The seller must answer my buyer's offer first because it came in first..." . "The seller must respond to my buyer's offer, since we presented it in writing..." . "The seller must take my buyer's offer. It was full price..." Those arguments aren't valid. Instead, the seller has several choices, which include: . Accept one offer and ignore or reject the others . Reject all offers . Reject one offer and make a counteroffer to that buyer Act on Your Client's Decisions: Your client has options. They can take the first satisfactory offer that comes in, or wait patiently for a better offer. They can enter into negotiations with a single buyer or prompt all interested buyers to submit their very best offers. It's a delicate balancing act between saving time and maximizing profit, encouraging higher bids but potentially scaring off buyers. Keep the lines of communication open with your client and act on their decisions promptly. No More Marketing: Once your client has officially accepted an offer, you are no longer obligated to advertise their property or show it to additional buyers. This is the understanding unless your client has requested in writing for you to continue marketing the property after acceptance of an offer.
Quiz Level 7 c) The contract can include language which puts off the legal description until closing. Don't ever use a contract that says things like, "legal description to be provided within two weeks of signing" or "legal description to be provided before closing." Language like this can void the contract. Get that legal description in the contract!
All of the following is TRUE about legal descriptions in a sales contract EXCEPT: a) The seller can describe the property by its lot and block numbers. b) The seller can attach an exhibit for the legal description. c) The contract can include language which puts off the legal description until closing. d) The seller can describe the property by its deed book and page number.
Quiz Level 7 b) including an appraisal contingency. Contingencies can delay certainty that your buyer will actually buy the property.
All of these will most likely help give your client a better chance of securing a property in a competitive market EXCEPT: a) putting down a larger down payment. b) including an appraisal contingency. c) purchasing their own home warranty. d) agreeing to a shorter option period.
Brokerage Information: Commission and Seeking Experts
Commission: f. Seller has agreed to pay Listing Broker(s) a commission pursuant to a separate brokerage engagement agreement entered into between the parties and incorporated herein by reference ("Listing Agreement"). The Listing Broker has agreed to share that commission with the Selling Broker. The closing attorney is hereby authorized and directed to pay the Broker(s) at closing, their respective portions of the commissions out of the proceeds of the sale. If the sale proceeds are insufficient to pay the full commission, the party owning the commission shall pay any shortfall at closing. The acceptance by the Broker(s) of a partial real estate commission at the closing shall not relieve the party owing the same from paying the remainder after the closing (unless the Broker(s) have expressly agreed in writing to accept the amount paid in full satisfaction of the Broker(s) claim to a commission). The Brokers herein are signing this Agreement to reflect their role in this transaction and consent to act as Holder if either of them is named as such. This Agreement and any amendment thereto shall be enforceable even without the signature of any Broker referenced herein. There's a lot of information here regarding: . Who pays commissions . Who receives commissions . Commission splits . Duties of the closing attorney around commissions . Commission deficits and responses to that . And more! Seeking Experts: g. Buyer and Seller have not relied upon any advice or representations of Brokers other than what included in this Agreement. Brokers shall have no duty to advise Buyer and Seller on any matter relating to the Property which could have been revealed through a survey, title search, Official State Wood Infestation Report, inspection by a professional home inspector or construction expert, utility bill review, an appraisal, inspection by an environmental engineering inspector, consulting governmental officials or a review of this Agreement and transaction by an attorney, financial planner, mortgage consultant or tax planner. Buyer and Seller should seek independent expert advice regarding any matter of concern to them relative to the Property and this Agreement. This clause makes explicit that buyers and sellers need to rely on relevant experts for things like inspection, appraisals, and mortgages; and that this expertise is not a responsibility of the brokers or agents.
More Miscellany, Georgia Style! 🍑
I'll recap the most salient Georgia-specific contract regulations that have been scattered through this chapter, as well as introduce a few more. Recap: . Present all offers, including verbal offers. . Present all material facts. . Only attorneys can close transactions. . The rectangular survey method is not used for legal descriptions. . Legal descriptions and purchase prices must be included in contracts. And now, some new information! Georgia Condominium Act: According to this Act, the sales contract for a condominium needs to disclose that: . Oral representations cannot be relied upon as correctly stating the representations of the seller. . The buyer should refer to required documents in the Disclosure package to learn about correct representation. In addition, the Act states that the buyer has at least seven days after receiving all parts of the Disclosure package to terminate the contract without penalty. Contract Rescission Rights in Georgia: Two Acts, the Georgia Time-Share Act and the Georgia Land Sales Act, require that the sales contracts in these situations (that is, for time shares and for certain kinds of subdivisions) provide contract rescission rights to purchasers. Georgia Statute of Limitations: The statute of limitations for written contracts under seal is 20 years. If they aren't under seal, the statute of limitations is six years.
Closing Costs Clause
3. Closing Costs; Seller's Contribution at Closing: $ 0.00 As the story tells us, the seller is contributing nothing to the buyer's closing costs. So the Seller's Contribution at Closing is $0.00.
Quiz Level 7 a) TRUE True: A sales contract can include a provision that states any personal property that will or will NOT be transferred at the same time as the real property.
A real estate sales contract can include a provision that allows for the transfer of personal property. a) TRUE b) FALSE
Quiz Level 7 c) If the seller wants to reserve the right to sue the buyer for defaulting, they should not accept the earnest money. If the seller wants to reserve the right to sue the buyer for defaulting, they should not accept the earnest money.
A sales agreement states that if an agreement is terminated due to the buyer's default, and the earnest money is disbursed to the seller, this constitutes liquidated damages in full settlement of all claims of the seller against the buyer. Evaluate. a) A smart seller will always choose the Holder of earnest money, in order to prevent undue damages. b) Earnest money can never be used for liquidated damages, so this provision is void. c) If the seller wants to reserve the right to sue the buyer for defaulting, they should not accept the earnest money. d) A smart buyer will always have this provision in a sales agreement, as it gives them the right to sue the seller upon default.
Quiz Level 7 a) An agent may not complete a contract form that has been prepared by legal counsel by filling in the blank spaces provided. Georgia license law specifically states that a license holder may complete a contract form that has been prepared by legal counsel by filling in the blank spaces provided. The rest of the answer choices are true.
All of the below is true of Georgia contract law EXCEPT: a) An agent may not complete a contract form that has been prepared by legal counsel by filling in the blank spaces provided. b) The Georgia Time-Share Act and the Georgia Land Sales Act require that certain sales contracts provide contract rescission rights to purchasers. c) Agents cannot charge for the preparation of forms. d) Only attorneys can close transactions.
Contract Standards
As an agent, you're going to be filling out a lot of different forms and contracts. Filling out contracts takes a lot of knowledge, understanding, and practice. As a real estate student, it can be overwhelming. This is why I want to share with you my Contract Writing Style Guide. While your broker might have different rules for you to follow in the hard and fast real world of real estate, these are pretty standard rules across the industry, so they shouldn't vary too much. I recommend saving this guide to your computer or printing it out and putting it somewhere where you can easily reference it.
Escalation Clause
Another tool available to buyers in competitive markets is the escalation clause. An escalation clause is a clause in an offer stating that the buyer will automatically increase their offer price by a certain increment if the seller receives a better offer on the same property. You might also hear this being called an escalator. An offer that includes an escalation clause will state an offering price just like any other offer. This is the price that the seller can accept or counter (like normal!) if there are no other, more attractive offers. The escalation clause only kicks in if there is at least one better offer on the table. In such a case, the offer with the escalation clause automatically raises its offer above the competing offer's price. Scenario: Thuy's Dream House: Thuy, a buyer, found her dream house and knew she'd have some competition from other buyers. She had her agent submit an offer on her behalf to purchase the house for $300,000. She chose to include an escalation clause saying that she would beat any competing offer by $2,000 as long as the final purchase price did not exceed $310,000. Thuy is only on the hook to pay $300,000 for the house if no one else makes a better offer. If someone does make a better offer, she will pay as much as $310,000 to help her offer get selected. If another buyer offers $311,000, that person has beaten her offer (barring other contract terms) and the seller may very well choose their offer instead of Thuy's. That Escalated Quickly!: Sounds like a foolproof way to make sure your client wins the bidding war, right? Well, it's complicated. There are few issues that make escalation clauses less attractive: Some sellers choose not to accept offers with escalators, preferring that buyers simply submit their best offers up front. The upper limit stated in your escalation clause is important (you don't want your buyer to get stuck paying way more than expected just to beat someone else's exorbitant offer!), but it also explicitly tells the seller how high you're willing to go. 😳 Your client could be vulnerable to less-than-genuine competing offers that are submitted or fabricated just to drive up the price on your offer. Escalator Safety: Here are a few tips for using escalation clauses wisely: . Don't use them unless you're pretty certain that there will be multiple offers. If the property is not as hot as your buyer thought, you've exposed their upper limit (and therefore weakened their bargaining power) for no reason. You can bet the seller will come back with a counteroffer higher than their base offer. . Make sure your buyer is 100% comfortable with the upper price limit. They may very well end up paying that much! . Safeguard against fake or disingenuous competing offers by specifying in the escalation clause that other offers must be "bona fide" and that you must see proof of the offer you're supposed to beat. . By requesting a financing, inspection, and/or appraisal contingency in the offer, your buyer will have some protection (read: ways to get out of the contract) if the escalation clause lands them at a price they don't like. But be careful. While an escalation clause strengthens an offer, most contingencies weaken an offer, and it could all cancel out. . Include an end date for the offer. That way a seller can't surface the escalation clause long after the borrower has forgotten they ever even made an offer on that home.
Review: Sales Contract Requirements
Elements of a sales contract: ( ) Names of the parties ( ) Identification of the property ( ) States intention to convey ownership ( ) Terms of the sale ( ) Purchase price ( ) Mortgage details, if applicable ( ) Deposit amount ( ) Closing details ( ) Property disclosures ( ) Inclusions and exclusions ( ) Inspection information ( ) Acceptance procedures and deadlines ( ) Signatures of parties
Exhibits and Addenda
Exhibits and Addenda: Exhibits and Addenda. All exhibits and/or addenda attached hereto, listed below, or referenced herein are made a part of this Agreement. If any such exhibit or addendum conflicts with any preceding paragraph (including any changes thereto made by the parties), said exhibit or addendum shall control. So, throughout the contract, you've seen reference to the occasional exhibit or addenda. These exhibits and addenda need to be listed here, and then attached to the contract. If there's a conflict with anything in the contract, the exhibit or addenda controls. If you belong to a Realtor's association, you will find many of these exhibits and addenda as forms you can fill out. If there AREN'T forms, get a lawyer to write these addenda. More on Addenda: There are a number of different addenda that could be attached to the contract. The most common is probably the property condition disclosures, but there could be a number of other forms dealing with inspections and mortgages. An attorney should review all attached addenda to make sure they don't create any unwanted changes in the contract. Examples of Addenda: . Conventional Loan Contingency Addendum . FHA Loan Contingency Addendum . Lead-Based Paint Addendum . Legal Description . Loan Assumption Addendum . Seller's Property Disclosure Statement . Survey of Property as Exhibit What is this contingency business, you ask? A contingency is a provision within a contract that makes performance conditional upon the occurrence of a stated event. Another way to put this is until the contingencies have been fulfilled, the contract is voidable or unenforceable. Most real estate contracts will include at least one or two contingencies. Mortgage Contingency: Most contracts will contain a mortgage contingency clause, or financing contingency. This is a section of the contract that makes the sale contingent on the buyer obtaining an adequate mortgage loan. This section will outline what type of financing the buyer needs to receive in order for the sale to progress. For example, this section might state that a buyer needs to get a loan of $200,000 at 3% APR by the end of the month. If the buyer cannot obtain a loan with these terms, then the contract can be terminated. (Although any buyer using financing would be wise to have this contingency, getting pre-approved for a loan before making the offer makes it less likely that they'll need to use the contingency.) Appraisal Contingency: Similarly, an appraisal contingency enables the buyer to get out of the sales contract if the appraisal comes in lower than a certain amount. (An appraisal is an estimation of property's value as of a specific date, performed by a certified appraiser.) Buyers don't want to get stuck having to buy a property that isn't worth as much as they'd thought. Contingent on the Sale of Another Property: Transactions that are contingent on the sale of another property happen quite frequently in real estate. In these situations, the buyer needs to sell their current home in order to afford the new home. The sale of another property contingency is meant to protect buyers from owning two homes at once and ensure the buyer has enough funds for closing. The purchase of property in conjunction with a contingent sale can be a critically important contract function for buyers, allowing them to take advantage of real estate equity to assist in future purchases. Inspection Contingency: The sale is contingent on the property passing inspections. Attorney Review Contingency: There might be a clause in the contract that makes the contract contingent on the approval of the parties' attorneys. This clause will give the attorneys a certain amount of time to look over the contract and grant their approval or disapproval. Since brokers and agents are not attorneys, if a broker fills in the blanks of a contract, it is still recommended that an attorney look over the contract, and this clause makes it necessary for them to do so. Escape Clause: The contract might also include an escape clause, which says that if the seller receives another offer, the original buyer has a specific period of time to continue with the transaction before the seller proceeds with the new buyer. The escape clause usually allows the original buyer 24-72 hours to decide. Termination Under Contingencies: A contingency should state within itself how and when termination is communicated. Communicating a termination is like communicating an offer in terms of importance and priority. Prevent Contingency Abuse: Both sellers and buyers can abuse contingencies as a way to cancel the contract without defaulting. We don't want that! In order to avoid this, the contingency should: . Be very clear . Contain an expiration date . Explicitly require diligence and effort to fulfill the obligation (If the contingency isn't specific about who does what when, parties can take advantage.) Review of Contingencies: Type of contingency: . Mortgage - Sale contingent on buyer obtaining an adequate mortgage loan. . Appraisal - Sale contingent on amount of appraisal. . Sale of Another Property - Sale contingent on buyer selling another property. . Inspection - Sale contingent on property passing inspection. . Attorney Review - Contract contingent on approval of parties' attorneys.
The Story: Keeping Up With the Joneses
Here are the details! . Devon Jones and his wife, Christine, who goes by Chrissy," are in the process of purchasing a new home. They currently live at 1504 Center Court, Apartment 1001, in Athens, GA 30601. Today is October 1, 2018, the day of the contract signing. . They have recently signed a Buyer/Tenant Representation Agreement with you, making YOU their buyer's agent. . The property is located at 1233 Tree Lane in Athens, GA, 30606, in Clarke County. The Tax Parcel ID number is 3-104-567. . The legal description of the property is found in Deed Book 15, page 70, as located in the county records. . The seller, Robert Strassman, is a single man who originally purchased the home new in 1984. Mr. Strassman is still living on the property and is represented by a different listing broker. . The purchase price for the property is $250,000, and Mr. Strassman wants 10% down. . The buyers will deposit the down payment as earnest money with Ticor Title Company, located at 1010 Mulligan Road in Atlanta, GA 30336, within three days of the Binding Agreement Date. They will pay via wire transfer. Carla Bowles of Ticor Title Company will be the escrow agent (or holder) in this transaction. . The earnest money will be applied towards funds due from buyer at closing. . The buyers also want a seven-day option period. Besides $10.00 of nonrefundable option money, they are willing to pay $275.00 (by check) as additional option money. This, too, will be due within three days of the Binding Agreement Date. The buyers want it to be credited to the sales price at closing. . Mr. Strassman will not pay the buyers' closing costs (buyers' expenses) on this transaction. . Neither party has an attorney. Closing and Beyond: . The Jones' would like to close on November 28, 2018. They are willing to allow Mr. Strassman to stay in the property for three days after closing, leaving by 5pm on the third day. Contact Information: . The Jones are using Devon's cell phone number as their contact number, which is (111) 111-1111. Their email is [email protected]. . Robert Strassman's cell phone number is (222) 222 2222, and his email is [email protected]. Here is your broker's information: . Your broker firm is Aceable Realty, license number 333333. . Your broker is Julie Cohen, license number 444444. . Your broker's office is located at: 2328 Summer Lane, Athens, GA 30612. . Your broker's phone number is (555) 555-5555. . The MLS Office Code is ABC12. . Here is your information as a license holder in this story: . Your sales agent license number is 777777. . Your office address is the same as your broker. . Your email address is [email protected]. . Your cell phone number is (888) 888-8888. Here is the escrow agent's information: . The escrow agent is Carla Bowles. . Her address is 1010 Mulligan Road in Atlanta, GA 30336. . Her email is [email protected]. . Her phone number is (333) 333-3333. Here is the listing agent's information: . The listing broker is Tom Smith, license number 666666. . His cell phone number is (999) 999-9999. . His address is 7575 Pawnee Road, Athens, GA 30622. . His email is [email protected]. . His MLS Office Code is XYZ89. The Scene Is Set: Whoa! That was a lot of setup for this story. But don't worry — you won't have to memorize everything you just read. Remember that you can click on any contract image in the Contract Workshop to refresh your memory about the details of this story.
Quiz Level 7 b) False. False: While buyers are countering, license holders should let them know that the property is still available and the seller is free to sell it to someone else.
If a buyer is in the process of countering an offer, the seller cannot sell the property to anyone else. a) True. b) False.
Eric and E-SIGN: The Discussion
Intent is important. Electronic signatures, like traditional ink signatures, are only valid if each party intended to sign. Kate's intent was not to make the offer, so the paperwork was null and void. How can this be prevented? Eric would benefit from reviewing the rules of electronic documents and signatures with each client prior to sending them any electronic documents. Doing this will save Eric time and clients like Kate heartache in the future.
More Buyer's Agent Tips
Limit Contingencies: I'll go in depth about contingencies in the next chapter, but for now, know that these are conditions that must be met for a contract to become binding. Try to avoid contingencies unless your client really needs them. A financing contingency, for example, makes a sale contingent on the buyer obtaining an adequate mortgage loan. This can delay certainty that your buyer will actually be able to buy the property. The seller may choose to move on to a sure deal. Don't include an appraisal contingency if your client is dead set on the property. (An appraisal contingency makes the sale contingent on the property meeting a certain minimum appraised value.) If they are willing and able to pay their offer price for the property (even if the home appraises at a lower price), this contingency is unnecessary. Just make sure your client is fully aware that the potential difference between the appraised value and selling price must be paid for up front, and cannot be financed. Tap Into the Resources: In highly competitive markets, your client has a better chance of securing a property if they can put down a larger down payment. Another negotiating tool is to limit requests for seller-paid closing costs in the offer. Your client can also choose to spring for their own home warranty and title policy. Anything you can do to save the seller some money on closing day will be a point in your favor. Consider the Seller's Living Situation: It will most likely be evident if the owner is still living in the home or has already moved away. Their status can give you a clue as to which incentives to try. 🕵️ If the seller is living in the home, consider offering a lease back to them. They might appreciate being able to stay in the home for a few days or weeks after closing while they coordinate the purchase and/or move to a new home. If the property is vacant and you're dealing with an empty (or perfectly staged) home, you can infer that the owner is plenty ready to stop paying for it and maintaining it. Note when the house went on the market. Most sellers want to get through the process as quickly as possible and move on with their lives. If you can offer a quick closing (in coordination with the client's lender, usually), do so! Get on the Listing Agent's Good Side: Start negotiations from a strong position by being the kind of agent you'd want to work with. That's how the Golden Rule goes, right? You can benefit in all areas of your career if you're organized, professional, and pleasant to work with. Be prompt and polite in all your dealings with listing agents. They may be willing to clue you in on what's most important to the seller when it comes to contract terms. The listing agent should also tell you what the seller's ideal closing date is. You can also see if your buyer is willing to do things to sweeten the deal, such as agreeing to a shorter option period (that is, the amount of time they have to back out of the deal. More on that later). Respect Undisclosed Information: Even if you two are pals, the listing agent is not allowed to disclose details about the other offers in a multiple offer situation. That would give you an unfair advantage in determining your client's offer, therefore treating the other interested parties unfairly. It could also put an upper limit on how high your client would have to bid, which is not in the seller's best interest.
Quiz Level 7 a) A lead-based paint disclosure should accompany the sales contract. If a home is being sold that was built prior to 1978, a lead-based paint disclosure should accompany the contract.
Manderlay Mansion was built in 1975. It is being sold to Rebecca. What is TRUE? a) A lead-based paint disclosure should accompany the sales contract. b) Rebecca should ask for the property to be sold "as is." c) The mansion will not be subject to a due diligence period. d) The seller will be required to pay the earnest money.
Special Stipulations Clause
SPECIAL STIPULATIONS. The following special stipulations, if conflicting with any exhibit or preceding paragraph, shall control: Most sales contracts contain one or more special stipulations (also known as contract provisions). These are conditions that can be added to a contract to make sure the buyer and/or seller have certain needs met in the transaction. Specifically, special stipulations are additional items that: 1. Are not in the contract. 2. Amend or change any of the contract's language Get a Lawyer!: If you belong to a Realtor's association, they will often have preprinted special stipulations forms where you must simply fill in the details. However, if you don't belong to a Realtor's association, or if they don't have the relevant form, I recommend that you get your legal counsel to write the special stipulations, so that you avoid the unauthorized practice of law. If you aren't able to do that, consult with your broker. What's a worst-case scenario? Well, say you do decide to write in a special stipulation. Maybe you write, "This contract is contingent upon a satisfactory appraisal or satisfactory inspection." This changes the buyer's rights under the contract. And there it is - you've unwittingly practiced law. This is why I don't want you writing these things, Yoni. You could say something that changes a party's legal rights. Let's go through some common stipulations. Personal Property: The contract should be explicit about any personal property that is to be conveyed with the sale of the real property. For example, the buyer might negotiate for the seller to include a rug or microwave in the sale. When the real property transfers to the buyer at closing, that personal property transfers with it. There could also be a section in the sales contract that lists the standard items that are always included in the sale of real property unless otherwise stated (flooring, alarm system, stove, etc.). Excluded Property: The contract might also provide room to specify items that will NOT be conveyed in the transfer of real estate. These would be items that normally convey with real estate, but that the seller wants to keep. For example, a light fixture, an appliance, a tree, or other such items might be listed as excluded items in the sales contract. "Subject To": A sales contract might include a blank to fill in with the amount of funds being used that are subject to a seller's existing mortgage. What does this mean? A "subject to" provision refers to the purchase of a property that is subject to the existing mortgage. In such a sale, the title changes hands, so the buyer owns the house legally, but the seller's old mortgage stays in place. The buyer pays the seller, and the seller turns around and pays the lender, usually keeping a cut for themselves. So although the buyer owns the home, the seller's obligations under the existing mortgage remain unchanged. If the sale is subject to an existing mortgage, then the amount that the buyer is paying the seller will be entered in the contract. What Stipulations Look Like: Special stipulations should be very specific. BAD Stipulation: Seller to replace all carpet in home with new beige carpet similar to existing carpet. GOOD Stipulation: Seller agrees to replace, at Seller's full expense, all of the carpet and pad in the entire home with new carpet 5 days prior to the closing date set forth herein. The carpet make and model shall be Botero Signature Beige #5678, 12oz. weight, with a new 10 lb pad. Carpet shall be installed by Best Carpets, Inc. (999-999-999) out of Atlanta, GA or another licensed carpet installation professional approved by the Buyer in writing. If Seller fails to comply, $6,000 shall automatically be deducted from Seller's net proceeds at closing and held in escrow with closing attorney made payable to Best Carpets, Inc. Those funds shall be disbursed upon Buyer's written approval to attorney post closing. Remember, you aren't writing these (I hope!)... but it's helpful to see what a good stipulation looks like, right?
Multiple Offer Situations
That brings us to the other main topic of this chapter: multiple offers. When supply isn't keeping up with demand in a real estate market, competition for desirable and affordable properties can get fierce. A multiple offer situation occurs when more than one party submits an offer on a single property. There could be two people, or, in some hot markets, more than 10 people all trying to buy the same home. Not everyone can win the bidding war, and the sellers are not about to set up a timeshare. So, who gets the privilege of buying the place, and what goes into the selection process?
Title Clauses
Title Warranty: c. Warranty: Seller warrants that at the time of closing Seller will convey good and marketable title to said Property by limited warranty deed subject only to: i. Zoning; ii. general utility, sewer, and drainage easements of record as of the Binding Agreement Date and upon which the improvements do not encroach; iii. declarations of condominium and declarations of covenants, conditions and restrictions of record on the Binding Agreement Date; and iv. leases and other encumbrances specified in this Agreement. Buyer agrees to assume Seller's responsibilities in any leases specified in this Agreement. In this clause, the seller warrants (or promises) that at closing, they will convey the property's "good and marketable" title to the buyer via deed. You'll learn more about deed and title later, but for now, know that: . A deed is the official document that shows the owner has the legal title to the property. . A title is not something you can hold. It's an abstract concept that includes someone's ownership rights to a specific piece of real property. A "good and marketable" title is a title that is free from significant encumbrances or defects that might otherwise prevent a purchaser from enjoying or eventually selling the property. Back to the Clause: The warranty (or promise) is that the title is good and marketable EXCEPT FOR any of those listed issues (zoning, easements, condominium rules, leases, and other encumbrances specified in the contract). Title Examination: d. Examination: Buyer may examine title and obtain a survey of the Property and furnish Seller with a written statement of title objections at or prior to the closing. If Seller fails or is unable to satisfy valid title objections at prior to the closing or any unilateral extension thereof, which would prevent the Seller from conveying good and marketable title to the Property, then Buyer, among its other remedies, may terminate the Agreement without penalty upon written notice to Seller. Good and marketable title as used herein shall mean title which a title insurance company licensed to do business in State will insure at its regular rates, subject only to standard exceptions. This clause spells out the buyer's right to make sure the title is lookin' good. The buyer can examine the title evidence, get a survey of the property, and give the seller a list of title objections any time before closing. If the seller cannot address the buyer's title objections by closing (unless an extension has been granted), the buyer can terminate the contract without penalty through written notice. EXAMPLE The title company hired by the buyer runs a title search. The title search reveals unpaid taxes on the property. The seller is not able to pay the unpaid taxes by the closing date, so the buyer terminates the contract without penalty. Title Insurance: e. Title Insurance: Buyer hereby directs any mortgage lender involved in this transaction to quote the cost of title insurance based upon the presumption that Buyer will be obtaining an enhanced title insurance policy since such a policy affords Buyer greater coverage. You'll learn more about this later, but a title policy, also known as title insurance, protects lenders (and buyers, depending on the policy) from financial losses related to title issues. Unlike other types of insurance that protect against future events, a title policy insures against problems that occurred before the time of purchase but are discovered after closing. This clause is stating that the lender will calculate the title insurance coverage based on highest possible coverage.
Quiz Level 7 a) A counteroffer is considered a rejection of the original offer. It's true that a counteroffer is considered a rejection of the original offer.
Which of the following is TRUE? a) A counteroffer is considered a rejection of the original offer. b) A seller must make a counteroffer if the original offer is within 10% of the listing price. c) Counteroffers don't have to be made in writing as long as the original offer was in writing. d) An agent does not need their client's permission to submit a counteroffer.
Quiz Level 7 c) A listing agent and their seller can choose to tell none of the buyer's agents about the multiple offers. In this situation, a listing agent and their seller can choose to tell none of the buyer's agents about the multiple offers.
Charity is a listing agent in Georgia. She and her seller have received multiple offers on the seller's home. They decide to tell none of the buyer's agents that there are multiple offers. Evaluate this situation. a) A listing agent and their seller can either tell all of the buyer's agents or none of them about the multiple offers, but cannot tell a select few. b) A listing agent and their seller are mandated by law to tell all buyer's agents about all multiple offers. c) A listing agent and their seller can choose to tell none of the buyer's agents about the multiple offers. d) A listing agent and their seller are mandated by law to tell none of the buyer's agents about the multiple offers.
Agents, Contracts, and Law
Georgia license law specifically states that a license holder may complete a contract form that has been prepared by legal counsel by filling in the blank spaces provided. It's important to simply fill out contract forms. Don't try to strike out sections, change their meaning, or add unusual information that the form is not designed for. Encourage your client to consult an attorney if they have questions or concerns. Explain, Don't Advise: As the license holder, you are free to explain to the principals the meaning of the factual statements or business details contained in the contracts as long as you do not offer or give legal advice. It's one thing to simply read the form with the client to help them understand the meaning. That's your goal. It's another thing when the client does not understand or begins to ask the license holder what they should do. That's when the real problems can occur. Illegal or Unauthorized Practice of Law in Georgia 🍑: As a license holder, you cannot: . Close a transaction . Prepare legal documents . Charge a fee for your completion of real estate forms . Provide legal opinions
Net Cost Sheet to Buyer
Guess what? A net sheet for the buyer, exists, too. While the seller sees all their possible net profits, the buyer sees all their possible net costs. Many brokerages will have their own "net calculator" for agents to use with buyers and sellers. Refer to the sheet: Estimate of Net Cost to Buyer
Quiz Level 7 d) The buyer will automatically increase their offer price by a certain increment if the seller receives a better offer on the same property. If an offer includes an escalation clause, that means the buyer will automatically increase their offer price by a certain increment if the seller receives a better offer on the same property.
What does it mean if an offer includes an escalation clause? a) The buyer is stating that they are willing to pay the seller's closing costs up to a certain maximum amount to secure acceptance of the offer. b) They buyer will automatically lower their offer price by a certain increment if the seller doesn't accept the offer within a specified number of days. c) The buyer is stating that they have submitted their highest and best offer, and that any counteroffers are made by the seller will be rejected. d) The buyer will automatically increase their offer price by a certain increment if the seller receives a better offer on the same property.
Quiz Level 7 c) The contract will have a time and date at which the offer expires. If the seller does not accept the offer before that, the contract is null and void. The contract will have a time and date at which the offer expires. If the seller does not accept the offer before that time, then the contract is null and void and a new one will have to be created.
What is the time limit of an offer? a) If notice has not been properly given, then this provision of a contract goes into effect. b) It is the period of time between the signing of the contract and closing. c) The contract will have a time and date at which the offer expires. If the seller does not accept the offer before that, the contract is null and void. d) This refers to the option period.
Notices Clause
12. Notices. a. Generally: All notices given hereunder shall be in writing, legible and signed by the party giving the notice. In the event of a dispute regarding notice, the burden shall be on the party giving notice to prove delivery. The requirements of this notice paragraph shall apply even prior to this Agreement becoming binding. Notices shall only be delivered. i. in person; ii. by courier, overnight delivery service or by certified or registered U.S. mail (hereinafter collectively "Delivery Service"); or iii. by e-mail or facsimile. The person delivering or sending the written notice signed by a party may be someone other than that party. You've seen the phrase "send notice" and "give notice" throughout the contract so far. Here, finally, the contract deigns to explain exactly what that means. Notices need to be: . In writing . Legible . Signed by the party giving the notice If there is a dispute over the delivery of a notice, they who gave notice must prove they delivered it. They're in charge of gathering receipts and whatnot. Notice delivery requirements apply even BEFORE the contract is signed. Methods of Delivery: Notices can be delivered: . In person . By courier, overnight delivery service, or certified or registered U.S. mail . By email . By fax Note that the person delivering or sending the written notice can be someone other than the notice-giver. Delivery counts, even if it wasn't one of the signing parties who dropped it off! Delivery must be to the address specified on the signature page of the contract, unless subsequently provided according to all notice requirements. Agent Pro Tip: These days, email has become the most common way to deliver notices. Delivery of Notice: b. Delivery of Notice: A notice to a party shall be deemed to have been delivered and received upon the earliest of the following to occur. i. the actual receipt of the written notice by a party; ii. in the case of delivery by a Delivery Service, when the written notice is delivered to an address of a party set fourth herein (or subsequently provided by the party following the notice provisions herein), provided that a record of the delivery is created; iii. in the case of delivery electronically, on the date and time the written notice is electronically sent to an e-mail address or facsimile number of a party herein (or subsequently provided by the party following the notice provisions herein). Notice to a party shall not be effective unless the written notice is sent to an address, facsimile number or e-mail address of the party set fourth herein (or subsequently provided by the party following the notice provisions herein. So, when is a notice officially " delivered and received"? Of the below, it's whatever happens first: . The party actually receives the notice (for example, if an agent hand-delivers a notice to the accepting party). . The delivery service drops the notice off at the party's address (for example, if a courier leaves the notice at the accepting party's home). . The notice has been sent via email or fax, per the transmission's accompanying time stamp.
Default Clause
13. Default. a. Rights of Buyer or Seller: A party defaulting under this Agreement shall be liable for the default. The non-defaulting party may pursue any lawful remedy against the defaulting party. If someone defaults, there's gotta be recourse. This part of the contract spells out exactly what will happen. Whoever defaults is, well, at fault. They'll be liable. Whoever did NOT default can go after the defaulter via legal action. Rights of Broker: b. Rights of Broker: In the event a party defaults under this Agreement, the defaulting party shall pay as liquidated damages to every broker involved in this transaction with whom the defaulting party does not have a brokerage engagement agreement an amount equal to the share of the commission the broker would have received had the transaction closed. For purposes of determining the amount of liquidated damages to be paid by the defaulting party, the written offer(s) of compensation to such broker and/or other written agreements establishing such broker's commission are incorporated herein by reference. The liquidated damages referenced above are a reasonable pre-estimate of the Broker(s) actual actual damages and are not a penalty. In the event a Broker referenced herein either has a brokerage engagement agreement or other written agreement for the payment of a real estate commission with a defaulting party, the Broker shall only have such remedies against the defaulting party as are provided for in such agreement. There are a couple scenarios here: . Defaulting party not represented by a broker: Here, the defaulting party must pay liquidated damages equal to the amount any involved broker(s) would have received had the transaction closed. . Defaulting party represented by a broker: Broker has no remedies beyond their written agreement about commission. Attorney's Fees: c. Attorney's Fees: In any litigation or arbitration arising out of this Agreement, including but not limited to breach of contract claims between Buyer and Seller and commission claims brought by a broker, the non-prevailing party shall be liable to the prevailing party for its reasonable attorney's fees and expenses. In any litigation or arbitration, including about commission claims, the loser has to pay reasonable attorney fees for the winner.
Risks of Damage to Property Clause
14. Risk of damage to Property. Seller warrants that at the time of closing the Property and all items remaining with the Property, if any, will be in substantially the same condition (including conditions disclosed in the Seller's Property Disclosure Statement) as on the Binding Agreement Date, except for changes made to the condition of Property pursuant to the written agreement of Buyer and Seller. Seller shall deliver Property clean and free of trash and debris at time of possession. Notwithstanding the above, if the Property is destroyed or substantially damaged prior to closing, Seller shall promptly give notice to Buyer of the same and provide Buyer with whatever information Seller has regarding the availability of insurance and the disposition of any insurance claim. Buyer or Seller may terminate this Agreement without penalty not later than fourteen (14) days from receipt of the above notice. If Buyer or Seller do not terminate this Agreement, Seller shall cause Property to be restored to substantially the same condition as on the Binding Agreement Date. The date of closing shall be extended until the earlier of one year from the original date of closing, or seven (7) days from the date that Property has been restored to substantially the same condition as on the Binding Agreement Date and a new certificate of occupancy (if required) is issued. What if the pristine, lovely property that the buyer has been promised isn't delivered to them in that condition? A good contract anticipates all possible outcomes, so the above clause addresses what happens in this scenario. The seller is promising that at closing, the property (and any items remaining with the property) will be clean, free of trash, and in the same condition as when the agreement was signed. The exception is those changes outlined in the contract. For example, if the contract stipulates that the kitchen is going to be painted a different color by move-in, it's fine if, when the buyer moves in, the kitchen is now that color. What about situations of tornadoes/wild parties/name your worst disaster? If the property is substantially damaged or destroyed before closing, the seller needs to tell the buyer and provide insurance information and results of any claim. The buyer can decide to terminate or not.
Governing Law and Interpretation Clause
17. Governing Law and Interpretation: This Agreement may be signed in multiple counterparts, each of which shall be deemed to be an original and shall be interpreted in accordance with the laws of Sate. No provision herein, by virtue of the party who drafted it, shall be interpreted less favorably against one party than another. All references to time shall mean the time in State. If any provision herein is to be unenforceable, it shall be severed from this Agreement while the remainder of the Agreement shall, to the fullest extent permitted by law, continue to have full force and effect as a binding contract. Multiple Counterparts: This just means that there does not have to be one contract with everyone's signatures. Maybe the buyer and seller, for whatever reason, can't be in the same place at the same time for signing. The buyer and their agent can sign one copy of the contract. The seller and their agent can sign another. These different "counterparts" still equal one contract. No Special Treatment for the Writer: It doesn't matter who drafted what stipulation or provision or anything like that. The provision gets interpreted the same for all parties. State Your Case: The rules of the state will apply to the contract. Time: All references to time mean the time in your state. Personally, I'm always getting time zones confused (Central? Eastern? Southwest Diagonal Parisian Equator Zone? Heavens, I don't know.) So as long as you know what time it is in your state (not too hard, I hope), you're good. Severus Snape: If any part of the contract is unenforceable, it will be severed (not dumbledored) from the contract, and the rest of the contract will be binding. It can... potter along. ♂️
Closing Attorney Clause
6. Closing Attorney: __________________. Buyer shall have the right to select the closing attorney to close this transaction, and hereby selects the closing attorney referenced herein. If Buyer's mortgage lender refuses to allow that closing attorney to close this transaction, Buyer shall select a different closing attorney acceptable to the mortgage lender. The closing attorney shall represent the mortgage lender in any transaction in which the Buyer obtains mortgage financing (including transactions where the method of payment referenced herein is "all cash"). In transactions where the Buyer does not obtain mortgage financing, the closing attorney shall represent the Buyer. This clause is all about the closing attorney. Specifically, this clause: . Gives the name of the closing attorney . Makes it clear that the closing attorney represents the mortgage lender . States that: . The buyer can choose their closing attorney, but if the lender rejects that choice, the buyer must pick another closing attorney whom the lender does find acceptable. . The closing attorney will represent the lender in any transaction where the buyer is getting financing. . If the buyer does not get a loan, the closing attorney represents the buyer.
Extension of Deadline, No Authority to Bind, and Condemnation Clauses
22. Extension of Deadlines: No time deadline under this Agreement shall be extended by virtue of it falling on a Saturday, Sunday or federal holiday except for the date of closing. If a deadline lands on a Saturday, Sunday, or federal holiday, it still must be met. No extensions. The only exception is the closing date. No Authority to Bind: 23. No Authority to Bind: No Broker or affiliated licensee of Broker, by virtue of this status, shall have any authority to bind any party hereto to any contract, provisions herein, amendments hereto, or termination hereof. However, if authorized in this Agreement, Broker shall have the right to accept notice on behalf of a party. This clause states that a broker or affiliated license holder cannot bind any party to the contract or any of its parts. This basically means that only the parties can enter into the binding contract (or its parts). The broker doesn't have that power. As we have said many times in this course, while an agent represents their client, the client is always the one who ultimately makes the decisions. If the contract authorizes it, the broker can, however, accept notices on their client's behalf. Condemnation: 24. Condemnation: Seller shall: a. immediately notify Buyer if the Property becomes subject to a condemnation proceeding; and b. provide Buyer with the details of the same. Upon receipt of such notice, Buyer shall have the right, but not the obligation for 7 days thereafter, to terminate this Agreement upon notice to Seller in which event Buyer shall be entitled to a refund of all earnest money and other monies paid by Buyer toward the Property without deduction or penalty. If Buyer does not terminate the Agreement within this time frame, Buyer agrees to accept the Property less any portion taken by the condemnation and if Buyer closes, Buyer shall be entitled to receive any condemnation award or negotiated payment for all or a portion of the Property transferred or conveyed in lieu of condemnation. You may remember that governmental agencies or related agencies such as railroads or utilities can take the title to real property without the owner's consent through eminent domain. This process is called condemnation. It requires that the taking be for a public purpose and that the owner is justly compensated. Yikes! What if this happens during the sale of property? Well, the seller needs to immediately notify the buyer if the property has become subject to a condemnation proceeding, and give all the details. The buyer has a right for a specified period of time to terminate with proper communication of notice to the seller. If that happens, the buyer gets a refund of earnest money and any other money they've paid toward the property. If the buyer decides to go forward with the agreement, the buyer agrees to accept the property minus whatever part is condemned. Upon closing, the buyer would get any condemnation award.
Closing Costs Clause
3. Closing Costs; Seller's Contribution at Closing: $________. If the seller is contributing anything towards closing costs, that amount goes here. Seller's Closing Costs: a. At closing, Seller shall make the referenced Seller's Monetary Contribution which Buyer may use to pay any cost or expense of Buyer related to this transaction. Buyer acknowledges that Buyer's mortgage lender(s) may not allow the Seller's Monetary Contribution, or the full amount thereof, to be used for some costs or expenses. In such event, any unused portion of the seller's Monetary Contribution shall remain the property of the Seller. The Seller shall pay the fees and costs of the closing attorney: i. to prepare and record title curative documents and ii. for Seller not attending the closing in person. The buyer can use the seller's closing costs for any transaction costs or expenses, unless the buyer's mortgage lender prohibits it. If that happens, the seller gets the unused amount back. Also, the seller pays the closing attorney for preparing documents that "cure" the title of any defects (more on that later in the course), and for any costs that result from the seller not attending the closing in person. Buyer's Closing Costs: b. At closing, Buyer shall pay: i. State property transfer tax; ii. the cost to search title and tax records and prepare the limited warranty deed; and iii. all other costs, fees and charges to close this transaction, except as otherwise provided herein. Now we move on to the buyer's closing costs: the state property transfer tax, the cost to search title and tax records and prepare the deed; and all other closing costs, except as provided in the contract. Proration: c. Ad valorem property taxes, community association fees, solid waste and governmental fees and utility bills for which service cannot be terminated as of the date of closing shall be prorated as of the date of closing. In the event ad valorem property taxes are based upon an estimated tax bill or tax bill under appeal, Buyer and Seller shall, upon the issuance of the actual tax bill or the appeal being resolved, promptly make such financial adjustments between themselves as are necessary to correctly prorate the tax bill . In the event there are tax savings resulting from a tax appeal, third party professional costs to handle the appeal may be deducted from the savings for that tax year before re-prorating. Any pending tax appeal for the year in which the Property is sold shall be deemed assigned to Buyer at closing. Anything that can't be terminated by the date of closing, like solid waste fees or utility bills, will be prorated as of the date of closing. This clause also spells out various responses in case appeals over tax bills affect proration.
Closing and Possession Clause The Closing Date is November 28, 2018. You should have marked the box for possession of the property transferring to the buyer after closing. When after closing? You should have filled in 3 days after closing at 5 o'clock, and then marked the box for PM. Did you use digits instead of spelling the numbers out? Good!
4. Closing and Possession. a. Closing Date shall be _November 28, 2018_ with possession of the Property transferred to Buyer at: ( ) Closing or (X) _3_ days after Closing at _5_ o'clock ( ) AM (X) PM.
Closing and Possession Clause
4. Closing and Possession. a. Closing Date shall be ___________ with possession of the Property transferred to Buyer at: Closing or ___ days after Closing at ___ o'clock AM PM. This clause specifies the closing date and when possession of the property transfers to the buyer. Notice that the closing date and transfer of possession can be the same date, but they don't have to. For instance, this clause could put the closing date at May 3rd and the transfer of possession at May 6th. Attorneys Conduct Closings in Georgia 🍑: As of 2005, only attorneys can conduct closing in Georgia. However, brokers must make sure that all parties get a copy of the closing statement (even though the attorney conducts the closing). Agent Pro Tip: When choosing a closing date, it is important to make sure there is a proper amount of time allowed for performance (the fulfillment of contractual obligations). If there isn't a reasonable or adequate amount of time to do due diligence, the existing contract could very well end up terminated, with both parties having to decide to start over from scratch or go their separate ways.
Holder of Earnest Money Clause The story tells us that the holder of the earnest money in this case is the escrow agent, which is Carla Bowles.
5. Holder of Earnest Money ("Holder"): Carla Bowles.
Holder of Earnest Money Clause
5. Holder of Earnest Money ("Holder"): _____. This space is for the name of the person who holds the earnest money! But...what is earnest money? Earnest Money: Funds paid to confirm or commit to a contract are considered earnest money. They let the seller know that the buyer is serious about entering into a contract to buy the property being offered. When the contract is executed, the earnest money will often be applied toward the closing costs. The license holder needs to take care not to deliver the earnest money before the offer has been officially accepted. Earnest money can be deposited only once the offer has been accepted and notification has been given. Earnest money shows that the buyer is highly interested in the property and is willing to close the sale. It is essentially a deposit that a buyer makes to show that they are making the offer in good faith and are serious about their offer. Earnest money can be held by a number of different parties: attorneys, brokers, or anyone with trust powers. Sometimes earnest money is called EMD (that is, an earnest money deposit). Trust or Escrow Account: The money should always be held in a special trust or escrow account. Often, the holder of the earnest money will have one account where all the earnest money they are holding is stored. By keeping accurate records, they can disburse the proper amount of earnest money from that account. If a transaction falls through, the holder of earnest money does not automatically reimburse the earnest money unless they are given written authority by both of the parties. Earnest Money Amounts: The standard earnest money amount is about 1% of the purchase price, or a few thousand dollars. However, it can be as much or as little as the buyer wants. An offer with more earnest money will generally be more attractive to a seller. A buyer is not required to include earnest money with their offer at all. But the inclusion of earnest money is common enough to be expected and can help an offer's chance of acceptance. Timeline of Earnest Money Deposit: a. The earnest money shall be deposited into Holder's escrow/trust account (with Holder being permitted to retain the interest if the account is interest bearing) not later than: i. five (5) banking days after the Binding Agreement Date hereunder or ii. five (5) banking days after the date it is actually received if it is received after the Binding Agreement Date. This section gives a timeline. It varies from contract to contract, but generally the deposit of earnest money happens within five days of the Binding Agreement Date (that is, when the contract is signed). If Problems Arise: b. If Buyer writes a check for earnest money and the same is deposited into Holder's escrow/trust account, Holder shall not return the earnest money until the check has cleared the account on which the check was written. In the event any earnest money check is dishonored by the bank upon which it is drawn, or earnest money is not timely paid, Holder shall promptly give notice of the same to Buyer and Seller. Buyer shall have three (3) banking days from the date of receiving the notice to cure the default and if Buyer does not do so, Seller may within seven (7) days thereafter terminate this Agreement upon notice of Buyer. If Seller fails to terminate the Agreement timely, Seller's right to terminate based on the default shall be waived. Say an attorney is the holder of earnest money. They must wait until the check clears the buyer's bank before any return of the money to the buyer. If the check doesn't go through, or if the money is not paid according to the specified deadline, the holder must give notice to the buyer and seller. The buyer then will have a few days (it varies from contract to contract) to fix the problem and pay the earnest money. If the buyer fails to pay the earnest money, the seller can, after the time specified in the contract, terminate the contract. If they don't terminate in a timely fashion, they lose the right to do so.
Closing Attorney Clause Neither party in the story has an attorney, so you should have put N/A in this blank.
6. Closing Attorney: _N/A_. Buyer shall have the right to select the closing attorney to close this transaction, and hereby selects the closing attorney referenced herein. If Buyer's mortgage lender refuses to allow that closing attorney to close this transaction, Buyer shall select a different closing attorney acceptable to the mortgage lender. The closing attorney shall represent the mortgage lender in any transaction in which the Buyer obtains mortgage financing (including transactions where the method of payment referenced herein is "all cash"). In transactions where the Buyer does not obtain mortgage financing, the closing attorney shall represent the Buyer.
Earnest Money Clause
7. Earnest Money. a. Earnest Money shall be paid by ( ) check ( ) or ( ) wire transfer. ( ) $________ as of the Offer Date. ( ) $________ within ____ days from the Binding Agreement Date. ( ) $ _________ Here the contract gets into details about the earnest money. How will it be paid? When? Application of Earnest Money: b. Earnest money paid under this section ( ) shall ( ) shall not be applied towards funds due from Buyer at closing. Often, earnest money gets applied towards the expenses that the buyer pays at closing. Buyer's Entitlement to Earnest Money: c. Subject to the paragraph below, Buyer shall be entitled to the earnest money upon the: i. failure of the parties to enter into a binding agreement; ii. failure of any unexpired contingency or condition to which this Agreement is subject; iii. termination of this Agreement due to the default of Seller; or iv. termination of this Agreement in accordance with a specific right to terminate set forth in the Agreement. Otherwise, the earnest money shall be applied towards the purchase price of the Property at closing of if other funds are used to pay the purchase price then the earnest money shall be returned to Buyer. This sections spells out the scenarios in which the buyer gets their earnest money back. Keep in mind that these scenarios will vary contract by contract. Here, the buyer gets the earnest money back under any of these conditions: . The parties don't enter into a binding agreement. . The contract does not satisfy a contingency. . The contract terminates because the seller defaulted. . The contract terminates because of some other right to terminate that a party uses. If all rolls along smoothly, though, the earnest money will get applied to the purchase price at closing. However, if other funds are used to pay the purchase price, the buyer gets the earnest money back.
Answer: The due diligence period, or option period, is 7 days. The buyers were willing to pay $275.00 in additional option money. You should have marked the check box for the method of payment. You also should have written in that they would pay the earnest money within 3 days of the Binding Agreement Date and checked that box. They wanted the money to be applied towards the purchase price at closing, so you should have marked the first box.
8. Inspection and Due Diligence. a. Due Diligence Period: Property is being sold subject to a Due Diligence Period of _7_ days from the Binding Agreement Date. b. Option Payment for Due Diligence Period: In consideration of Seller granting Buyer the option to terminate this Agreement, Buyer: i. has paid Seller $10.00 in nonrefundable option money, the receipt and sufficiency of which is hereby acknowledged; plus ii. shall pay Seller additional option money of $ _275.00_ by (X) check or ( ) wire transfer of immediately available funds either 1. ( ) as of the offer Date; or 2. (X) within _3_ days from the Binding Agreement Date. c. Option Money at Closing: Any option money paid by Buyer to Seller 1. (X) shall (subject to lender approval) or 2. ( ) shall not be applied toward the purchase price at closing and shall not be refundable to Buyer unless the closing fails to occur due to the default of the Seller. Based on the information from the story, how should you fill out the blanks in the Inspection and Due Diligence clause?
Inspection and Due Diligence Clauses
8. Inspection and Due Diligence. a. Due Diligence Period: Property is being sold subject to a Due Diligence Period of ____ days from the Binding Agreement Date. The point of the due diligence period is for the buyer to be 100% sure they want to go through with the purchase. During this time period (which is also known as the option period), the buyer can get inspections and environmental reports, check the zoning of the property, and verify deed restrictions. Or they can just sit around and think about whether or not they want the property. The buyer can choose to terminate the contract without consequences during the time period the parties have agreed to. Option, Defined: An option gives one party the right to perform a non-obligatory action within a time period (e.g,. terminating a contract or the right of first refusal). Here, it refers to how the buyer has the option to terminate during this period, but isn't obligated to do so. Option Payment: b. Option Payment for Due Diligence Period: In consideration of Seller granting Buyer the option to terminate this Agreement, Buyer: i. has paid Seller $10.00 in nonrefundable option money, the receipt and sufficiency of which is hereby acknowledged; plus ii. shall pay Seller additional option money of $_________ by ( ) check or ( ) wire transfer of immediately available funds either 1. ( ) as of the Offer Date; or 2. ( ) within ______ days from the Binding Agreement Date. The buyer gives the seller a whopping $10 (or some other specified, basically symbolic amount) for giving them the option to terminate the agreement during the due diligence period. This money is nonrefundable. A contract may also specify that the buyer will give the seller more offer money upon the offer date or within a certain amount of days from the Binding Agreement Date. Option Money and Purchase Price: c. Option Money at Closing: Any option money paid by Buyer to Seller 1. ( ) shall (subject to lender approval) or 2. ( ) shall not be applied toward the purchase price at closing and shall not be This part of the contract specifies whether or not the option money is applied toward the purchase price at closing. Agent Pro Tip: Modifications by way of amendment to a contract can occur at any time between contract date and closing. However, most amendments will occur during the option period — a time during which buyers have the most leverage to make the contract "right." Neither party is required to agree to an amendment to the original contract, but failure to do so may cause the contract to terminate. Additionally, there is no limit as to the number of amendments a contract can have. One or two is typical, but there is no hard and fast rule about this as long as all parties agree to the changes. Common amendments: . Change the price, down payment, or loan amount . Request that the seller perform repairs and/or treatments listed in an addendum . Change the closing date . List an amount of money seller will pay of buyer's closing costs . Extend the option period through an additional payment of option money . Terminate the option period . Extend the period of time the buyer has to terminate the contract
Lead-Based Paint Clause
9. Lead-Based Paint. To the best of Seller's knowledge, the residential dwelling(s) on the Property (including any portion thereof or painted fixture therein) ( ) was built prior to 1978, or ( ) was not built prior to 1978. If any portion of a residential dwelling on the Property was built prior to 1978, the Lead-Based Paint Exhibit is hereby attached as an exhibit to this Agreement. The term "residential dwelling" includes any painted fixture or material used therein that was built or manufactured prior to 1978. It's common to see a lead-based paint disclosure included in sales contracts. Lead-based paints were used in the U.S. until 1978, when it was discovered that lead poisoning posed a serious health risk. So, if a home is being sold that was built prior to 1978, a lead-based paint disclosure (the "exhibit" in this clause) should accompany the contract.
Answer: The seller originally purchased the home new in 1984. That means the house was built in 1984. That is after 1978, so you should have marked the was not built prior to 1978 box.
9. Lead-Based Paint. To the best of Seller's knowledge, the residential dwelling(s) on the Property (including any portion thereof or painted fixture therein) ( ) was built prior to 1978, or (X) was not built prior to 1978. If any portion of a residential dwelling on the Property was built prior to 1978, the Lead-Based Paint Exhibit is hereby attached as an exhibit to this Agreement. The term "residential dwelling" includes any painted fixture or material used therein that was built or manufactured prior to 1978. Based on the information from the story, which box should you check?
Georgia Offer Requirements 🍑
Before we end this chapter, let's take a look at Georgia's laws. Georgia license law has some specific requirements regarding offers: . Present offers promptly. . Present all offers until the transaction is closed - including verbal offers! . If the offeror is not your client or customer, you must give a copy of the offer to the license holder working with or representing the offeree. . For every offer, include the GREC-issued license number of each firm and each license holder participating in the transaction (remember, GREC is the Georgia Real Estate Commission). . Provide a copy of any document used in the transaction to anyone signing the document. . If the offer is accepted and signed by all parties, copies of the document must be distributed to everyone who signed and to all involved brokerage firms. . Transaction documents need to be maintained for three years, and made available to GREC upon request. . Records can be stored in a system that uses paper, film, electronics, or other media, as long as you can provide true copies, and copies can be made available to GREC. Present All Material Facts: The Brokerage Relationships in Real Estate Transactions Act (BRETTA), which is a Georgia law, defines material facts as "those facts that a party does not know, could not reasonably discover, and would reasonably want to know." BRETTA requires that a license holder disclose all material facts to a client. Err on the side of disclosing too much, not too little. This is how the "present all offers, including verbal offers" rule emerged. After all, a verbal offer meets all three requirements: the seller-client would not know about the offer, couldn't discover its existence on their own, and definitely would want to know about it. Therefore, a verbal offer is a material fact.
Blank Purchase Agreement
Behold, the blank Purchase Agreement! Click the image to open it up in all its glory. PURCHASE AND SALE AGREEMENT (12 SHEETS) The first thing you'll fill out is the Property Identification.
Binding Agreement Date and Duty to Cooperate Clauses
Binding Agreement Date: 19. Binding Agreement Date: The Binding Agreement Date shall be the date when a party to this transaction who has accepted an offer or counteroffer to buy or sell real property delivers notice of that acceptance to the party who made the offer or counteroffer in accordance with the Notices section of the Agreement. Notice of the Binding Agreement Date may be delivered by either party (or the Broker working with or representing such party) to the other party. If notice of accurate Binding Agreement Date is delivered, the party receiving notice shall sign the same and immediately return it to the other party. The Binding Agreement Date is when the party who has accepted an offer or counteroffer to buy or sell has communicated acceptance of that offer to the party who made it AND has delivered it properly according to the Notices section. Essentially, the Binding Agreement Date is when the final offer has been accepted, and acceptance has been properly communicated to the other party. Once the Binding Agreement Date is decided, the clock starts on obligations for parties to perform at closing. Until the delivery of the notice of acceptance, the buyer has the right to rescind their offer. Delivery of Notice of Binding Agreement Date: A notice will need to be delivered that spells out this date. Either party or their broker can deliver it to the other party. Once this notice is delivered, the party receiving the notice needs to sign and return it to the other party. Everyone should be notified by this point about when the Binding Agreement Date is. Duty to Cooperate: 20. Duty to Cooperate: All parties agree to do all things reasonably necessary to timely and in good faith fulfill the terms of this Agreement. Buyer and Seller shall execute and deliver such certifications, affidavits, and statements required by law or reasonably requested by the closing attorney, mortgage lender and/or the title insurance company to meet their respective requirements. This clause mandates that both parties act in a cooperative and timely fashion.
Contract Contents
But what's actually in that contract? Even if you aren't writing it (you aren't, remember?) you should still understand the kind of language that commonly appears in a contract for sale. An agent will be responsible for helping their clients hit the deadlines and fulfill the obligations outlined in the contract. . For buyer clients, that might mean ensuring they obtain insurance and get funding in place to close on time. . For seller clients, that might mean reminding the seller of their obligations to do the repairs listed in the contract before closing. Sales Contract Requirements: A sales contract must: . Include the names of the parties involved. . Identify the subject property. . Be signed by the parties bound by the contract. . Contain evidence of intent to convey ownership interest. . Contain the terms of the sale. . State the purchase price. Typically, sales contracts will also include: . Mortgage details. . The deposit amount. . When and where the closing of the transaction will take place. . Inclusions and exclusions (what is included in the sale of the property). . A section regarding inspection. . Acceptance procedures and deadlines. . Property disclosures.
Brokerage Information: Dual and Designated Agency
Consent to Dual Agency: e. Consent to Dual Agency: If Broker is acting as dual agent in this transaction, Buyer and Seller consent to the same and acknowledge having been advised of the following: It's important for the seller to be aware about dual agency. If a brokerage represents buyers, it is possible that the listing broker may represent a potential buyer who shows interest in the property. And in that case, the listing broker will owe both fiduciary duties to the prospective buyer and the seller. Let's break down what that means through the remaining dual agency clauses. Different Interests: i. Dual Agency Disclosure (if applicable): 1. As a dual agent, Broker is representing two clients whose interests are or at times could be different or even adverse. A seller and a prospective buyer may have different interests. For example, a seller most likely wants to sell their property for the maximum profit while a buyer most likely wants to buy it for the least amount of money. Disclosure Rules: 2. Broker will disclose all adverse material facts relevant to the transaction and actually known to the dual agent to all parties in the transaction except for information made confidential by request or instructions from each client which is not otherwise required to be disclosed by law. Just like for all other real estate transactions, a listing broker acting in dual agency will need to comply with dual disclosure rules. Dual Agency Consent: 3. Buyer and Seller do not have to consent to dual agency and the consent of Buyer and Seller to dual agency has been given voluntarily and the parties have read and understand their brokerage engagement agreements. The seller has the option to not consent to dual agency. If an agency situation changes to dual agency, the listing agent would be wise to get written confirmation from the seller that they understand how the agency relationship is changing. Confidentiality in Dual Agency: 4. Notwithstanding any provision to the contrary contained herein Buyer and Seller each hereby direct Broker while acting as dual agent to keep confidential and not reveal to the other party any information which could materially and adversely affect their negotiating position. A seller can still expect their listing agent to comply with the fiduciary duty of confidentiality in a listing agency relationship. As long as the information is not a material fact to the buyer, the listing agent should not disclose any information to the buyer that may harm the seller's ability to negotiate. Designated Agency: ii. Designated Agency Disclosure: If Broker in this transaction is acting as a designated agent, Buyer and Seller consent to the same and acknowledge that each designated agent shall exclusively represent the party to whom each has been assigned as a client and shall not represent in this transaction the client assigned to the other designated agent. This clause makes sure that everyone knows and consents to the fact that a designated agent will only represent their assigned party.
When You're the Listing Agent
Let's now look at multiple offers from the listing agent's point of view. The great news is that multiple offers are obviously to the seller's advantage. Offers pile up when you're in a seller's market, meaning there are more buyers than there are available properties. There are some important things to keep in mind... Have a Plan: If you're the agent listing a property that you think will attract multiple offers, discuss a plan with your seller before you even post the listing. You and the seller can decide to treat multiple offers in one of the following ways: . Tell none of the buyer's agents that there are multiple offers 🙊 . Tell all the agents that there are multiple offers to encourage them to submit their highest and best offers 🗣 . Tell a select buyer or buyers (but not all of them) about the multiple offers Disclosing Multiple Offers: You and your client can determine if and how you will disclose multiple offer situations to your potential buyers. Disclosure to buyers should be fairly limited on this subject. Don't disclose the terms and conditions of other offers to any of the agents. This would give the clued-in agent and their client an unfair advantage when it comes to negotiating. You want to treat the buyer agents fairly, but your client's interests are still your biggest priority. Follow the Seller's Directions: In Georgia, agents are NOT required to make buyers aware that multiple offers have been made. They can give information to one buyer but not the other(s). At the direction of the seller, agents are free to share as much or as little as they want with buyers about the other offers on the table. It just depends on the negotiation strategy. Purchase offers are normally not confidential documents. If it's important to a buyer to keep their offer confidential, a buyer's agent can establish a formal confidentiality agreement between the parties prior to submitting the offer. Don't Lie!: While the agent is not required to go out and tell the other buyers about others, neither are they allowed to lie. If a buyer asks an agent if there is another offer, and there is, the agent must say yes. However, as described above, the agent and seller get to decide how much detail to give. Avoid Multiple Counteroffers: Some sellers and their agents propose counteroffers (in writing, with initials and signatures) to more than one buyer. This is not a good practice. Remember, a counteroffer to a buyer remains open until the buyer rejects it (in writing) or it is withdrawn (in writing) by the person who made it. Encourage Patience: Your client may be tempted to accept a great offer that comes in on the very first day that the house spends on the market. Try to pump the brakes. By suggesting that the house be left on the market for at least a week, you can allow full market exposure to work its magic. This patience could net your seller several excellent offers to choose from.
Quiz Level 7 d) remind the listing agent that legal action can be taken if they don't disclose every detail of the multiple offers. The buyer's agent needs to respect what the listing agent can't disclose. Lisa should do everything else in the answer choices.
Lisa is a buyer's agent. She and her buyer are in a multiple offer situation. She wants to help her buyer navigate this stressful time. She should do all of the below EXCEPT: a) help the buyer pick a good lender and try to limit financial contingencies. b) use escalation clauses wisely. c) get on the listing agent's good side and take advantage of open houses. d) remind the listing agent that legal action can be taken if they don't disclose every detail of the multiple offers.
Modification, Assignment, and Survival of Agreement Clauses
Modification and Assignment: 15. Entire Agreement, Modification and Assignment: This Agreement constitutes the sole and entire agreement between all of the parties, supersedes all of their prior written and verbal agreements and shall be binding upon the parties and their successors, heirs and permitted assigns. No representation, promise or inducement not included in this Agreement shall be binding upon any party hereto. This Agreement may not be amended or waived except upon the written agreement of Buyer and Seller. This Agreement may not be assigned by Buyer except with the written approval of Seller which may be withheld for any reason or no reason. Any assignee shall fulfill all the terms and conditions of this Agreement. This clause gives authority to this contract, only this contract, and only what is written within this contract. So, prior written and verbal agreements? Who cares, this contract is all that matters now. Is something not in the contract? Who cares, if it's not in this contract, it's not binding. In fact, this contract is such a boss that if the current parties die, the contract is binding on their heirs or successors. It's also binding on any assignee's to the contract. The buyer can't assign their interest, though, unless the seller agrees. The agreement can be amended, but only by written agreement of both parties. Scenario: Ron Swanson In Ron Swanson's will, he says that his stash of gold and his house will go to the man or beast who kills him. Written into the sales contract of Ron's house is the stipulation that no woman by the name of Tammy may ever cross its threshold. Therefore, the man or beast that ultimately inherits Ron's house must abide by the no Tammy rule. Survival: 16. Survival of Agreement: The following shall survive the closing of this Agreement: a. (1) the obligation of a party to pay a real estate commission; b. (2) any warranty of title; c. (3) all representations of Seller regarding the Property; d. (4) the section on condemnation; and e. (5) any obligations which the parties herein agree shall survive the closing or may be performed or fulfilled after the closing. A survival clause states that even after closing, certain things will still be required or remain true. Why does this matter? Well, say that the buyer, a year after closing, discovered that there was lead in the paint, even though the seller disclosed no such thing. The buyer can still go after the seller for misrepresentation, even though closing has happened, the buyer has moved in, and there has been nary a peep from the buyer until now to express dissatisfaction. Some contracts will specify a certain amount of time for survival (for example, two years after closing).
Quiz Level 7 d) at any time between contract date and closing. Modifications to a contract can occur at any time between contract date and closing.
Modifications to a contract can occur: a) after the first showing but before financing is approved. b) after the home inspection but before closing. c) at any time between contract date and the time financing is approved. d) at any time between contract date and closing.
Counteroffer Example
On Feb 10, Agent Mary shows a property to a buyer client. The property is listed for $225,000. Mary's client decides to offer the seller $205,000. The buyer plans to put 20% down and take out a conventional loan for the rest. The buyer can pay their own closing costs and wants the seller to furnish the title policy and the survey. They want to close by March 30. On Feb 11, Dan, the listing agent, presents the offer to the seller. The seller counters the offer with the full price of $225,000 and counters the closing date with April 15th. Mary presents the counteroffer to the buyer. The buyer agrees to the new closing date but does not agree to the price. The buyer counters again with a sales price of $215,000. Dan presents the counteroffer to the seller who agrees to the $215,000 sales price but says, at that price, he wants the buyer to pay for the survey. The plot thickens! Mary presents the counteroffer to the buyer, who agrees to pay for the survey in addition to the $215,000 price. Everything has now been agreed upon and all the changes are initialed by both parties. (Yay!) The contract has been signed by all of the parties. Mary will: (1) Complete the effective date. (2) Notify Dan that the contract has been accepted and make sure that all the parties and agents have copies of the final contract. (3) Deliver the earnest money and a copy of the final contract to the appropriate party. Remember: If the final acceptance had been obtained by Dan instead of Mary, Dan would have taken care of Steps 1 and 2. These things are usually performed by the agent that finalizes the contract.
Last Steps
Prepare the Offer: Once your buyer client has settled on what they want to offer, fill out the offer completely and correctly. Your client can choose to include a nice letter about why they love the home. Promptly deliver the offer (including a copy of loan pre-approval, if applicable) and remind your client to be ready to send the agreed-upon earnest money. Offering more earnest money can be advantageous in a multiple offer situation. It shows that your client is serious about buying the property. Time is another factor. Your client can agree to a shorter option (due diligence) period to demonstrate enthusiasm for the purchase. Just make sure you can get an inspector in during that short period. Withdrawing Offers: Remember that an offer may be withdrawn at any time, for any reason, prior to the seller accepting the offer. Do it in writing. You know this, but everything's better in writing. Knowing that an offer may be withdrawn can give your client peace of mind if they are uncertain about anything or interested in submitting offers on more than one home. After Losing a Bid: Losing a bid in a multiple offer situation is tough. Inform your client personally by phone, not email. Try to empathize with a disappointed client, but remember to set a positive tone and reassure them that there are plenty of house fish in the neighborhood sea. 🐠 A personal anecdote may be helpful here. Tell them about a time when you or one of your other clients had an offer rejected, only to find an even more perfect home later on. Stress City: Multiple offers can be stressful to everyone. Stressful for buyers: They have intense competition, the process is very emotional, and they have very little control. Stressful for sellers: They must decide which offer is best, and it may not be the one offering the most money. A solution a number of agents utilize in this multiple offer scenario is to tell all agents and their clients that they have 24 hours (or 48 hours) to submit their final and best offer, and the seller will then make a decision. This is just one strategy; the seller and listing agent can work together to decide what they want to do. Review Let's quickly review how to handle multiple offers. *Refer to worksheet: How To Handle Multiple Offer Situations. When the Offer Becomes a Contract: Ah, what a beautiful thing. It's that magical moment when the hopeful caterpillar offer transforms into a majestic, legally binding butterfly. Break out the or high fives. You survived another multiple offer situation in a buzzing market.
Inspection of Property and Neighborhood Clauses
Property: d. Right to Inspect Property: Upon prior notice to Seller, Buyer and/or Buyer's representatives shall have the right to enter the Property at Buyer's expense and at reasonable times (including immediately prior to closing) to inspect, examine, test appraise and survey Property. Seller shall cause all utilities, systems and equipment to be on so that Buyer may complete all inspections. Buyer agrees to hold Seller and all Brokers harmless from all claims, injuries and damages relating to the exercise of these rights and shall promptly restore any portion of the Property damaged or disturbed from testing or other evaluation. If Buyer is concerned that the Property may have been used as a laboratory for the production of methamphetamine, or as a dumpsite for the same, Buyer should review the National Clandestine Laboratory Register of the state. The buyer (and/or their representatives) can enter the property after giving the seller notice and wander all about to inspect, examine, appraise, and survey the property. The seller has to have all relevant systems on (utilities, equipment) for the buyer to test. If the buyer wants to test the washing machine, or the alarm system, or to make sure the property doesn't have any rodent or roach friends, now is the time. This clause also clears the seller from any harm if the buyer hurts themselves during the inspections. The buyer also needs to leave the property as they left it. Drug Registry: This particular contract contains a section concerning drug production. If the buyer thinks the property may have been used as a meth lab, they are directed to consult the National Clandestine Laboratory Register. (Yes, that's actually its name. "Clandestine" means secret or hidden.) Neighborhood: e. Duty to Inspect Neighborhood: In every neighborhood there are conditions which different buyers may find objectionable. Buyer shall have the sole duty to become familiar with neighborhood conditions that could affect the Property such as landfills, quarries, power lines, airports, cemeteries, prisons, stadium, odor and noise producing activities, crime and school, land use, government and transportation maps and plans. It shall be Buyer's sole duty to become familiar with neighborhood conditions of concern to Buyer. If Buyer is concerned about the possibility of a registered sex offender residing in a neighborhood in which Buyer is interested, Buyer should review the state's Violent Sex Offender Registry. The buyer not only needs to inspect the property, but also the neighborhood. Is there anything they find objectionable? For example, a buyer might not want to live next to a cemetery (eek! ghosts!). Or they might not want to live nearby a sewage plant (eek! stinks!). It is up to the buyer to discover and investigate these kinds of things. The contract also points the buyer to a resource to learn if any sex offenders live nearby.
Executory Contract
When an offer or counteroffer becomes a contract, it becomes an executory contract. Agents frequently say the property is "pending." In fact, if the listing has been entered into the MLS by the listing agent, they will move that property into the "pending" category. Commitment: Once the contract becomes an effective, executory contract, the parties are committed to performing the contract. After this point, the seller should only negotiate with another buyer if it's for the purpose of securing a back-up contract. Back-Up Contract: A back-up contract is what it sounds like: a contract that can serve as Plan B if the original contract falls through for some reason. When a seller receives multiple offers, they may choose to accept one offer and accept their second choice as a backup offer. Also, an offer may be in the back-up position not because it's inferior to the primary offer, but because it came along after the primary offer was signed and finalized.
Acceptance and Contact Information
SELLER'S ACCEPTANCE AND CONTACT INFORMATION: Seller's signature ------ Print or Type Name ___________ Seller's Address for Receiving Notice _________ Seller's Phone Number ( ) Cell ( ) Home ( )Work ______ Seller's Email Address ______ BUYER'S ACCEPTANCE AND CONTACT INFORMATION Buyer's Signature ________ Print or Type Name _______ Buyer's Address for Receiving Notice _______ Buyer's Phone Number ( )Cell ( )Home ( )Work ______ Buyer's Email Address ________ BUYER AGENT and SELLER AGENT (one for each) Broker _____ Print or Type Name of Agent _____ Agent's Address for receiving Notice ______ Agents Phone Number ( )Cell ( )Home ( )Work_____ Agent's Email Address ________ MLS Office Code _____ Broker Firm License Number ______ (at bottom of page) Binding Agreement Date: The Binding Agreement Date in this transaction is the date of _________, 20___. We're almost done! Signature lines and all contact information are provided for the parties and the license holders. This is also where the binding agreement date is written in. Agent Pro Tip 1: Whoever is drawing up the contract should make sure that all parties' full legal names are entered. Does someone go by "Tommy"? Check and see if their legal name is "Thomas." Agent Pro Tip 2: Do you have a married couple who are buyers or sellers? There are a couple of different ways to do this: . "First Last / First Last," or . "First and First Last, a married couple" So, say you had Austin and Joanne Myers. You could put: . "Austin Myers" and "Joanne Myers" as two separate buyers, or . "Austin and Joanne Myers, a married couple"
Up Ahead: Purchase Agreement Clauses
Since there isn't a standard purchase agreement for the entire state of Georgia, I'll be highlighting some very important clauses in a generic purchase agreement and discuss why these clauses are important to you and your clients on the upcoming screens. Respect a Contract's Individuality: So, when this contract breaks down, say, closing costs, or length of inspection period, keep in mind these are examples only. Specific details like this will be decided for each contract. You don't need to memorize those specific details. Instead, get a sense for a purchase contract's language and common provisions. Your takeaway needs to be the purpose of the clauses, not their nitty-gritty details. Capitalization: Contracts often use basic words from the English language in specific, defined ways that differ from their normal meaning. For example, "agreement" has a meaning that you and others probably associate with it. "Agreement" could be used in a contract to refer to a specific agreement — and for this reason, the contract writer would want to call it out. So whenever you see a capitalized word in a contract, the contract writer is indicating to you that the capitalized term has a specific definition. To see the term's specific definition for the contract, look for where the capitalized term first appeared in the contract. It will often appear in quotation marks there. You may also see a term capitalized early on in a contract but later used in normal lower case form. When you see this happen, the contract writer is referring to the term with its normal dictionary meaning and not the capitalized meaning. How to Read This Contract Walkthrough: On the screens ahead, I'll show you key clauses from a purchase agreement. Below each clause, I'll have a brief paragraph that summarizes the point of that clause.
When You're the Buyer's Agent
What if you're on the other side of this situation? If you're the buyer's agent, you have your work cut out for you. You have to help your client navigate a competitive environment AND ease any frustrations that may arise. A real estate supply squeeze isn't all that bad for you, though. You'll likely form positive "we're in this together" relationships with your clients and enjoy well-deserved commissions on generally higher sales prices. Open Houses: If you attend an open house with your client, agree to show your enthusiasm about the house if you're loving it. There's a time and place for detailed questions, but making a good impression on the listing agent is key. Listing agents love buyers who are excited about the home and easy to work with. Lenders May Matter: Loan qualification letters let sellers know that a buyer is going to be able to pay without issues. As you know, buyers get to select their own lender if they are securing financing for a purchase. You can give recommendations, but not requirements. That being said, it may hurt your client's bidding power if they choose a lender that has a bad reputation and fails to close on time. Recommend lenders that you and other agents respect. Help Your Client Determine the Price: Your client may know exactly how much they want to offer for a particular home, multiple offers or not. If you think their offer is way too low for a chance at acceptance, you can express this concern and make suggestions for a stronger offer. If your client insists on submitting a low offer, you should cooperate and write up the offer all the same. More often, homebuyers will want to talk through their offer with you and get your advice on its viability in the situation, especially if you find out that the seller already has other offers on the table. The Price Is (Just) Right: It's important to guide your client to their best offer. If the offer is too high, they risk overpaying for a so-so home just for the sake of "winning." If the offer is too low, they risk losing a great home for the sake of saving a little money. (A few thousand dollars could make a difference, and it doesn't look much different when added to a loan that's stretched out over 30 years.) It's enough to stress out any home buyer, but finding the right middle ground isn't as hard as people may think. The perfect offer is one that they won't regret, no matter the outcome. If it's turned down, they won't say, "I wish I had offered more." They will be able to see the price it fetched from someone else and accept that the price was over budget or higher than what they'd be happy paying. If it's accepted, they won't have buyer's remorse or say, "I wish I had gotten a better deal."
Quiz Level 7 a) a title that is free from significant encumbrances or defects that might prevent a purchaser from enjoying or eventually selling the property. A "good and marketable" title is a title that is free from significant encumbrances or defects that might otherwise prevent a purchaser from enjoying or eventually selling the property.
What is a "good and marketable" title? a) a title that is free from significant encumbrances or defects that might prevent a purchaser from enjoying or eventually selling the property. b) a title that the seller has successfully sold before. c) a title that the buyer can afford. d) a title that has a reasonable insurance policy and shows that the property has never been foreclosed upon.
Quiz Level 7 d) This is a section of the contract that makes the sale contingent on the buyer obtaining an adequate mortgage loan. A financing contingency is a section of the contract that makes the sale contingent on the buyer obtaining an adequate mortgage loan.
What is a financing contingency? a) This is a section of the contract that makes the sale contingent on appraising at a certain value. b) This is a section of the contract that makes the sale contingent on attorney review. c) This is a section of the contract that makes the sale contingent on the property passing inspection. d) This is a section of the contract that makes the sale contingent on the buyer obtaining an adequate mortgage loan.
Quiz Level 7 a) It is important to make sure there is a proper amount of time allowed for performance. When choosing a closing date, it is important to make sure there is a proper amount of time allowed for performance (the fulfillment of contractual obligations).
What is a good practice in choosing the closing date? a) It is important to make sure there is a proper amount of time allowed for performance. b) It is important that the buyer, not the seller, determine the closing date. c) It is important that the legal description is provided at closing. d) It is important that the duration of proration prior to the closing date is determined.
Quiz Level 7 b) It simplifies the offer process, so a full contract doesn't need to be drawn up for every offer. If the offer in the binder is accepted, then a lawyer can draw up the sales contract. This way, a buyer doesn't have to get a lawyer to draw up a contract every time they want to make an offer.
What is the advantage of using a binder to submit an offer? a) An attorney never needs to get involved in the transaction. b) It simplifies the offer process, so a full contract doesn't need to be drawn up for every offer. c) It contains more details than a final sales contract. d) A seller can modify the information in a binder.
Quiz Level 7 b) The seller. It's the seller's decision whether or not to accept an offer from a buyer. Although the agent can give advice, they don't have a say in the action the seller decides to take.
Who makes the decision on whether or not to accept an offer from a buyer? a) The broker. b) The seller. c) It's a joint decision between the seller and agent. d) The agent.
Quiz Level 7 d) to show the seller that they are serious about an offer. The earnest money is a deposit made to a seller showing the buyer's good faith in regards to the future performance of a sales contract.
Why might a buyer deposit earnest money? a) to pay for legal fees. b) so the seller can have enough funds to pay for a title policy. c) to pay for their agent's commission. d) to show the seller that they are serious about an offer.
Contract to Closing
Woo-hoo! Contract is signed! Everybody agrees on everything, and you can go home and collapse, victorious. Well. Okay. Treat yo' self, but only briefly. The signing of the contract is one finish line, but the closing is another. What do you do in that stretch of time between signing and closing? . Keep an open line of communication with all the parties. . Make sure that all relevant parties have a copy of the signed contract: the buyer, the seller, the brokers, the lender, and the closing attorney. . Remind your client that "time is of the essence" means exactly that. If you represent the buyer, and they do an inspection, find termites, and then decide to terminate but wait until AFTER the due diligence period is over, well, they are gonna be out of luck. . Follow up on loan applications. . Prep parties on what will happen at closing. If they want to read all the relevant documents, they can, but have them do it before closing. They won't have time at the closing itself. . Give parties cost and net worksheets ahead of closing, as these will approximate closing costs. . Go to the closing. You aren't required to do this, but it's nice.
"As Is" Clause
g. Property Sold "As -Is" Unless this Agreement is Subject to Due Diligence Period: i. Unless the Property is being sold subject to a Due Diligence Period referenced herein, the Property shall be sold "as-is" with all faults. Even if the Property is sold "as-is" Seller is required under State law to disclose to the Buyer latent or hidden defects in the Property which Seller is aware and which could not have been discovered by the Buyer upon a reasonable inspection of the property. The inclusion of a Due Diligence Period herein shall: 1. during its term make this Agreement an option contract in which Buyer may decide to proceed or not proceed with the purchase of the property for any no reason; and 2. be an acknowledgement by Seller that Buyer has paid separate valuable consideration of $10.00 for the granting of the option. If there is no due diligence period, then the property is sold "as is." These are transactions in which the seller decides beforehand that they will not agree to any repairs on the property and that the property will be sold in the condition as is. These two little words, "as is," seem to place all the risk of the purchase on the buyer. It's not that simple. If a seller deliberately does not disclose a defect to the buyer, then the seller could be held responsible in the future. The "as is" clause does not protect the seller in this situation. Caveat Emptor: Caveat emptor is a Latin phrase meaning, "let the buyer beware." It is used to mean the buyer is expected to do their due diligence when purchasing property. The "as is" clause is based somewhat on caveat emptor. The only difference is that the seller should also beware that they are disclosing all known defects in the property. Exercise of Option; Amendments: ii. During the Due Diligence Period, Buyer shall determine whether or not to exercise Buyer's option to proceed or not proceed with the purchase of the Property. If Buyer has concerns with the Property, Buyer may during the Due Diligence Period seek to negotiate an amendment to this Agreement to address such concerns. This clause is another reminder of what a due diligence period consists of, and how the buyer can address any concerns during the period. Notice of Termination: iii. Buyer shall have elected to exercise Buyer's option to purchase the Property unless prior to the end of any Due Diligence Period, Buyer notifies Seller of Buyer's decision not to proceed by delivering to Seller a notice of termination of this Agreement. In the event Buyer does not terminate this Agreement prior to the end of the Due Diligence Period, then: 1. Buyer shall have accepted the Property "as-is" subject to the terms of this Agreement; and 2. Buyer shall no longer have any right to terminate this Agreement based upon the Due Diligence Period. More of the same about how the due diligence period works. The only piece of new information is that the buyer must notify the seller with a notice of termination if they decide to terminate during the due diligence period. If there is no notice, then the seller can assume that the buyer is, in fact, buying. Repairs and Replacements: iv. All agreed upon repairs and replacements shall be performed in a good and workmanlike manner prior to closing. Say that during the due diligence period, the buyer asks for leaks to the air conditioning system to be fixed. Under this clause, the repairs would need to be done before closing.
Brokerage Information: Special Stipulations
h. If Broker has written any special stipulations herein, the party for whom such special stipulations were written: i. confirms that each such stipulation reflects the party's complete understanding as to the substance and from of the special stipulations; ii. hereby adopts each special stipulation as the original work of the party; and iii. hereby agrees to indemnify and hold Broker who prepared the stipulation harmless from any and all claims, causes of action, suits, and damages arising out of or relating to such special stipulation. What are special stipulations, you ask? Well, towards the end of the contract, a clause will read: [Special Stipulations. The following special stipulations, if conflicting with any exhibit or preceding paragraph, shall control:] Here, at the end of the contract, is where the broker can add any special stipulations. (I strongly encourage you to get an attorney's help in writing these!) Each stipulation is a specific requirement. For example, if a buyer wants a carpet replaced in the home at the seller's expense, this stipulation would go in this space. So, the contract clause above makes sure that the broker and the relevant party are on the same page about the stipulations. Does the stipulation as written reflect exactly what the party wants? Is the party ready to adopt the stipulation as written as their responsibility? This clause also clears the broker from any responsibility should something with the stipulation go wrong.
Earnest Money: Disputes and Protections
h. if an earnest money dispute cannot be resolved after a reasonable time, Holder may interplead the earnest money into a court of competent jurisdiction if Holder is unsure who is entitled to the earnest money. Holder shall be reimbursed for and may deduct its costs, expense and reasonable attorney's fees from any funds interpleaded. The prevailing defendant in the interpleader lawsuit shall be entitled to collect its attorney's fees, court costs and the amount deducted by Holder to cover Holder's costs and expenses from the non-prevailing defendant. Interplead Your Case: If there is an earnest money dispute which can't be resolved, the holder can get a court to decide who gets the money. This is called an interpleader action or lawsuit. Legal expenses can be paid from the earnest money. Whoever loses must pay the winner's court fees. Holder's Protections: i. All parties hereby covenant and agree to: i. indemnify and hold Holder harmless from and against all claims, injuries, suits and damages arising out of the performance by Holder of its duties; ii. not to sue Holder for any decision of Holder to disburse earnest money in accordance with this Agreement. This clause states that the holder can't be sued around their disbursement decisions. The holder can't be... held... accountable. (Ya like that?)
