BUYER ADVISORY: Topics to research before purchasing real estate (ADRE)
BUYER BROKER AGREEMENT:
YOU HAVE ONE SIGNED WITH YOUR BUYER. YOU FIND THE BUYER A HOME AND YOU ARE PAID BY THE LISTING BROKER--WONDERFUL! BUT WAIT--THERE'S MORE! ANOTHER BROKER CLAIMS TO BE THE PROCURING-CAUSE OF THESE BUYERS, HE HAS SHOWN THEM THE SAME HOME PRIOR TO THIS.
HE or SHE FILES WITH AAR AND BEATS YOU UP AND YOU GIVE UP YOUR COMMISSION PLUS THE $500 FILING FEE. MAYBE YOUR BBA SHOULD HAVE BEEN AMENDED SOMEWHAT TO HANDLE THIS SITUATION! LIKE THIS:
“If Buyers have viewed any property with another brokerage firm that they subsequently purchase through xxx and HomeSmart that forms into a “procuring cause” complaint at the Board of Realtors, all costs of this complaint and any awards of commissions that are lost to another broker shall be paid by the Buyers within 10 days of demand from xxx, Real Estate Agent with HomeSmart.”
BUYER BROKER AGREEMENT RELEASE: (From Agent) Buyer is hereby released from the Buyer Broker Agreement dated xx/xx/xxxx, EXCEPT for those homes that (AGENT NAME) has already shown to buyer, or has written/submitted offers.
BUYER CONTINGENCY ADDENDUM, AAR https://www.aaronline.com/wp-content/uploads/2014/02/February-2014-AZR.pdf
Buyer contingency offers without an offer on current home. What kind of closing date would you ask for in a situation like this?
There is no right or wrong, but line 11 of the Buyer Contingency Addendum is often 30-45 days from contract acceptance, and line 14 (which is the one where you're estimating the COE date for the Buyers current house) is usually 30-45 days after that. That means that the COE date for the contract on the subject property is usually estimated at 60-90 days.
Obviously that can be changed with an addendum if the circumstances change. KF
BUYER CONTINGENCY ADDENDUM: NOTE: If Buyer is Contingent, make sure that their “Accepted Offer” for their Contingent Property is further Contingent Upon Seller “Accepting/Approving” of Buyers Accepted Offer. (See line #’s 12-13 in BCA). Also, if our buyer, request seller put to UCB. If our listing, recommend seller put to CCBS (seller wishes to make explicit that contract is contingent)
CONTINGENT BUYERS ACCEPTANCE FOR HIS/HER SALE MUST INCLUDE THIS COUNTEROFFER LANGUAGE (BECAUSE SELLER OF HIS REPLACEMENT HOME HAS TO APPROVE AND ACCEPT CONTINGENT BUYERS CONTRCT!) “This offer is contingent upon Seller(A) submitting this Purchase Contract to the Seller(B) of the Replacement Property where Seller(A) is acting in the capacity of Contingent Buyer, and Sellers(B) Acceptance and Approval of this offer.” “Notice of Seller(B) Acceptance or Denial to be delivered within 5 days of Receipt of the Accepted Offer Documents.”
BUYER CONTINGENCY ADDENDUM, BUYER RECEIVED OFFER, WHAT NEXT? (TOP HALF OF FORM) Buyer must submit accepted contract within 3 days of execution (line # 10-11) or by date on line #11, whichever occurs first. Seller may, within 5 days of receipt of accepted offer documents (line # 11-12) cancel this contract and all Earnest Money shall be returned to Buyer. Unless Seller cancels within 5 days of receipt of buyers offer documents, this contract shall become contingent on the closing of the PENDING SALE by xx/xx/xxxx (line #14).
“NOTIFICATION AND ACKNOWLEDGEMENT OF BUYER SUBMITTING ACCEPTED OFFER TO SELLER” “Buyer hereby delivers notice to seller that buyer has accepted an offer for Buyers Contingent property located at 123 Main Street, Tempe. Offer is Attached. Seller has 5 days from receipt of this notice to accept or reject Buyers accepted offer documents (See line #’s 11-12 of BCA). If Seller does not cancel within 5 days, this contract shall become contingent on the closing of the pending sale of Buyers property by xx/xx/xxxx (See Line #14 of BCA).
“NOTIFICATION AND ACKNOWLEDGEMENT OF SELLERS APPROVAL OF BUYERS ACCEPTED OFFER” “Seller hereby delivers notice to Buyer that Seller accepts and approves the Buyers Purchase Offer for Buyers Contingent property located at 123 Main Stree, Tempe. This purchase agreement is now contingent on the closing of the pending sale of Buyers property by xx/xx/xxxx. (See Line #14 of BCA).
“NOTIFICATION AND ACKNOWLEDGEMENT OF CANCELLATION, SELLER REJECTS BUYERS ACCEPTED OFFER: “Seller hereby delivers notice to Buyer that Offer to Purchase Buyers Contingent Property is deemed unacceptable and Seller elects to immediately cancel this Purchase Contract as allowed in the Buyer Contingency Addendum (See line #’s 11-12 of BCA). Title Company is instructed to issue written notice of escrow cancellation and immediately release Earnest Money to Buyer.” (Unless EM was non-refundable).
“NOTIFICATION AND ACKNOWLEDGEMENT OF CANCELLATION, NO ACCEPTED OFFER ON BUYERS CONTINGENT PROPERTY:” “Buyer hereby delivers notice to Seller that no offer for the sale of the Buyers Contingent Property was accepted by the Required Date of xx/xx/xxxx (See line #11 of the BCA). As per line #’s 23-25 of the BCA, this Contract is now cancelled. Title Company is hereby instructed to issue written notice of escrow cancellation and immediately release Earnest Money to Buyer.” (Unless EM was non-refundable). OR “Seller hereby delivers notice to Buyer that no accepted offer for the purchase of the Buyers Contingent property was delivered to Seller by the Required date of xx/xx/xxxx (See line #11 of the BCA). As per line #’s 23-25 of the BCA, this Contract is now cancelled. Title Company is instructed to issue written notice of escrow cancellation and immediately release Earnest Money to Buyer.” (Unless EM was non-refundable).
CANCELLATION OF BUYER’S ACCEPTED OFFER: (Bottom portion of form: Once Buyer Accepts Offer, Contract Becomes Contingent on Closing, now similar to top portion of form, which is here:)
CANCELLATION OF ACCEPTED OFFER FOR BUYER’S PROPERTY: If Buyer’s Accepted Offer cancels for any reason, Buyer shall deliver notice to Seller within three (3) days of Buyer’s receipt of cancellation and provide evidence of cancellation.
Notice to Seller shall state Buyer’s election to either: Immediately cancel this Contract and all Earnest Money shall be released to Buyer; or Proceed with the Contract by removing this Buyer Contingency and provide: (i) written documentation from Buyer’s Lender that Buyer can close escrow by the COE Date without the sale and closing of Buyer’s Property; or if this is an all cash sale (ii) evidence of Buyer’s financial ability to close escrow by the COE Date without the sale and closing of Buyer’s Property. Should Buyer elect to proceed with this Contract, Seller and Buyer agree that all other contingencies shall remain.
“NOTIFICATION AND ACKNOWLEDGEMENT OF CANCELLATION OF BUYERS ACCEPTED OFFER AND BUYERS CANCELLATION OF PURCHASE CONTRACT” “Buyer hereby delivers notice to seller that buyers accepted offer for the property located at 123 Main Street, Tempe has been cancelled. Evidence of cancellation is Attached. (See Line #’s 15-22 of the BCA). Therefore, Buyer elects to immediately cancel the purchase contract for the for the property located at 456 Jones Street, Tempe and requests that Earnest Money be immediately released back to Buyer per line #18 of the Buyer Contingency Addendum.” Title Company is hereby instructed to issue written notice of escrow cancellation and immediately release Earnest Money to Buyer.” (Unless EM was non-refundable).
“NOTIFICATION AND ACKNOWLEDGEMENT OF CANCELLATION OF BUYERS ACCEPTED OFFER, BUYER ELECTS TO REMOVE CONTINGENCY AND PROCEED WITH PURCHASE CONTRACT” “Buyer hereby delivers notice to seller that buyers accepted offer for the property located at 123 Main Street, Tempe has been cancelled. Evidence of cancellation is Attached. (See Line #’s 15-22 of the BCA). Buyer hereby informs Seller that Buyer is Removing the Buyer Contingency from the Purchase Contract dated xx/xx/xxxx and will proceed to close escrow, notwithstanding the terms and conditions agreed to in the Purchase Contract (see line #32 of BCA). Lender Pre-Qualificaton (or LSU or proof of funds if cash) is attached with the Box on Line #8 (Line #14 LSU) checked that “Buyer is not relying on the sale or lease of a property to qualify for this loan.’ “Home Sale Requirement” provision is now removed. This Purchase Contract shall continue in full legal force and effect.”
BUYER CONTINGENCY ADDENDUM, SELLER ACCEPTS BACKUP OFFER: (Note: Back up Offer Cannot “Kick Out” Offer when contingent on COE only (bottom portion of form or accepted/approved offer on top portion of form). Scenario, Buyer submits BCA with purchase contract, contingent on Accepted Offer For Buyers Property (TOP HALF OF FORM). (Marleny Gomez, Adrian Hayman (mate). Seller accepts. During escrow, Seller accepts backup offer. Buyer has two choices: 1) Remove contingency and continue with transaction, or 2) Cancel transaction.
Seller first delivers notice to buyer, buyers responds with number one or number two below. Use an Addendum, both parties sign.
“NOTIFICATION AND ACKNOWLEDGEMENT THAT SELLER HAS ACCEPTED BACKUP OFFER” “Seller hereby delivers notice to Contingent Buyer that Seller has accepted a backup offer for the property located at 123 Main Street, Tempe. See line #’s 26-32. Buyer now has 5 days to deliver written notice to seller that Buyer elects to either Remove Contingency and proceed to close or this contract shall be deemed cancelled and Earnest Money shall be released to the Buyer. If Buyer elects to proceed to close, notice from Buyer shall include written documentation from Buyers Lender (Pre-Qualification or updated LSU with Home Sale Provision removed), or if all cash, evidence of Buyers Financial Ability to close escrow by the COE date without the sale and closing of the Buyers Property.”
1) “NOTIFICATION AND ACKNOWLEDGEMENT OF BUYERS CONTINGENCY REMOVAL” Buyer received notice on xx/xx/xxxx that Seller has accepted a backup offer for the property located at 123 Main Street, Tempe. As per line #’s 26-32 of the Buyer Contingency Addendum, Buyer hereby informs Seller that Buyer is Removing the Buyer Contingency from the Purchase Contract dated xx/xx/xxxx and will proceed to close escrow, notwithstanding the terms and conditions agreed to in the Purchase Contract (see line #32 of BCA). Lender Pre-Qualificaton (or LSU or proof of funds if cash) is attached with the Box on Line #8 (Line #14 LSU) checked that “Buyer is not relying on the sale or lease of a property to qualify for this loan.’ “Home Sale Requirement” provision is now removed. This Purchase Contract shall continue in full legal force and effect.” OR
2) “NOTIFICATION AND ACKNOWLEDGEMENT OF BUYERS CANCELLATION” Buyer received notice on xx/xx/xxxx that Seller has accepted a backup offer for the property located at 123 Main Street, Tempe. As per line #’s 30-31 of the Buyer Contingency Addendum, Buyer hereby informs Seller that Buyer is unable to remove the Buyer Contingency and elects to immediately cancel the Purchase Contract dated xx/xx/xxxx. Earnest Money to be immediately refunded to the Buyer.”
BUYER CONTINGENCY FAILED, BUT KEEP CONTRACT IN FORCE, EXECUTE REPLACEMENT BCA OR EXTEND: “Seller & Buyer acknowledge and agree that the Buyer Contingency which was attached to and made a part of the PC dated xx/xx/xxxx has failed due to the cancellation of the buyers accepted offer. Contrary to any language otherwise in the PC, Addenda or other related documents, Seller & Buyer agree that this PC will not be cancelled and will remain in full legal force and effect and both parties hereby agree to execute the attached, Revised/Amended Buyer Contingency Addendum simultaneously along with this Addendum.”
Good morning: We have a buyer contingency offer on the new home for our seller and our buyer just cancelled. Per the 2nd section of the contingency addendum we need to give notice to the seller that we have lost our buyer and the contract be deemed cancelled. The seller we are under contract with is willing to convert the contingent offer to a section 1 contingent offer still keeping us under contract and allowing us the opportunity to get the house back under contract… my question is, can we write an addendum to change the original contingency addendum or do we need to cancel the entire contract and re-write it using a new contingency addendum with section 1 checked instead of section 2 checked?
Rey, you could do it on an Addendum, say something like "Buyer has notified Seller that their Contingent Offer for the property located at 123 Main Street has been cancelled. Contrary to any language otherwise, either in the PC or any related documents or Addenda, this Purchase Contract dated xx/xx/xxxx shall not be cancelled. Buyer and Seller agree to execute an Amended Buyer Contingency Addendum (attached). The Purchase Contract dated xx/xx/xxxx shall remain in full legal force and effect. All other terms and conditions shall remain the same."
“Contingency Period to have Buyers property at 123 Main St, Tempe, AZ under contract is hereby extended to xx/xx/xxxx.”
Be sure to check your COE date on your PC to see if that needs to be amended as well.
BUYER CONTINGENCY ADDENDUM, DELAY INSPECTIONS UNTIL OFFER 1) RECEIVED, OR 2) APPROVED, IF MY BUYER) (Use language from back up offer/short sale addendum) 1) “The date of Buyer’s written notice to Seller that Buyer has accepted an offer for Buyer’s property shall be deemed the date of contract acceptance for purposes of all applicable contract time periods. Buyer shall promptly open Escrow and deposit Earnest Money as described in the Contract upon delivery of written notice of Contract Acceptance to Seller.” OR
2) “The date of Sellers written notice to Buyer that Seller has Approved of offer for Buyer’s contingent property shall be deemed the date of contract acceptance for purposes of all applicable contract time periods. Buyer shall promptly open Escrow and deposit Earnest Money as described in the Contract upon receipt of written notice that Seller has Approved of Buyers Offer on his/her Contingent Property.”
BUYER CONTINGENCY IS NOW SATISFIED:
Hi - Well, with deals come questions....I have a buyer who no longer needs to purchase contingent on the sale of his property. He would be completely removing that contingency. Do I just use an addendum to state the contingency is removed? Thx - K
Hi Karen, while not required, you could certainly create an Addendum stating that "the buyers home sale contingency has been satisfied and is hereby removed as a condition of this purchase contract dated xx/xx/xxxx." Totally up to you. Jeff.
CAMERAS: So, I was at a listing appointment and the seller informed me that there are cameras in the house. They record both audio and video. Are there any legal issues with this if the house is listed with a Realtor?
Not that I've ever heard of Diane, especially if they disclosed that there were cameras with audio there.
So does it need to be disclosed somehow for Buyers agents/buyers looking at the house?
Good morning Diane, An NAR article from June, 2016 states the following:
The cameras are most likely legal, although the laws can vary by state, says Indiana University law professor Fred Cate.
“It's against the law to record someone on audio or video if they’re in a situation in which they have a reasonable expectation of privacy, [such as in] a changing room or a locker room or a bathroom,” says Cate, author of “Privacy in the Information Age.” “But when you’re in somebody else's house with a real estate agent, it’s a little harder to argue you really have an expectation of privacy.”
So, as a professional courtesy, it's my opinion that it's probably a good idea to disclose that there are cameras recording both video & audio in the home.
CANCEL WITHOUT CAUSE: We are well past inspections, appraisal came in and lastly we have clear to close!!! This is all great stuff right….My client is now freaked out about the aluminum wiring and piggy tailing with copper and tells me that she would like to have an electrican out to review the electrical.. She is a professor at ASU and understands that she was offered to have this done during inspections and elected not to. She tells me that if she doesn’t hear what gives her comfort, she is going to cancel the sale and is willing to lose her earnest money of $2,500. Besides loosing the earnest money, what recourse would the seller have? Seller is a licensed real estate agent as well.
Hi Kim, section 7b of the PC outlines what might happen if the contract is breached. Typically, the Earnest Money is forfeited to the seller, however, there is always a possibility that the seller could try to claim additional damages, that would be getting into the "legalities of contract breach" and it would be hard to predict the outcome if that happens. Hope it all works out for you and your client.
CANCEL ON HOA DISCLOSURES: Buyer has reviewed and hereby gives seller notice of buyers disapproval of HOA disclosures. Therefore, Buyer elects to cancel the contract dated xx/xx/xxxx for the property located at 123 Main Street, Tempe, AZ as per lines #42-43 of the HOA Addendum. Buyer requests that Earnest Money be immediately released from escrorw and returned to Buyer. Signed____ Dated______.
CANCELLATION NOTICE, DISAPPROVAL OF HOA DISCLOSURES: As per the purchase contract dated xx/xx/xxxx and the HOA Addendum which was attached to and made a part of said contract, buyer hereby gives notice of disapproval of HOA Disclosures (CC&R’s, financial disclosures, monthly HOA fee’s, etc, etc.) and elects to immediately cancel the contract. This cancellation is within buyers unilateral rights as per the HOA Addendum, page two, line #’s 42-43. Effective immediately, please cancel escrow number 123456 and return the earnest deposit in full to the buyers. BUYER_________________DATE________________.
CANCEL, MUTUAL: “Seller and Buyer mutually agree to cancel this Purchase Contract dated xx/xx/xxxx. Seller agrees to immediately reimburse Buyer for inspection fee ($350) and appraisal fee ($450) for a total of $800. Earnest Money to be immediately released back to the Buyer.”
CANCELLATION: “In order to cancel this file in the HomeSmart system we will need 2 things. You will need to upload a copy of all contract documents you have pertaining to this file, including the document used to cancel the transaction (ie. BINSR, loan denial). In addition, please upload the letter or cancellation instructions from the title company stating that they have cancelled the file and the disposition of the earnest money as well. If mutual cancellation instructions were signed by both Buyer and Seller and it indicates who will receive the earnest money, that will work as well.”
CAPITAL GAINS AND THE SALE OF YOUR HOME, IRS https://www.irs.gov/taxtopics/tc701.html
CAPITAL IMPROVEMENT FEE (from HOA Addendum): Negotiable, typically paid by Buyer, some HOA’s mandate paid by buyer...why would seller want to pay on back end if they paid when they were the buyer on the front end?
The CAPITALIZATION RATE, often just called the CAP RATE, is the ratio of Net Operating Income (NOI) to property asset value. So, for example, if a property was listed for $1,000,000 and generated an NOI of $100,000, then the cap rate would be $100,000/$1,000,000, or 10%.
CC&R’S WITH NO HOA: Be careful, if no HOA but there are deed restrictions/CC&R’s, CC&R’s may be selectively enforced by neighbors/individuals even without an HOA. ESTOPPEL? Have your client speak with an attorney.