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Paragraph 5 of a promulgated contract form deals with what?
Earnest money is necessary and required to bind a contract.
Earnest money serves as what?
liquidated damages in the event of default; shows the seller that the buyer is really interested.
Is the earnest money applied to the sales price if the buyers decide to go through with the contract?
Earnest money is placed in an ____________ until termination or funding of contact.
escrow account; title company
How can a buyer make their offer more attractive to a seller?
offer earnest money; amount decided on by the buyer and seller
The blanks calling for additional earnest money can be used when the buyer...
is unable to make full desired deposit at the time of signing the agreement.
Paragraph 23 of a promulgated contract deals with what?
What is option money?
to allow the buyer to do their due diligence; Inspections, ability to obtain insurance, and anything else they need to verify.
The buyer pays the seller this kind of money for the seller to grant the buyer a number of negotiated days with the unrestricted right to terminate to contract.
The option money must be paid to the seller within how many days?
If the option money is not paid within 3 days the contract is still valid, but paragraph 23 does not exist as part of the contract, therefore the buyer has no right to terminate.
Usually, the company selected to issue the owner's title policy in paragraph 6A is the same chosen in paragraph 5 to serve as escrow agents.
true; but not mandatory
Choice of title company and who pays for title is...
negotiated by the parties; check appropriate box in paragraph 6A.
The _________ is usually required to pay for an appraisal when the buyer is seeking a new loan, and it is the _________ who selects the appraiser and is the client of the appraiser.
The owner's title policy is a contract between...
the buyer and the title company
_______ prohibits the seller from requiring the buyer to use the services of a particular title provider.
RESPA (Real Estate Settlement Procedures Act)
Providing the ________________ is an economical way for the seller to show evidence of clear title and indemnify the buyer from financial loss in the event of title failure.
In addition to identifying who issues and who pays for the title policy, paragraph 6A establishes...
that the policy is subject to exclusions promulgated by the state.
What are they? look at the contract.
The standard printed exception, in paragraph 6A (8), relates to...
discrepancies, conflicts, and shortages in area or boundary lines; it may be amended to include only shortages in area by providing a survey acceptable to the title company and paying an additional fee; check the right box.
For properties with the same sales price, the premium cost to insure the title of the property is the same at all title companies in the state.
When using a loan guaranteed by the Department of Veterans Affairs, the government regulations require that the seller pay the...
legal fees for the preparation of the note and mortgage instrument for the borrower's loan.
In paragraph 6B, the agreement calls for the seller to furnish the buyer a commitment for title insurance, and at the buyer's expense, legible copies of deed restrictions (restrictive covenants) and documentation of any exceptions in the commitment. What is a commitment and what are restrictive covenants? And how many days must this occur after the title company receives a copy of the contract?
commitment: a statement of the terms and conditions on which a title insurance underwriter is willing to issue a title insurance policy
restrictive covenants: deed restrictions that apply to a group of homes or lots in a specific development or subdivision; are normlly put in place by the original developer and are different for every area of homes.
20 days; the parties agree that if the title company is unable to deliver within 20 days, the time for delivery is automatically extended up to 15 days or 3 days before the closing date, whichever is sooner.
What are possible restrictive covenants of a deed?
-nearly always stipulate the minimum size residence allowed, how many homes may be built on one lot, and what type of construction the homes must be (or must not) be.
- -setbacks (how far homes must be from streets and interior lot lines)
- -Easements (such as a pathway for power lines or roads)
- -fees for road maintenance or amenities
- -Rules regarding changing or voiding the covenants
- -Regulations dealing with in-home businesses and home rentals
- -Rules that limit tree cutting
- -Clauses that dictate what type of fencing can be used or that forbid all types of fencing
- -Clauses to reduce clutter on lots, such as prohibiting owners from storing a vehicle that doesn't run within view of others, or parking a recreational vehicle on the property.
What are setbacks?
how far homes must be from streets and interior lot lines
After the buyer receives the commitment, the buyer has some days to object in writing to any matters disclosed in the commitment. How many days does the buyer have to do this?
The number of days will be determined by agreement of the parties.
Why is it important to understand the restrictive covenants and and other deed restrictions that are in place for a property?
they dictate how the buyer can and cannot use the property
Paragraph 6C deals with the survey. What are the three options for providing a survey?
6C (1); seller furnishes the survey and the affidavit, usually in 10-15 days; box must be checked on who will pay for a new survey if lender does not accept originally survey.
6C (2); new survey at buyers expense
6C(3); new survey at seller's expense.
What is the main reason why you won't be able to use an existing survey?
new improvments to property.
What are improvements that can affect survey? On your house? How much is a new survey? How is price determined?
Paragraph 6D deals with Objections. What is objections?
Used to list things that the buyer wants to o with the property, that the buyer may not be able to do because of some restrictions, easements, or the like.
The buyer has a limited number of days to object to things found on the Commitment, Exception Documents, and Survey or they lose the right to object.
Objection can be waived, allowed, or not allowed; but this section gives the buyer an idea if their wish will be granted or not
EX: parking an RV in the driveway or putting in a swimming pool
The Seller has ___ days to cure objectives.
15 days; closing can be extended
Paragraph 6E deals with Title Notices. What are the ten notices that may be given if necessary?
- -Abstract or Title Policy
- -Membership In Property Owners Associations
- -Statutory Tax Districts
- -Tide Waters
- -Annexation; if property is located outside the limits of a municiplity
- -Property Located In a Certificated Service Area of a Utility Service Provider
- -Public Improvement Districts
- -Transfer Fees
- -Propane Gas Service Area
- -Notice of Water Level Fluctuations
Paragraph 7 is Property Conditions. Paragraph 7A gives the buyer and the buyer's agent the right of access to the property at reasonable times and for inspections. This section also does what?
-Makes the seller responsible for immeditely turning on utilities.
-7B and 7C; Seller's Disclosures; Property Code and Lead based Paint
-7D; Buyer accepts the Property "as is"; if there are items the buyer wants repaired, there is a space to negotiate for those items at the time the offer is prepared.
-7E; confirms that neither the buyer nor the seller is obligated to do lender required repairs; if neither agrees to do them, property will not qualify for the loan and the contract can be terminated and the buyer will receive the earnest money back; 7E also gives the buyer to terminate even if the seller agrees to do the lender-required repairs, if the cost of those repairs is going to exceed 5% of the sale price.
-7F; explains that any repairs agreed upon will be done by professionals and completed before closing
-7G; addresses environmental matters; buyers should have property inspected for enivornmental hazards; radon (radioactive gas element, asbestos, mold, etc.
- -7H; informs the buyer of their right to choose a Residential Service Contract and to negotiate for the seller to reimburse the buyer for the cost; it is important that the buyer understand the following:
- --Many different companies offer service contracts
- --Coverage and exclusions may differ from one company to another
- --It is the buyer's responsibility to review and choose the coverage
Even though the contract states the property is being purchased "as is" does not relieve the seller or license from full disclosure about the condition of the property.
"As is" indicates...
the buyer is willing to buy the property for the price they have offered, in the as is condition they can see, subject only to the things listed in paragraph 7D.
**If they find out new info (inspection) and the seller does not want to repair, the buyer can terminate under their option to terminate in paragraph 23
Buyers need to review the seller's disclosure notice before...
making a offer
What are reasons why a seller is not required to furnish a seller's disclosure/
- -pursuant to court order or foreclosure sale
- -by a trustee in bankruptcy
- -to a mortgage by a mortgagor or successor in interest, or to a beneficiary of a deed of trust by a trustor or successor in interest
- -by a mortgagee or a beneficiary under a deed of trust who has acquired the real property at a sale conducted prusuant to a power of sale under a deed of trust or a sale pursuant to a court-ordered foreclosure or has acquired the real property by a deed in lieu of foreclosure
- -by a fiduciary in the course of the administration of a decedent's estate, guardianship, conservatorship, or trust
- -from one co-owner to one or more other co-owners
- -made to a spouse or to a person or persons in the lineal line of consanguinity of one or more of the transferors
- -between spouses resulting from a decree of dissolution of marriage or a decree of legal separation or from a property settlement agreement incidential to such a decree
- -to or from any governmental entity
- -that transfer new residences of not more than one dwelling unit which have not previously been occupied for residential purposes.
a legally binding command or decision
The RESPA prohibits kickbacks. What are kickbacks?
commissions, rebates, referral fees, etc, for licensees who refer their clients to a particular lender, settlement agent, inspector, residential service company, et cetera, unless the licensee renders a service that warrants a payment or fee. If a licensee is to receive a fee for service rendered, this must be disclosed to the client.
If a licensee refers a client to a residential service provider with whom the licensee has an existing relationship, the licensee should disclose this to the client using _________________________________.
TREC's Disclosure of Relationship with Residential Service Company
**The form provides for the licensee to disclose any compensation received from the residential service company and the service rendered to earn that compensation.
Paragraph 8, Brokers Fee, states what?
the broker is not a party to the sales contract. Brokers need to have a separate agreement in writing to secure commission
Paragraphs 5 and 6 describe what?
the agreement between the parties earnest money, the title policy, and the survey
Paragraph 6E states what?
Puts agents and sellrs both on notice of certain legislation that requires disclosure to buyers about a variety of items. The buyer receives the notice when they receive the contract form.
Paragraph 7 states what?
discusses property condition, including seller's disclosure notice, lead-based paint disclosure, environmental matters, and residential service contracts
Paragraph 8 states what?
the sales contract is the agreement between the buyer and the seller only; contractual agreements between broker and seller and broker and buyer are found in other documents.
The title policy protects the buyer from loss due to utility easements created by the dedication deed or plat of the subdivison.
The buyer will receive a copy of the restrictive covenants at the _________ expense, according to the contract.
When the existing survey is NOT acceptable to either the lender or the title company, the buyer shall obtain a new survey no later than ___ days prior to the closing date.
Buyer must object NOT later than the closing date or within ___ days after recieving the Commitment, Exception Documents, and the survey
an agreed-upon number of days
Provided the seller will NOT incur any expense, how many days after their receipt does the seller have to cure the timely objections of the buyer or any third-party lender?
Title Policy can be furnished by either party, but which party most likely furnishes it?
Title policy rates are based on...
state rates and sells price; apps on phone, contact title company
Why is it important to get a title policy?
make sure the seller is the owner and to see if there are any restrictions
What are a good amount of days to furnish a survey?
Who fills out the Seller's Disclosure?
the Seller, not the agent; seller disclosure can be listed on the MLS
When the box is check for "the buyer accepts the property as is", this is mostly used for what kind of deals?
cash deals; mortgage companies most likely will not give loan
FHA will not give insurance is paint is chipping.
It is good to suggest to the seller to give the buyer a home warrenty.
true; $500; optional; if something breaks say within a year; buyer can still sue, but most likely won't
Seller keeps the termination option fee if buyer decides not to buy.
If the purchase price is low (ex, $20,000) how is commission split.
most likely by minimums, not percentages
Who fills out the Contract and Earnest Money Receipt?
Third Party Financing Addendum is not used for...
seller financing; use Seller Financing Adendum