re u 18

What is the purpose of a purchase agreement in real estate?

It is the culmination of marketing efforts and helps buyers find a property.

sales contracts overview

Purchase agreement is culmination of marketing efforts

• Helping buyers find a property

• Real estate licensees expedite negotiations

Bring both parties to agreement

Priority is to the client they represent

meeting of the minds

What is the Seller's Property Disclosure Statement?

A document that requires sellers to disclose known facts about the condition of one-to-four family dwelling units.

seller has duty to disclose any defects that threten structural soundness or personal safety

buyer has respons to discover any problems/issues that are important to them and use this info to formulate their offer

licensee = obligated to disclose know costs assoc w selling or buying prop before clients enter agreement of sale

disclosures

Licensees are obligated to disclose known facts about the

property

• Buyers are obligated to discover any problems or issues

important to them

Ie. Home Inspection Contingency

Licensees are obligated to blank known facts about the

property

disclose

Buyers are obligated to blank any problems or issues

important to them

discover

Ie. Home Inspection Contingency

What are material facts in real estate?

Information that is significant to the person and that person's ability to

make an informed decision

Ie. Think of it as relevant and important facts

info outside of prop condition may be important…ex. allergies, specific use for prop,

certain matters are not material according to courts, like those that violate fair housing laws

What are latent defects?

Hidden structure defects not easily discovered by ordinary inspection

Buyers have responsibility to discover

Ie. Seller may not know BUT remember Seller cannot conceal

buyers may cancel sale or seek damages when seller conceals

courts rule in favor of buyer when seller neglected to reveal violations of zoning or building codes (ex. building house on landfill and structual soundness compromised)

licensee must disclose any material fact discovered to buyer, if not, may be liable to buyer

What are stigmatized properties?

Undesirable because of events that occurred on the property

Criminal events

Illegal drug manufacturing

Gang-related activity

Death or suicide on the property

PA stigmatized properties, Milliken v. Jacono

psych stigmas are not material defects that reduce value of the prop and thus do not req seller disclosure

it is up to the buyer to research infamous history of house

What are closing cost estimates?

Estimated statements of closing costs

Provide buyers and sellers BEFORE they enter into an agreement of sale

RE Commission’s Rules state it must include

- Broker's commission

- Mortgage payments and financing costs

Taxes and assessments

Prorated based on settlement date.

Settlement costs

Title Insurance, Notary, Docketing, Wire Transfer, Filing, Etc.

Note: Title insurance is standardized pricing but title company fees differ. You can

negotiate certain fees.

As accurate as can be expected from someone having knowledge of and experience in

the field.

first one to see agreement of sale is..

buyer

Step 1: Buyer makes an OFFER on the Agreement of Sale form.

Step 2: Seller Signs the Agreement of Sale to ACCEPT. At this point

we have a....CONTRACT

What is proration?

A proportional calculation based on who (buyer or seller) actually owes an expense for a given period of time

It prevents overcharging by adjusting costs to reflect actual consumption, such as mid-month move-ins or subscription changes, calculating payments based on days used versus total days

What must sellers provide under the Uniform Condominium Act + Uniform Planned. Community Act?

Sllers must furnish the buyers with copies of the development's declaration, bylaws, and rules + regulations, and resale certif if applicable

Note: Remember these from Real Estate Fundamentals? The requirements for forming a condo plus those required to run the condo.

Buyer is entitled to five days to review the documents

if fifth day extends past the date a binding agreement of sale is formed or even past the closing date, buyer has right to void purch

fraud

intentional misrepresentation of material fact to harm or take advtage of another person

false stmnt ab prop or concealing facts

misrepresentation

Unintentional misstatement or omission

Can be an issue if the licensee should have known (negligent misrep)…lack of awareness = no excuse; if buyer relies on licensee’s stmnt, licensee is liable for damages

if licensee fails to preform act, like failing to deliver counteroffer—damages

Licensee could be held liable

What is the difference between opinion and fact in real estate disclosures?

Statements of opinion are permissible if there is no intention to deceive

fraud

Intentional misrepresentation of a material fact

To harm or take advantage of the other person

Contract may be disaffirmed or renounced

Misrepresentation

Unintentional misstatement or omission

Can be an issue if the licensee should have known

Licensee could be held liable

Puffing

Ie. The Best View in the Northern Hemisphere

What is puffing?

An exaggeration of fact; of prop’s benefits ex. The Best View in the Northern Hemisphere...exam! sounds good, not really true (best cheesesteak in Philly)

won't get in trouble, but will get in trouble for fraud or intentional misrepresentation or taking advantage of material fact…ex : neglected to inform buyer that lot next to prop is being used as toxic waste dump, or buyer asks if area is safe and licensee lies despite violent crime skyrocketing

may face disciplinary action from State Real Estate Commission

What is the first step in the Agreement of Sale process?

The buyer makes an offer on the Agreement of Sale form.

-aka Offer to purchase in some areas

• When signed by seller it becomes an agreement of sale

• Legally enforceable contractual relationship between buyer and

seller

• Dictates contents of the deed

agreement of sale: signing the contract

Fill in blanks of preprinted forms

Avoid unauthorized practice of law

Ie. Drafting own forms. Charging for additional services (filling in blanks cant charge)

agreement of sale: offer

Earnest money

Binder

Counteroffer

what is earnest money?

deposit on a home offer that shows that you are serious, broker holds

goes to down pmt

amt decoded by buyer and seller:

-discourage buyer from defaulting

-compensate seller for taking prop off mrkt

-and cover expenses seller might incur if buyer defaults

what is binder in real estate?

a preliminary, often legally binding, document outlining the key terms of a property purchase (price, closing date, contingencies) accompanied by an earnest money deposit to show serious intent.

It acts as a temporary agreement, bridging the gap between an offer and the formal contract, typically lasting 5-10 days

agreement of sale: acceptance

Use of electronic signatures is appropriate

Equitable title

Ie. Seller will be giving up their rights to the property

Destruction of premises

Ie. Contract terms provide for what happens here. Typically, if the property is destroyed, the contract is void. Also, Seller must maintain property insurance until closing date.

What happens when the seller signs the Agreement of Sale?

It becomes a legally enforceable contract between the buyer and seller.

parts of agreement of sale

Identify purchaser

Identify property

Identify seller and type of deed

-Ie. PA will be a Special/Limited Warranty Deed.

Financial details

Contingencies

Closing details

Addendums can be added at the end of the Agreement.

-Title evidence

Proration details

Liquidated damages

Dated signatures of all parties

Personal property

Special assessments

Buyers' final walkthrough

Other details

What key details must be included in an Agreement of Sale?

-Sales price and terms

• Legal description of the property

• Statement of kind and condition of title

• Form of deed to be delivered by seller

• Kind of title evidence, defects of title

• All terms and conditions

• Any contingencies

parts of agreement of sale: contingencies

Contingencies (protect the buyer), create voidable contract

3 elements

actions necessary to satisfy, time frame actions must be performed, who is respons for paying for any costs

Mortgage

Inspection

Property sale and buyer actions

escape clause: seller can continue to market prop until buyer’s contingencies satsified or removed, buyer retains right to elim ocntingencies if sller receives more favorable offer

types of disclosures

Agency

Real estate recovery fund

Zoning classification

Lead-based paint (pre-1978)

What is the role of earnest money in a real estate transaction?

It serves as a deposit to demonstrate the buyer's commitment to the purchase.

limiting liability....

-Who is your client?

What are your duties to your client?

Disclosed dual agency

Time is of the essence

Ie. Deadlines matter, need to be done by specific date

Disclosure duties

What is equitable title?

The rights of the buyer to obtain full ownership of the property upon completion of the sale.

not legal title, now buyer has interest in prop…after sales contract executed

What happens if the property is destroyed before closing?

Typically, the contract is void, and the seller must maintain property insurance until the closing date.

What are contingencies in a real estate contract?

Conditions that must be met for the contract to be valid, such as mortgage approval or home inspections.

What is the purpose of amendments and addendums in a contract?

To modify or add terms to the original agreement.

What is the significance of 'time is of the essence' in a contract?

It emphasizes that deadlines in the contract must be adhered to strictly.

option agreements

unilateral contract by which optionor (owner)gives optionee (prospective buyer) the right to buy or lease owner’s prop at fixed price w/in specif period of time

pays a fee for this option right-buyer

binds seller only

other agreements

Installment contracts

Contract for deed, land contract

seller retain title, purchaser pays reg installments for specif period of time until after titletransfers?

• Lease Purchases

• Note: Typically these contracts are done by lawyers. It is

very rare to see these on the MLS or performed by a

realtor. A person may approach a realtor with a contract or

sale proposal but the realtor should seek or refer to legal

counsel and avoid unauthorized practice of law.

What are installment contracts?

Contracts for deed or land contracts that allow buyers to pay for property over time.

buyer obtains equitable title, pays RE tax, insurance premiums, maintains prop,

Why should realtors avoid unauthorized practice of law?

To prevent legal issues and ensure compliance with legal standards.