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 17, 2016

The Real Estate Closing Process

The Escrow Closing or Real Estate Closing Process is not as complicated as it seems, with a little help anyone can understand and feel comfortable with the process.

The escrow closing process follows certain steps in a certain order, once you understand these steps, the process becomes clear. Several of the steps are part of every closing; others are optional depending on the circumstances.

Real Estate Contract

The Real Estate Closing process begins when you make an offer by signing a purchase contract, and the offer is accepted by the seller. When this step is completed several people get involved in your closing.
The Title Company begins to research the title of the property. An appraiser and surveyor may also start working on your closing. These happen in the background, all preparing for the signing or closing.

Title Commitment Review

After signing the Purchase Contract, the title company will prepare a Title Commitment. The Title Commitment shows any liens, judgments and other problem with the real estate title or ownership.

It is also a commitment to insure the property in your name at closing, subject to any terms contained in the Title Commitment. Review it carefully and call the title company with any questions.

Disclosures Review

Before closing, the seller is required to make disclosures to the buyer. These disclosures vary from state to state but include any leases that may be on the property as well as other things the seller is aware of.

If there are building on the property the disclosures should also include any problems or required repairs on the buildings.

If the disclosures show significant problems you have a certain amount of time to cancel the deal. The exact amount of time you have to cancel is spelled out in the purchase contract.

Appraisal

An appraisal is performed by a licensed appraiser, who uses recent land sales, to estimate the market value of your land.

If you requested an appraisal on the property, you should receive it before signing. If you do order an appraisal, the purchase contract should be conditioned on the property appraising for at least the purchase price. The appraisal is optional.

Land Survey

A Survey is often part of the real estate closing. The Purpose of a real estate survey is to mark the property boundaries, and map them in relation to the surrounding properties.

If there isn’t an existing survey on the property, and the boundaries are not marked, you need a survey.
Surveys are often required when you build a house on the property. If you plan on building in the future, this is good time to get a survey as the seller may pay all or part of the cost.

Property Inspection

The inspection is your last chance to look at the land again before you buy. This is usually scheduled just before signing.

Depending on what you are buying this could be very important. If you are buying land only, it may be less important, but if you are buying land with buildings, equipment, etc., this is the time to make sure everything is in working condition.

Real Estate Escrow Signing

Finally, it’s time to show up at the designated place to sign the Real Estate closing documents. This is sometimes referred to as the Escrow closing, although the entire process is part of the escrow closing. The previous steps may happen without your knowledge, and explains why it takes so long.

You will need to bring the required money to close. The amount should be certified funds (cashier’s check, wire, etc.).

This is the time to review all the papers and have any questions answered. This is your last chance to have any concerns addressed by the seller or realtor. Once you sign the papers the land and any problems are yours.

Document Recording

After signing, and after the money has been cleared, the title company will record the deed, transferring the property into your name.

If you borrowed money to purchase, the mortgage documents will also be recorded. After the recording is completed, you become the official owner.

Possession

Date of possession will be sometime after Recording. It is usually an agreed number of days after the recording, as agreed in the purchase contract.