Section 1.a Lines 1-4
All parties to the contract must be named. If you are not 100% confident of the Sellers legal names it is permissible to check the “as identified in section 9c” box on line 2. Please be aware however, that some lenders will require the contract to reflect the sellers names on page one.
What is the correct way to reflect buyers when the purchaser is an LLC or a corporation?
When an offer is written “and/or nominee” or “and/or assignee” it is important to remember that even if the buyer assigns the buyer rights or nominates another buyer, the original buyer continues to be obligated to the seller and will be liable if the assignee or nominee fails to perform.
What is included in the “Premises”?
AZ Law (A.R.S. §25-214 (C) states that both husband and wife must sign the real estate contract and all other agreements related to the transfer of real property for the community property to be obligated. If this is impossible, one spouse can execute documents on behalf of the other pursuant to a power of attorney.
ALSO: Both husband and wife should sign the written disapproval notice (BINSR) whether they are the buyers or the sellers.
What are the risks associated with the property section?
Section 1.b Lines 5-9
The Property must be clearly identified so as to make no mistake as to the location. This is accomplished through the use of the legal description. You must use the full legal description. Do not write lengthy!
Best practice tip: When you receive the prelim title report check the legal address against the contract. If there is a difference discuss with the Title Company and if appropriate amend the contract.
Section 1.c Lines 10-20
Line 10: The full purchase price before any concessions or contributions
Line 11: The amount the buyer wishes to “risk” to show the seller the buyer’s good faith. One of the myths believed by many real estate agents is that more earnest money is better.
Line 11 asks the parties to identify the amount of Earnest Money. Is Earnest money required to have a valid contract?
In addition to the above pros/and cons, large earnest money may also be ruled by the courts as liquidated damages rather than earnest money.
Why was a blank line added after “Earnest Money” on line 11 and what goes there?
Line 12-16: Either the balance remaining after the earnest money is deducted from the purchase price or any additional down payment the buyer intends to make. All amounts must be attributed to a source (i.e down payment, new convention loan, FHA loan etc.)
- Determines the form of earnest money
- Earnest money must be deposited upon contract acceptance
- Broker Trust Account
Line 18 now reads, “Upon acceptance of this offer, Earnest Money, if any, will be deposited with: □ Escrow Company □ Broker’s Trust Account.” Previously, the Purchase Contract stated that “Earnest Money has been received by Broker,” but that language has been removed. Why was this change made?
IF THIS IS AN ALL CASH SALE: A Letter of Credit or a source of funds from a financial institution documenting the availability of funds to close escrow is attached hereto.
If the Earnest Money is not deposited upon acceptance of the offer, can Seller issue a Cure Period Notice?
Section 1.d Lines 21-31
When does close of escrow occur?
Discussion: Close of escrow is an exact date. What is the inherent danger in writing an on/or before close of escrow date?
If either the escrow company or recorder’s office is not open on the date stated, the COE shall occur on the next day that both are open.
Close of escrow is Friday October 5, 2016. When is it appropriate to tell your buyer they can move?
What should you never ever do?
Best Practice Tips:
- Schedule closes on Mondays, Tuesdays or Wednesdays
- Schedule closes for the first three weeks of the month
- Remember that loan docs may have to be redrawn if COE fails to close in the current month
- The COE date has a financial impact on both the buyer and seller as it relates to closing costs
- Allow ample time to close. Even when the loan officer says “I can close that loan in 2 weeks”!