RESIDENTIAL REAL ESTATE CONTRACTS: SECTION 19-22
This is a brief summary of real estate contracts. This summary does not cover all aspects of the contract. This video has been made specifically for Real Estate Agents to use as an unofficial educational resource. Nothing in this video is intended to convey legal advice or best practices in any field. This video is only intended to give general advice on broad topics relating to contracts and the closing process at large. For legal advice please contact an attorney and for lending advice please contact a lender.
This section is solely to protect the Realtor. It states that you are not a structural engineer, plumber, or any other licensed representative and that all advice on such matters should be taken from someone licensed in that field. For your own protection, this is what you should always tell clients. You may give your opinion on matters but have to identify that you are not licensed to give advice on this topic. This is also an opportunity for you to say that, although you can’t advise on that topic, you know a licensed person who can and you can recommend this person to your client. This is one of those situations where it comes in handy to form solid bonds with other individuals who work within the industry in some aspect: surveyors, pest control technicians, electricians, plumbers, attorneys, etc.
The disclosures for conventional, FHA, and VA loans are broken down here. VA and FHA have special protections built into them that conventional loans do not have, and this is one of the reasons why we highlighted the section where you have to input loan information on page 1.
One protection is that the appraisal is required to let the lender determine the maximum mortgage amount. Let’s say the property doesn’t appraise for the full amount you’ve agreed to purchase it for. Until now, if the property appraised for a lower amount, you have still agreed to pay the higher amount to purchase it. This section protects the buyer in that a low appraisal will likely affect the loan, and if the buyer can no longer get the loan for the property then they are no longer required to buy it.
You are not required to pay your entire year’s taxes at the end of the year if you didn’t hold the property for the entire term. You only pay taxes for the time you have the property.
The most important part of this section, though, is the HOA section. Your attorney has to contact all HOAs associated with your closing to find out if they have special dues, fees, or transfer bonds that apply to the closing. For example, some HOAs have a transfer fee of 1% of the sale price when transferring from seller to buyer. This is often not a fee the buyer will anticipate, so it’s important to let them know about it as early in the process as possible. HOAs and their rules change frequently, so if you are the listing agent and you know there is an HOA in your property’s area, please collect that information and send it in to the attorney handling your closing.
22. RISK OF LOSS
We discussed earlier that the seller needs to keep utilities on during the inspection process, but they also have to keep insurance on during the time period leading up to closing. If something happens to the property while it’s under contract, it is the seller’s responsibility to have the insurance to pay for it, to rebuild it, and to fix it. Technically the purchaser has the option to assume the proceeds of that insurance company and once they have closed they can fix it the way they want to. Some see this as an opportunity to remodel or fix things the way they want. There are exceptions to this; if the purchaser is the one who caused the problems then that purchaser is responsible for fixing them. If you are performing inspections and you’re the one who damages things, then you’re responsible.
Click below to download the documents from this class
Sample Real Estate Contract (highlighted)
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