Financing Part 2-2017 AAR PC

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Section 2.e Lines 87-89

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Buyer shall deliver to seller the LSU with a minimum of lines 1-40 complete within five (10) days of contract acceptance.  Seller is entitled to an updated LSU upon request.

Section 2.f Lines 90-92

section-2-f-lines-90-92Additionally, section 2f requires the buyer to provide the lender with the “Buyer’s name, income, social security number, Premises address, estimate of value of the Premises, and mortgage loan amount sought” within three days after Contract acceptance

NOTE: The reason for this is because the above information (loan application) triggers TRID timelines and assures the seller that the buyer is moving forward with their financing.
Quick Quiz

Fill in the Blank:
Buyer shall to seller the LSU with a minimum of lines 1-40 complete within five (10) days of contract .

Section 2.g Lines 93-96

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images (4)Buyer agrees to diligently work to obtain the loan and will promptly deliver all lender requested documentation.  Buyer is required to sign all loan documents three (3) days prior to Close of Escrow date.

 

Section 2.h Lines 97-98

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Indicates the buyers intended type of financing.

Section 2.i Lines 99 And Section 2.j Lines 100-102

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All costs of obtaining a loan shall be paid by the buyer unless otherwise detailed in the contract.

Seller concessions are addressed here.  Buyer shall no longer deliver an additional clause addendum.

Quick Quiz

Fill in the Blank:
All  of obtaining a loan shall be paid by the buyer unless otherwise detailed in the .

If Buyer is obligated to provide compensation to Broker(s), can the funds come from Seller concessions?

Answer: Seller concessions, as described in Section 2j, include only the following, “Buyer’s loan costs, impounds, Buyer’s Title/Escrow Company costs, and recording fees.”

What fees are not included in the seller concessions?

Answer: Any fee that is not attributed to the buyer’s loan costs or the buyer’s title/escrow costs.  For example, inspection fees, home warranty would not be included.

Section 2.k. Lines 103-106

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imagesBuyer must immediately notify the seller in writing of any changes to the buyer’s loan program, finance terms, or lender according to the Pre-Qualification or LSU whichever was provided by the buyer.  The buyer may make unilateral changes so long as the changes do not affect the buyer’s ability to obtain approval without PTD conditions by COE date, increase the seller’s closing costs or delay COE.

What should you always do as the buyer’s representative if there is any change to the buyer’s loan program?

Answer: Write an addendum to the Contract withdrawing the previous Pre-qualification/LSU and incorporate the new LSU.  At the same time the buyer must also furnish the new LSU.

Section 2.l Lines 107-110

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The appraisal contingency provides that the buyer may cancel the contract if the property does not appraise for at least the value of the purchase contract.  Upon notice of the appraisal the buyer has five days to take action or the appraisal contingency is automatically waived.

Section 2l explains that if the Premises fails to appraise for the purchase price, Buyer has five days after notice of the appraised value to cancel the Purchase Contract and receive a refund of the Earnest Money. The words “unless otherwise prohibited by federal law” were added to the end of this section. Why?

Answer: When purchasing a home with an FHA or VA loan, the lender must ensure that the property serves as sufficient collateral for the amount it lends. FHA and VA therefore require an amendatory clause be made part of the sales contract.

The FHA/VA Amendatory Clause states in part:

It is expressly agreed that notwithstanding any other provisions of this contract, the purchaser shall not be obligated to complete the purchase of the property described herein or to incur any penalty by forfeiture of earnest money deposits or otherwise unless the purchaser has been given in accordance with HUD/FHA or VA requirements a written statement by the Federal Housing Commissioner, Department of Veterans Affairs, or a Direct Endorsement lender setting forth the appraised value of the property of not less than $_____.

The added verbiage reflects this language and highlights the fact that Buyer may cancel the transaction without penalty pursuant to the FHA/VA Amendatory Clause regardless of language contained in Section 2l.

The lender performs an appraisal, which reveals items that must be repaired before it will agree to fund the loan. At Buyer’s request, Seller agrees to perform the repairs. After the repairs are made, the lender requires an inspection to confirm that the repairs have been completed to the lender’s satisfaction. Who pays for the cost of the inspection?

Answer: The Buyer. Verbiage has been added to Section 2m stating that “Any appraiser/lender required inspection cost(s) shall be paid for by Buyer.” NOTE – “Appraisal costs” and “inspection costs” represent two different fees.

Does the appraisal contingency apply to any appraisal required by the lender?

Answer: If the premises fail to appraise for the purchase price in any appraisal required by the lender, the buyer has five days to cancel the contract and receive a refund of the earnest money.
Quick Quiz

Fill in the Blank:
The appraisal contingency provides that the may cancel the contract if the property does not appraise for at least the value of the purchase .

Does notice of the appraised value occur when the buyer/buyers agent is told the appraisal was low or does notice have to be in writing?

Answer: The date is from the date of notice verbal or written.

If the appraisal comes in low, what are the buyer’s options?

  1. Cancel the contract
  2. Waive the contingency and pay the difference at closing
  3. Effect a price reduction

If the appraisal comes in low, does the buyer have to reduce the sales price?

Answer: NO.

In a cash offer does the buyer have an appraisal contingency?

Answer: Not unless the contingency is written back into the contract. 

If the seller believes the buyer failed to make a diligent and good faith effort to obtain loan approval, what are the seller’s options?

Answer If the seller believes the buyer failed to make a diligent and good faith effort to obtain loan approval, the seller should contest the notice in writing.  If the buyer does not produce evidence of the inability to qualify that is satisfactory to the seller the seller can initiate mediation to resolve the dispute.

HARD MONEY

Your buyer is an investor intending to flip the property and intends to use hard money to close the “B” transaction.  Should the offer be written as a financed or as a cash offer?

Answer: Line 10-14 whichever line contains the hard money amount should include the words “by hard money loan”
Quick Quiz

Fill in the Blank:
If the seller believes the failed to make a diligent and good faith effort to obtain loan approval, the seller should contest the notice in .

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