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Agreement of Sale
- States the specific rights and obligations to which the properties mutually agree
- Legally binding
- Material Facts--Information that is significant to a person and that person's ability to make an informed decision. Ex: a buyer may have particular health concern, (i.e. allergies), a specific use for the property or other requirement that makes certain facts material to a decision
- Latent Defects--A hidden structural defect that would not be discovered by ordinary inspection. Buyers may cancel the sales contract or receive damages when a seller fails to reveal known latent defects.
- Estimated statements of closing costs--required before the parties have an agreement of sale. Real Estate Commission's Rules and Regulations state the the broker's commission, mortgage payments and financing costs, taxes and assessments and settlement expenses must be included.
- Uniform Condominium Act and Uniform Planned Community Act--require a seller to furnish copies of the development's declaration, bylaws and rules and regulations of the association (and resale certificate, if possible). Laws state the the buyer is entitled to five days to review the documents. If the fifth day extends past the date a binding agreement of sale is formed or even past the closing date, the buyer has the right to void the purchase, according to procedures stated in the laws.
Opinion Versus Fact
- Statements of opinion are permissible if ther is no intention to deceive.
- Fraud--the intentional misrepresentation of a material fact in such a way as to harm or take advantage of another person.
- Misrepresentation--unintentional misstatement or omission. It does not have to be intentional to result in a licensee liability. Occurs when the licensee should have known that a statement about a materical fact was false. A licensee who accidentally fails to perform some act-for instance, forgetting to deliver a counter offer-may be liable for damages that result form such a negligent omission.
- Puffing--the exaggeration of a property's benefits.
- those that society has found undesirable because of events that occurred there or because a know sex offender lives in the area. Federal law does not mandate active notification, but some state laws do.
- A disclosure that a property's previous owner or occupant died of AID or was HIV positive constitutes illegal discrimination under the federal Fair Housing Act.
Agreement of Sale
- Contract can be called; an offer to purchase, contract of purchase and sale, purchase agreement, earnest money agreement or deposit receipt.
- In addition to the essential elements of a contract, several details frequently appear in contracts, including legal and enforceable rights.
- Included are: sale price and terms, a legal description of the land, (lots and blocks, metz and bounds, rectangular (gov't)., a statement of the kind and condtion of the title and the form of dee to be delivered by the seller, the kind of title evidence required, who will provide it, and how many defects in the title will be eliminated; and a statement of all the terms and conditions of the agreement between the parties and any contingencies.
- Preparing a Contract--Usually pre printed forms and licensees are permitted to prepare contracts by filling in the blanks on these forms. Wording can not be altered. If any ambiguity, the courts generally interpret the agreement against the person who prepared it. Preprinted forms are designed for residential transactions and are rarely suited for non residential transaction. Essentials include--offer and acceptance, consideration, legally competent parties, legality of object and, reality of consent.
- Offer--offeror makes makes the offer. The offer is signed by the buyer and presented to the seller by the licensee. The seller can accept, reject or make a counter offer.
- Earnest Money--Hand Money. Not essential, but customary. Usually in the form of a check. Check is given to the broker, who holds it in an escrow account. The amount should be sufficient to: discourage the buyer from defaulting, compensate the seller for taking the property off the market, and cover any expenses the seller might incur if the buyer defaults. Money can not be mixed with the brokers personal funds. (commingling). Broker can not use the funds for their personal use, (conversion). A special escrow account does not have to be opened for each earnest money deposit received; all deposits may be kept in one account. If the offer is not accepted, the money is returned to the would be buyer. Once the seller accepts the offer, the buyer may not secure the return of the money, even though the seller is not entitled to it until the transaction has been completed. The money belongs not to the broker.
- Binder--Some state only require a shorter document called a binder. A more formal contract is drawn up after the seller accepts and signs the binder.
- Counteroffer--new offer, it rejects the original offer.
- Acceptance--the seller agrees to the original offer or a later counteroffer exactly as it is made and signs the document. An offer is not accepted until the person making the offer has been notified of the other party's acceptance.
- Equitable Title--title transfers only upon delivery and acceptance of a deed. However, after both buyer and seller have executed a sales contract, the buyer acquires an interest in the land. The time from the signing of a contract to the delivery of the deed.
- Destruction of premises--The buyer is responsible for the premises. The seller may be liable for a loss if the seller was negligent, is unable to deliver a good title, or had delayed the closing of the transaction. The seller should maintain adequate insurance through the date of the closing.
Parts of an Agreement of Sale
- Purchaser's name and statement of the purchaser's obligation to purchase the property, including how the purchaser's plans to take possession of the property.
- Adequate description of the property
- Seller's name and a statement of the type of deed a seller agrees to give, including any covenants, conditions and restrictions.
- Purchase price and how the purchaser
- intends to pay for the property.
- Amount and form of the down payment toward the loan.
- Date of closing and transfer of property
- Title evidence
- Proration of taxes, rents, fuel costs and other expenses.
- Completion of the contract should the property be damaged or destroyed between the time of the signing and the closing date.
- Liquidated damages clause, specific performance clause or other statement of remedies available in the event of default.
- Any contingency clauses
- Dated signatures
- Agency disclosure statement
Additional Provisions to the Agreement of Sale
- Personal property to be left with the premises
- Real property to be removed by the seller before closing
- Transfer of any applicable warranties on items such as heating systems or built in appliances
- Identification of any leased equipment that may be transferred to the purchaser or returned to the lessor.
- Appointment of a closing or settlement agent
- Closing or settlement insturctions
- Transfer of payment of any outstanding special assessments
- Right of a walk though before closing
- Agreement as to what documents will be provided by each party and when and where they will be delivered.
- Additional concerns that must be satisfied before a sales contract is fully enforceable
- Create a voidable contract.
- Must include the following elements: actions necessary to satisfy, time frame within which the actions must be performed, and who is responsible for paying any involved costs.
- Most common contingencies include the following:
- Mortgage Contingency: protects the buyer's earnest money until a lender commits the mortgage loan funds.
- Inspection Contingency
- Property Sale Contingency
- Insurance Contingency
Amendments and Addendums
- Amendment--a change or modification to the exiting contract
- Addendum--an provision added to an existing contract without altering the content of the original. An addendum is essentially a new contract between parties that includes the original contract's provisions by reference, meaning the addendum mentions the original contract.
- Disclosures--an agreement must contain the following:
- A statement identifying the capacity in which the broker or any licensee affiliated with the broker has provided services relating to the subject transaction to any other party in the transaction--agency relationship
- A statement describing the purpose of the Real Estate Recovery Fund and the telephone of the Commission where a consumer can receive further information.
- A statement of zoning classification for the property, except in cases the property is zoned solely or primarily to permit single family dwellings and
- A statement of access to a public road may require issuance of a highway occupancy permit form the PA Department of Transportation
- A lead based paint disclosure
- A sewage facilities disclosure
- If condo, time share of planned community, the contract mus include the buyer's right to rescind purchase.
Option--unilateral contract by which an optionor, (generally an owner), gives the optionee(a prospective purchaser or lessee, the right to buy or lease the owner's property at a fixed price within a stated period of time. The optionee pays a fee, the agree-upon consideration for this option right. The optionee has to decide to either exercise the option right right or allow the option to expire. An option is enforceable by the optionee only, a unilateral contract. Options must contain all the terms and provisions required for a valid contract. Common use is a lease that includes an option for the tenant to purchase the property.
- Vendor-Seller; Vendee-Buyer
- Installment Contract--(contract for deed, land contact of sale or articles of agreement).
- The seller , vendor, retains the legal title. They buyer, vendee, take possession and acquires equitable title to the property.
- The buyer agrees to give the seller a down payment and pay regular monthly installment, principles and interest, over a number of years. The buyer also agrees to pay the real estate taxes, insurance premiums and repairs and upkeep of the property.
- The seller is not obligated to execute and deliver a deed until all of the terms of the contract have been satisfied.
- If the buyer defaults, then the possession goes back to the vendor.