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.
CHANGES DURING ESCROW: SEE CURE PERIOD
CHANGE BROKERAGE: (plus see LISTING agent change) “Buyer Broker has been changed from ABC Realty to XYZ Realty effective immediately. ADRE License number xyz.”
CHANGE LENDERS, NO AGREEMENT: “Seller does not agree to Buyer Lender or Loan Program changes, which were agreed to by all parties in the original Purchase Contract dated xx/xx/xxxx.”
CHANGE LENDERS: BACKGROUND PLUS LANGUAGE Today my client decided to change lenders due to lack of communication from the previous lender. I have not had a transaction where this has happened. I know the seller needs to be notified right away. I believe the standard addendum is necessary but not sure of specific verbiage for action.
Hi Jeff, So the contract section on changes (section 2K) says that you must disclose the change to the Seller one way or another. The important part is the requirement that you can only change lenders without the Sellers permission if the change is not going to increase Sellers costs, delay the COE date, or affect your Buyers ability to obtain approval.
If it is possibly going to affect any of those 3 items you definitely need an addendum with the Seller agreeing to the Buyers change in lender. If it's NOT going to change any of those things, then you simply need to disclose in writing, via email usually, to the listing agent that your buyer has changed. That being said, it's always safest to have an addendum showing the Seller consent since that last requirement is always a concern. If you didn't get an addendum, and then the Buyer is denied the loan from this new lender sometime down the road, the Earnest Money would be jeopardy. Hopefully that makes sense.
On an addendum I would say something like "The Seller is aware and agrees that the Buyer is changing lenders from XYZ Mortgage Company to ABC Mortgage Company. A new LSU is attached." Take Care, KF
CHANGE LENDERS: Buyer changing lenders during escrow. I think that we tell our agent (buyers side) that while permission or consent isn't mandatory from the Seller, it's always safest to get an addendum stating that the Seller approves the change.
I just talked to an agent that said she was told that she didn't need an addendum, all she needed to do is disclose the change, which she did. The problem is that now her Buyers are being denied the loan by lender #2. Without something showing that the Seller gave consent, the EM may be in jeopardy if the Seller argues that changing lenders affected their ability to obtain approval. Do we agree on this or any other thoughts??
Agreed. And supply a new PreQual and LSUs. TM
CHANGE LENDERS AND DOWN PAYMENT:
My client is changing lenders. This will also change the down payment information form a 3.5% to a 5% loan. I have already informed the listing agent, by way of an addendum, of the buyers lenders information, but I didn't make reference to a change in the down payment. Do I need to make them aware of this? If does it need to be on an addendum? I have already sent a new prequal to the listing agent.
I would say that you don't need to change or update the Seller more that providing them the updated Prequal. That form should reflect the new 5% down payment. The concern is obviously with your client having to bring in extra money, that there are consequences if they cannot come up with that money. The contract says not having the funds necessary for the down payment does not constitute an unfulfilled loan contingency, so anytime you're increasing the down payment, there is chance for it to backfire. Kyle.
Q: We went under contract May 14 with a set down payment, but the buyer now wants to increase her down payment to lessen the monthly payment. She has already discussed this with the lender, but my question is do i now need to create an addendum to reflect this change? And if so is there any specific wording I need to include?
A: Prepare an Addendum stating that the parties acknowledge and agree that the buyer will be increasing her down payment from X% to Y% (or use whole dollars). Also, attach an updated LSU from the lender showing this change and make sure both the loan officer and the buyer sign off on that.
If the seller refuses to sign off on the addendum, I would say that you should update the Seller by providing her/him with the updated LSU/Prequal and informing seller via email of the change. That form should reflect the new down payment. The concern is obviously with your client having to bring in extra money, that there are consequences if they cannot come up with that money. The contract says not having the funds necessary for the down payment does not constitute an unfulfilled loan contingency, so anytime you're increasing the down payment, there is some chance of risk.
The buyer is changing from Conventional financing to FHA financing I would want it to say something like "The seller agrees and consents to the fact that the Buyer will be changing loan programs from conventional to FHA. Please see attached LSU."
That shows that they gave the Buyers permission to do so.
Or, if just sending notice without asking for permission: “Buyers financing has changed from a conventional loan to an FHA loan.”
CHANGING FROM FINANCING TO ALL CASH (BUYER): “Buyer & Seller acknowledge and agree to the following: Buyer is switching from financing to an all cash transaction. Letter of credit/source of funds is attached. Section 2 Financing Provisions in the Purchase Contract shall not apply. All other terms and conditions remain the same."
CHANGING FROM ALL CASH TO FINANCING (BUYER): “Buyer & Seller Acknowledge and Agree that the Buyer is changing from all cash to financing this purchase. Updated LSU (or prequel) is attached. Section 2 Financing Provisions in the Purchase Contract shall apply.” Appraisal to be completed within 14 calendar days of Seller and Buyer executing this Addendum (or by xx/xx/xxxx).
CLAUSES, LIBRARY OF CLAUSES: http://internetcrusade.com/articles/Clauses.htm
CLOSE UNDER PROTEST? DELAY CLOSING? SIGN AN EXTENSION?
CLOSE/PAID IS GOOD TO GO ONCE FILE IS COMPLETE, NO CHECK HOLD RELEASE
CLOSING COSTS: How much can sellers contribute?
CLOSING COSTS: (NON-RECURRING AND PREPAIDS) http://www.reedmc.com/closing%20costs.htm
CLOSING HURDLES, NAR: http://realtormag.realtor.org/sales-and-marketing/article/2010/08/clearing-closing-hurdles
CLUE REPORT (Now called Insuranc Claims History): How do I order an actual clue report? “You don't the seller can go on line and order one or simply call their insurance carrier and ask for a 5 year claim history.” The seller in this case has only been with current company for one year and they are and older couple and don't even have internet access. “They can either call their previous carrier or write a statement regarding any past claims. Read that section of the contract, either way I just mentioned will work.” Good luck.
CLUE REPORT: SEE INSURANCE CLAIMS HISTORY http://www.lexisnexis.com/risk/insurance/home-insurance.aspx
CO-BORROWER VS CO SIGNER http://finance.zacks.com/coborrower-vs-cosigner-1932.html
CODE OF ETHICS, NAR http://www.realtor.org/about-nar/governing-documents/the-code-of-ethics
CODE OF ETHICS, NAR https://www.nar.realtor/about-nar/governing-documents/the-code-of-ethics
SOCIAL MEDIA POSTS THAT GET YOU IN TROUBLE:
COMING SOON REQUIRES A SIGNED LISTING AGREEMENT! 1) signed ER, 2) note on page six “this is a non-mls listing until xx/xx/xxxx, 3) seller authorizes coming soon advertising, 4) sign rider “coming soon.”
COMMERCIAL TRANSACTIONS: Also See Referrals. & Expertise; Q: This is XYZ, I have a client who are interested in purchasing a commercial property (small piece of mini market) this client is purchasing just the property, not the business, since it's not profitable at the moment and I would like to know if my license allows me to represent a commercial buyer? if so, HomeSmart has any tutoring or mentor courses to commercial real estate beginners?
A: Commercial transactions are dramatically different from residential transactions. We strongly recommend that you refer it out to someone with commercial experience and expertise. We do not offer any commercial continuing education courses. AAR does offer commercial CE classes, you would have to check their education calendar to see which classes, dates and availability.
COMMISSIONS: Q: Dear Broker, We are in negotiations and close to a contract on a commercial transaction with a non-MLS member. He emailed me that he confirms the commission is 3% to the Buyer Broker (HomeSmart). I don't have a signature, just an email confirmation. Is this sufficient as a "separate agreement between brokers" for payment of co-broke? Do I need it signed by theirs and our broker, too? Thx, Steffy
A: Hi Steffy, an email is better than nothing, but if it were me I would want something signed by the agent just because that's a bit more official. Take Care, Kyle
COMMISSIONS PAYABLE TO HOMESMART: HomeSmart is to receive your fees prior to you receiving your check. If the check is cut directly to you, please cut HomeSmart a check to cover your fees for the transaction.
COMMISSION ADVANCE: We have a request that came in from an agent. Apparently builders are beginning to offer commission advancements to agent/brokers. I have attached the advancement addendum for your review. This one is from Meritage and I was told Toll Brothers are offering the same. I want it noted that if the transaction fails to close the advanced commissions will be due to the builder within 30 days.
I guess other brokerages are allowing this, what is our policy? JS
“We do not allow agents to get commission or until it closes unless builder will put in writing that it does not have to repaid if it does not close. They can pay us and we hold the commission until closing.” TM
COMMISSION ADVANCE: HOMESMART ONLY PAYS ECOMMISSION ON SALES, NOT LISTINGS.
COMMISSIONS: DEFEND YOUR COMMISSIONS WITH YOUR SELLERS!
COMMISSION REDUCTION REQUIREMENTS FOR BUYER/SELLER CREDIT PROGRAMS
1) Subject to lenders approval
2) CREDIT not REBATE
3) Dates of program
4) Approx value
5) How Qualify (what performance is required)
6) Waive commission, take $ off sales price, tax free
7) Waive commission, have seller give same dollar amount in concessions instead, tax free (Better, less out of pocket cash required at closing + tax free + not taxed on this income + better than off sales price, amortization schedule = short vs long!)
CRI: Credit Reduction Instructions: CREDIT SELLER OR BUYER AT COE:
I want to credit a portion of my commission to the Buyer’s down payment or closing costs. How do I do that?
There is a form under downloads titled “Commission Reduction Instructions.” Complete that form and forward it to the title company. Brokers will send a copy to the closing department after they sign. Keep in mind, it will be subject to the lender’s approval. Be certain you obtain the lenders approval prior to offering this to your Buyer as there are some loan programs that do not allow contributions to the Buyer, or that have a cap of contributions that the Buyer can receive. You don’t want to be in a situation where you’ve promised to contribute money to your clients costs only to be told by the lender that you won’t be allowed to.
COMMISSIONS, COMMISSION REDUCTION INSTRUCTIONS: I am selling and purchasing a new home for myself. I would like to waive my co-broke on the purchase. Would it be appropriate to include the language in the contract or should it be done separately? Also, are there any savings in the fees owed to Home Smart since it is my own sale and purchase?
Hi Chad. It is never appropriate to include any language in the purchase contract referencing commissions. That should be done outside of the purchase contract. I have attached a form that you might be able to use to address waiving your commission in lieu of a lower sales price. Please call with any questions regarding this.
We do not offer discounted fee's for owner/agent transactions.
COMMISSION, WAIVE COMMISSION:
I have attached a commission waiver form. Remember, you must have at a minimum your HomeSmart transaction fee's.
It is against policy to include and verbiage in the contract regarding commissions, so use a form such as the one attached to accomplish that.
Also remember it is up to you to ensure that your contract price reflects your commission adjustment.
CRI Hi Patti, I can't sign this one either. You cannot pay or allocate commission dollars to anyone other than your client or another licensed agent. In this case you're saying to pay AZ Fence Company, which we can't allow.
What you'll want to do is simply credit the $1000 toward your clients closing costs, and that will leave the $1000 in their pocket to pay the fence company. Sorry that it needs to be revised again, but unfortunately we can't do it this way.
COMMISSION, BUYER WAIVING COMMISSION: I am personally buying this home and will pay for the $300 transaction fee at closing. Thanks for approving, and please call with any questions.
Here you go Debbie, please make sure that you instruct the Escrow Officer to put the $300 as commission on the Settlement Statement as a Buyer cost. I made that change on the form. That way it's going thru the title company. Kyle.
COE ADJUSTMENT: “COE may occur sooner with a written, mutual agreement between the parties.” Do not write COE as "on or before xx/xx/xxxx." Too ambiguous.
“Seller and Buyer acknowledge and agree that COE may occur sooner with written, mutual agreement between the parties.”
COE Delayed: I have a land sale that should have closed Friday Sept 8th, but did not close. The title company sent the closing papers to the buyer on Sept 7th and he lives out of state. He is a truck driver and could not get the papers signed and sent back to close on Friday. They are hoping to get the paperwork back to close Monday Sept. 11th (today). I wasn't notified until Friday afternoon when I asked how closing was coming along. My question is, do I need to do anything? Do I need an addendum sent over with a new COE date?
“No you really don't need to do an extension at this point. If you know it's going to close today then I'd basically just wait and let it close. If it were going to be next week then I would say to do an extension, but for a few days it's not overly critical as long as the parties are all on the same page.”
COMPENSATION FROM BOTH BUYER AND SELLER LANGUAGE “All parties acknowledge that buyers agent is being compensated by both seller and buyer in this transaction.”
COMPENSATION ADJUSTMENT: “Contrary to any offer of compensation offered through the Arizona Regional Multiple Listing Service (ARMLS), the total compensation due to the Selling Broker upon successful close of escrow for the above transaction shall be X% or X$.”
CONCESSIONS: CLOSING COSTS, SELLER TO BUYER CREDIT LANGUAGE + overrides language in contract that limits WHAT items can be credited). “Seller agrees to credit buyer $x at COE which may be applied to any and all borrower closing costs including loan costs, title fees, escrow fees, pre-paids, appraisal, HOA fees, capital improvement fees, home warranty or any other closing cost approved by lender at buyers sole discretion.” However should the total buyer closing costs be less than the agreed amount of $4,500 both parties agree to a principle price reduction by the amount of the remaining balance.”
2) “Seller agrees to contribute a total of $x towards buyer closing costs which include but are not limited to pre-paids, appraisal fees, loan costs, title and escrow fees, home warranty and any other closing cost approved by lender at buyers sole discretion. Any unused portion or amount disallowed by lender shall remain with the seller.”
“Seller to credit buyer an additional $X at close of escrow, bringing total seller concessions to $Y.”
CONCESSIONS, REMOVE CONCESSIONS DUE TO LOW APPRAISEL (or any reason). “Seller & Buyer acknowledge and agree that contrary to line #x of the PC, seller concessions shall be a total of $0 (or, shall read $0).” OR
“New Sales Price shall be Appraised Value of $x.” “New Sales Price is $x” or “Sales Price is hereby Reduced to $x.” “Seller concessions are hereby reduced to $x (or x% of new or existing sales price).”
CONCESSIONS, BACKGROUND--Pre Qual or LSU says buyer relying on concessions but concessions removed, REVISE LSU
CONCESSIONS REMOVED, COUNTER OFFER LANGUAGE: "Buyer to provide an updated pre qual or LSU within 48 hours of contract acceptance with seller concessions removed as a requirement."
CONCESSIONS: Prequalification says no but buyer is asking for concessions in purchase contract. They don’t need the concessions. Probably submit a counter offer removing concessions.
CONCESSIONS: RAISE PRICE SO CAN ASK SELLER FOR CONCESSIONS? Q: I am representing the buyer and we are within the 10-day home inspection period. We offered full price and didn't ask for closing costs as my buyer thought she would roll her closing costs into her loan. She now doesn't want to do that because her interest rate will go from 4% to 4.5 or 4.625.
The home was priced on the low end of the comps so I asked the listing agent if we could raise the price 5k and sellers give 5k for CC's. The listing agent is worried about that flagging the appraiser. My questions are. If seller is willing to do this could we just give them a new pg one with the new price and a new pg 3 with the 5k CC's or would we have to cancel this contract and write a new one?
A: You cannot just replace pages within a contract - the buyer and seller can formally cancel the contract and escrow and re enter into a new agreement. Jenny
con·cil·i·a·to·ry, kənˈsilēəˌtôrē/Submit adjective intended or likely to placate or pacify. "a conciliatory approach"...