Reading a Real Estate Contract

Reading A Real Estate Contract

A Real Estate Contract, Real Estate Purchase Contract or REPC is the contract to buy land or other types of real estate. These contracts are created by the state real estate department and used by real estate agents. Individuals use the same or similar contracts.

The contracts vary from state to state but are similar. The main sections are listed and explained below. The first section lists the names of the buyers, sellers and realtors. The Real Estate Contract is about as boring as it gets, but necessary to understand when buying land.

Property

The property section describes the property included in the sale. This includes the real estate, any appliances included with a house and any water rights, mineral rights etc. Any items not included in the sale are also listed.

Purchase Price

The price section includes the purchase price and any financing. The financing might include bank loans, private loans or owner financing.

This section may also state the contract is subject to loan approval. The buyer will not be required to complete the purchase if their loan is denied. There also may be a appraisal condition which allows the buyer to cancel the contract if the property appraisal is lower than the purchase price.

Settlement and Closing

The settlement section covers items that must be completed before the closing. This includes documents to be signed, money to be paid, and required disclosures.

Possession

This section gives the date when the buyer can take possession of the property. This is usually a certain period of time after the closing occurs.

Agency Disclosure

Its very important to review this section. The realtor(s) disclose who they represent which is either the buyer or the seller. Keep this in mind when dealing with a realtor.

Title Insurance

Every buyer should demand title insurance when they purchase real estate. This section details the title insurance policy requirements and who pays for it.

Seller Disclosures

Seller disclosures often include the following:

Property condition disclosure
Commitment for Title Insurance
Any leases not expiring before closing
Any environmental liens or issues
Any building or zoning code violations
Other issues seller is aware of that affect the property

Buyer’s Right To Cancel

Conditions allowing the buyer can cancel the contract may include:

Buyers approval of seller disclosures
Buyers inspection of the property
Buyers approval of a land survey
Buyers ability to get home owners insurance
Other test and evaluations as listed

Seller Warranties

The Seller guarantees the property will be in good condition with a clear title and be broom clean. This includes all appliances work, there are no roof leaks, foundation cracks, or other problems not disclosed to the buyer.

It also discloses if the seller will provide a home warranty and what coverage will be included in the warranty.

Walk-Through Inspection

The Buyer is entitled to inspect the property before the closing. The Seller agrees to correct any problems found during that inspection within the limits described in this section, and to allow buyer to enter the property for the inspection.

Changes During Transaction

Seller agrees none of the following will occur without buyers consent:

No changes to existing leases
No new leases shall be entered into
No substantial improvements or alterations made to property
No loans or other encumbrances placed on property

Complete Contract

Buyers and Sellers agree that this contract and the attachments and addendum’s is the complete contract. This precludes any claims of verbal agreements or other buyer said/seller said issues.

Dispute Resolution

This details how any disputes will be resolved. Often the parties agree to a mediation instead of court.

Default

Both buyer and seller may default (not complete) this contract. This explains the remedies in a default, which may include retaining the earnest money or filing a lawsuit to force contract completion.

Contract Deadlines

There may be separate completion deadlines for parts of the transaction or contract. These could include:

Buyer Loan Application deadline
Seller Disclosure deadline
Property Inspection deadline
Loan Denial deadline
Appraisal deadline
Settlement deadline

Not meeting any of these deadlines by the responsible party (buyer or seller) allows the other to cancel the contract.

Offer And Time For Acceptance

Either the buyer or seller could make the original offer to the other, although the buyer more commonly makes the offer. This states how long the other has to accept, reject, or make a counter offer.

Nothing is more boring than a Real Estate Contract. I know because I read them all the time. However, if you are buying or selling real estate you better read it and understand it. There is too much money at stake to sign this contract without fully understanding it. You may also want to have your attorney review the real estate contract before you sign.

February 25, 2016

6 Questions to help you Find a Realtor

How To Find A Realtor

How to find a realtor. When you choose a realtor they are working for you. You are hiring them. Below are 6 questions to ask when interviewing your prospective realtor.

1. How Experienced Are You?

Many have asked how to find a realtor. This is the most important criteria. Don’t be the guinea pig for a new realtor. Keep looking until you find one with at least a year of experience, and multiple sales. Ask how many sales they have closed.

2. Do You Know This Type of Land?

Realtors tend to specialize in a specific type of property. Most realtors specialize in houses, and have a limited knowledge of land.

Ask if they are familiar with the type of property you are buying or selling. Ask to see their previous sales of similar property.

3. Do You Have Complaints?

When asked how to find a realtor I always emphasis asking a realtor this question. This is a tough question to ask but you have a right to know. If you don’t get a straight answer, or question the answers given, check with the State Real Estate Department, they keep a record of all complaints.

Complaints can be frivolous, so ask for details of any complaints. You should avoid a realtor with multiple “legitimate” complaints.

4. Does your Company Have Complaints?

The same goes for complaints against the real estate company. Most realtors are honest, as are most companies, but bad realtors tend to congregate. If the company has a history of complaints look for a different realtor, preferably at a different company.

5. Do You Represent Buyer Or Seller?

It is vital to know who the realtor is representing. If they listed the property, they are working for the seller, and have a legal obligation to get the highest price possible for the seller.

If they did not list the property, they are most likely working for the buyer, and have a legal obligation to get the lowest price possible. If you are a buyer they will probably show you multiple properties, starting with their own listings, meaning they are working for the seller. There is nothing wrong with this, just make sure you know and have an idea of property values.

6. Any Exclusive Agency Agreement?

Realtors love Exclusive Agency Agreements but be wary of signing them. You have no obligation to sign such an agreement. If you do sign an Exclusive Agency Agreement you are agreeing that this specific realtor will be the only one you work with in a given area.

The area could be a town, county or an entire state. Don’t sign one that covers more than the realtors area. Never sign one that covers an entire state. If you do and then want to look at property in another area with a different realtor, they will be unlikely to help you as the commission would be paid to the first realtor.

How to find a Realtor is not always easy but most realtors are honest and willing to work hard to help you find the right property. Since you are hiring them, you have a right to interview them.

February 16, 2016

9 Questions to ask Before Buying Land

When Buying Land your are making a big decision and a big investment. Go slow, ask questions, and learn everything you can about the property before you buy. Below are some of the important questions to ask.

Should I Use A Realtor when Buying Land?

I believe in most cases you should use a realtor when buying land. The realtor is paid a commission from the seller so there is no charge to you. Why not use an expert for free?

Am I Paying A Fair Price?

Real Estate prices vary and it is hard to calculate an exact value for a piece of land. Be careful, look at similar parcels of land that sold recently to get an idea of the value when you are buying land.

Are There Land Use Limits?

There are many possible limits or restrictions on how you can use a parcel of land. Many restrictions are government regulations. These could include Zoning restrictions and Building Permit Requirements. You should also look for CCR’s (Covenants, Conditions and Restrictions.

Can I Connect To Public Utilities?

If the land is not already connected to electricity, water and sewer there can be significant costs in connecting. You may need to drill a well and install a septic system instead of connecting to water and sewer.

Does The Land Have Title Problems?

You should use a title company to handle the closing and insist on an Owner’s Title Insurance Policy when you buy land. This will insure you against any title problems, including liens, judgments, forged deeds etc. Have the title company explain the policy and any exceptions to coverage at closing.

Do I Have Legal Access To The Land?

Legal access means you have the right to use the roads leading to your land, crossing any property between your land and the nearest public road. The title company should insure access as part of the Owner’s Title Insurance Policy.

Who Owns The Mineral Rights?

The Mineral Rights are often owned by a different person than the surface rights (what we commonly think of as the land). If the mineral rights are owned separately the owners of the mineral rights may have the right to enter your property and set up equipment to extract their minerals.

Do I Like The Neighbors?

Before you buy land, meet the neighbors. While you are getting to know them ask them what they know about the land. They may have information that the realtor doesn’t.

Do I Like The Area?

If you find a parcel of land that you like but dislike the area you will end up disliking the land too. Investigate the local schools, the stores, the community and the roads you will travel.

Don’t forget to find out what the area is like in the winter and the summer. Of course this doesn’t cover everything you should look into when buying land, but it gives you a place to start. Remember caveat emptor (buyer beware), when buying land.

6 Reason to use a Real Estate Agent. Buyers and Sellers should find an experienced, trustworthy Real Estate Agent and let them guide you through the land closing process in Utah.

Understanding Mineral Rights. Mineral rights are a cause of controversy among property owners. This is especially true in areas with oil and gas exploration. Owners of these rights have certain rights which are difficult for land owner’s to accept. These rights are often called oil rights or sub-surface rights.

How To Calculate Real Estate Values. The most important step when buying or selling property is to decide the real estate values. I recently observed two land purchases. The two parcels of land were almost identical. Both were 10 acres of vacant land next to one another. The first parcel sold for $5,000.00; the second for $47,000.00. Almost 10 times more!

January 30, 2016

Real Estate Agent – 6 Reasons to Use One

6 Reason to use a Real Estate Agent

Buyers and Sellers should find an experienced, trustworthy Real Estate Agent and let them guide you through the land closing process in Utah.

A Realtor is your best friend during this process and will walk you through it from beginning to end. They will help you avoid many of the pitfalls and problems that arise when buying land.

Sellers are also usually better using a Real Estate Professional. There are many possible problems with a sale and the agent can work through most of these.

The Real Estate Agent May Be Free!

The Real Estate Agent is paid a commission from the sale of the property. The commission is paid by the seller so buyers use a realtor for free.

Buyers don’t have to use the realtor who listed and advertises the property. Choose the realtor you want, the payment will be worked out between the two realtors, and you will have the realtors services for free.

Will Help You Find The Right Property

A Real Estate Agent has access to the local MLS (Multiple Listing Service) which lists all the property for sale by realtors in the area. Using the MLS the realtor can find properties that meet the buyers criteria and take you to those properties.

Many MLS’s are now listed on Realtor.com, where anyone can view them, but the realtor is an expert at using this information to find the land you are looking for. When selling the agents access to the MLS allows your property to be seen by many potential buyers.

Will Do the Work For You

The Real Estate Agent will do most of the work involved in finding and purchasing property, and finding buyers. A real estate purchase transaction is a complicated procedure which involves many details as well as many people. In most cases the transaction will be easier and much smoother if a realtor is involved in the process.

Will Help You Pay a Fair Price

One problem for buyers is paying too much for land. It is difficult to know what the land is really worth. Because Realtors deal with many parcels of land they know approximately what a specific parcel of land is worth.

In my line of work I have observed those who use a realtor usually buy land at a fair price. Keep in mind the realtor who listed a parcel of land has an obligation to sell for the highest price since they represent the seller.

Will Show You The Property

The Realtor knows the local area and will help you find the land you are looking for. Looking for land may involve driving down back roads without directions or street signs. The realtor will take you to the properties you want to look at, and the areas you want to look in.

Often a piece of land does not have an address or directions. Sometimes you will need to read legal descriptions and topographical maps. The realtor has experience in reading these and can take you right to the property, and show you the property boundaries.

Will Help You Avoid Many Problems

Using a Real Estate Agent will help you avoid many of the problems experienced in land transaction. Many of these problems don’t arise until after the purchase.

There are many possible problems, too many to mention, but include such things as: road issues, water rights, mineral rights, etc. Save yourself from many problems and use an experienced, trustworthy realtor.