Purchase Contract Clauses
I am creating my first purchase contract and wanted to know what are some good clauses to add to the contract to protect me the seller?
How long should I give a buyer for closing? 30 days 45?
INC:
Rather than start from scratch, why not download one from the "freebies" section of this site (or from the internet), then modify it to meet your needs?
Of course, it is highly recommended that when you're done with your edits, have a qualified attorney look it over and make sure it will fly (legally) in your state.
Some "out" clauses include:
-satisfactory (to you) home inspection
- subject to partner's approval within x days
- subject to clear title
Also make sure there's an assignability clause in their in case you want to pass on the contract to another investor.
Andy
Thanks for the info. I am meeting with my attorney next week. Does anyone else has other clauses that I should ask about?
I met with an attorney today. This was his response that I should use the standard real estate form from the board of realtors. He said that way everyone has usually seen on of them. I just wanted to use a form that would be legal in North Carolina to sell a house by owner.
Any suggestions?
i'd use the realtors form. On most agreements there is the "other provisions" section where you can add just about anything under the sun you want to.
put in an assignability clause, that you can transfer the contract if you want.
Assignment clauses are dependent upon the type of mortgage the subject property is under.
Example:
Government REO's normally will not allow any type of assignment clauses as well as many lenders in today's market.
Therefore you will have to deed over to another investor upon sale of your rights for example.
If assignments or consignees are allowed I always used subject to partners approval and inspection as and example
Thanks for the info. Right now I am looking at a Bank REO and going to try to put everything I can think of to start. The comps in the area are for 115,000. The have it listed for 94,000. I am thinking about offering them somewhere in the 50's because it looks to me about 15k in repairs will be needed. It has also been on the market for a several months.
What you are talking about is a short sale; you are asking the lender to possibly take a large financial hit.
You simply can not go into a lenders office and ask them to knock of tens of thousands of dollars and expect them to say ok.
Doing a short sale will be dependant upon the type of loan and the amount the lender had to take back.
My first question to you would be what does the lender have invested in the subject property?
2nd of all what type of loan is it? was it government backed?
How do you plan to sell the discount to the realtor, it's listed with a realtor, if the listing agent is not sold on the benefits of the discount how will they sell it to the customer?
I am not trying to kick you around, you must approach this in a professional intelligent manner and show the lender how much they are loosing and then show them how much profit they will make by accepting your discounted offer.
I have been a part of 100's of short sales over the years and through this process I have learned you simply can not ask a lender to take a $44,000 hit in your case without justification.
On the other side of the fence if you plan to sell the property how do you plan to convince a lender that you purchased the property for say $50,000 put in $15,000 and this $15,000 increased the value by $65,000.
Keep in mind that when doing a short sale your credibility is on line and if you are unsuccessful in your presentation you will loose credibility with the listing agent and most importantly the lender in other words you will be a joke to them.
As an investor creditability is more important than your ability to pay cash.
Need more facts before guidance can be provided.
Quote:
On 2004-06-03 21:15, JohnMichael wrote:
What you are talking about is a short sale; you are asking the lender to possibly take a large financial hit.
I see NOTHING that indicates the OP is talking about a SS. He stated this is an REO. He as the buyer can offer ANY amount he likes to the bank--that doesn't mean the bank will accept it though. The fact that he wants to offer so much less than the listing price does not mean that he's looking for an SS.[ Edited by doni49 on Date 06/09/2004 ]
That is correct. If I am going to offer a lot less than the REO is listed for should I submit a list of repairs need to bring it up todate? What are some other ideas to get a bank to lower their asking price?
Ok boys lets get down to the chase, doni49 the fact remains the offer price is less than the lender has invested in the subject property and this is determined by the lenders asking price. "It's just investor common sense" and based upon my experience in dealing with REO's.
InvestorNC Normally lenders are only seeking to cover the cost to sale the subject REO.
The asking price is $94,000 - How much does the lender have invested in the subject property will determine the method of offer presentation.
[ Edited by JohnMichael on Date 06/14/2004 ][ Edited by JohnMichael on Date 06/14/2004 ]
Hey,
If you are trying to submit an offer to a bank, for an REO, that is knee deep in clever "get out of jail free clauses", save the paper; the bank is NOT going to accept it.
The bank wants to see the generic RE contact PLUS all of their specific paperwork.
For the most part, the bank will not budge off the price for several weeks to several months. If you bring all cash and a fast close, you can get them to move faster.
Thank you for the information.
Here are some clauses you might use. You can pick and choose which ones you want if any.
Good Luck.
BOB FORD
The laws of the state of California apply to this agreement.
Seller warrants that they can and will transfer ownership of this property with a Grant Deed.
All items permanently attached to the property are included in the purchase price free of liens. The following personal property is included with the premises: Stove, existing carpeting, fireplace equipment (if there is a fireplace), pool equipment (if there is a pool), water softener (if there is a water softener), room air conditioners (if there are any room air conditioners), blinds, curtains, drapes (if there are any), garage door openers, light fixtures. Seller to deliver property in clean, trash free condition. Any broken windows or screens to be replaced by the seller. All carpet, all appliances, drapes, curtains, floors, etc to be clean. Seller agrees to maintain heating, plumbing, electrical equipment, sewer systems, cooling equipment, built in appliances and/or equipment in working order and repair. Seller will keep the roof in water tight condition and maintain existing landscaping and grounds.
Seller warrants that all flues and chimneys are clear and in good working order.
Seller warrants that each of the following, if present on the property are in good working order and repair: Water filtering system, humidifier, garage door opener, lawn watering system, interior phone wires, dish washer, garbage disposal, door bell, thermostat for heating and cooling, and door locks. Seller warrants that the basement, if any, is watertight, that any mirrors and/or shower doors are free from cracks, that there is two hundred twenty volts electrical power at the master power switch, and there is one hundred ten volts electrical power in every room of the house. Seller warrants that all bathtubs and showers are watertight and that all drainage ditches are clear. Seller warrants that U.S. mail is now delivered to the property. All antennas, if any, that are now on the property shall remain intact and shall be included in this sale. If this property has a septic tank, seller warrants that it is in good working order.
Seller and seller's agents, if there are any seller's agents, jointly and severally warrants that there are no know or latent or patent defects in the property or improvements including the plumbing, electrical and other mechanical items on the property.
Seller will furnish buyer through closing agent/escrow a termite clearance report of all structures on the property for buyers inspection and approval. Said report will be by a state licensed pest control operator and will show the property to be free of visible evidence of infestation caused by wood destroying insects, fungi, and/or dry rot. Seller will pay for any corrective works.
Preliminary title reports to be approved by the buyer prior to the close of this sale. Any exceptions listed in the title report shall have a copy of the document that created the exception.
Prior to the close of this sale, buyer will notify closing agent/escrow, the name in which the title to the property will be vested.
Seller or seller's agents, if they are any seller's agents, will furnish buyer no later that ten working days before the close of this sale, a copy of the most current property tax bill.
Sellers warrants that all works carried out on the subject property prior to the close of the this sale will have been paid in full by the close of this sale and herewith indemnifies buyer from any such claims that may arise on said property.
Buyer reserves the right to a walk through inspection and approval by the buyer before the close of the sale. If the property is not vacant for this inspection, buyer has the option for a walk through inspection and approval on the day of the close of the sale.
Seller herein represents and warrants that the real property and improvements have been constructed and maintained in accordance with all applicable laws, ordinances, and governmental regulations and that there is no restrictions on erecting any structure on this property if said structure conforms to all zoning and governmental requirements.
Seller agrees to furnish buyer a title insurance policy on subject property at sellers expense.
Interest on any loan to be prorated to the close of the sale. Seller shall pay in full all state, county, and municipal taxes and special assessments which are a lien against property on the date of closing whether or not such taxes or assessments are delinquent.
Buyer to have first right of refusal for any note given by the buyer to the seller.
All fees to be paid to closing agent/escrow will be split evenly between the buyer and seller except as provided for in this agreement.
Any homeowner association transfer fee to be paid by the seller.
Seller will comply with Section 1102 of the California Civil Code by providing buyer as soon as possible but no later that ten working days before title transfer a completed Real Estate Transfer Disclosure Statement (Statutory PPC Form 110.21/22CAL) and Supplement to Statutory Disclosure Form PPC FORM110.31/32CAL. Buyer does not waive the right to receive these disclosure statements.
This agreement shall be binding on the heirs, assigns, successors, and personal representatives for the parties hereto.
Property will be vacant at the close of the sale.
Any fees required by any lender to transfer any loans on the property from the seller to the buyer will be paid for by the seller. Buyer agrees to pay any fees required to record at the county recorder any document signed by the buyer. Seller agrees to pay any fees required to record at the county recorder any document signed by the seller.
All liens on the property that will become the responsibility of the buyer will be taken "Subject to the terms of these liens". Any existing loans that will remain on the property after the close of the sale must have no qualifying requirements. This offer is subject to buyer approval of all existing loans encumbering the property that will remain on the property. Seller or seller's agent, if there are any seller's agents, will furnish buyer no later than ten working days before the close of the sale, copies of all notes and deeds of trust or mortgages on the property, and copies of the most current utilities bills.
Any association fees that the buyer must pay will be disclosed to the buyer on or before ten working days before the sale is to close.
Seller will give all keys to the property to the closing agent/escrow which will give them to the buyer when the sale is closed.
All forms that the buyer is to sign will be given to the buyer forty eight hours before they are signed.
The earnest money check, if any, will only be deposited at the wavier of all contingencies by the buyer.
Seller and seller's agents, if there are any seller's agents, will cooperate with any and all appraisals and inspections of said property.
Seller agrees that all mineral, water and air rights on subject property now owned by the seller will become the property of the buyer at the close of this sale.
Seller agrees that all utilities bills will be paid in full before the close of this sale. Seller warrants that the water from any well on the property is safe for human consumption.
All personal property left on the premises when the seller vacates the property will become the property of the buyer as a gift from the seller.
In the event that the legal description of the property, as contained herein and in any deed to be delivered to the buyer at the close of the sale is erroneous in any respect, including omissions, seller shall at the request of the buyer and on being furnished with a correct description of the property, will execute and deliver to the buyer a corrective deed drawn in accordance with the true description of the property.
Seller shall obtain signed offset statements from each lessee verifying that its lease is in full force and effect, and there have been no modifications or amendments to same. Said statement shall indicate the amount of any prepaid rent, security deposit or other funds of the lessee held by the seller.
Seller will instruct their agents to remove all of the agent's signs from the property within twenty four hours of the recording of the grant deed.
Seller agrees that the liability on the part of the buyer to satisfy the terms and conditions of any note given by the buyer to the seller shall be limited to the property securing such note and shall not extend beyond this point.
In the event that the purchase contract and this Schedule A differ in terms or conditions this Schedule A shall prevail.
Title to be conveyed shall be exclusive of any portion that may be taken by condemnation by a public authority before this sale is closed. In lieu of conveyance of such part, seller shall transfer and assign to buyer all his right to compensation and damage for such taking.
The omission from escrow instructions of any provision herein shall not waive the right of any party. In the event that this sale is not completed by the mutually agreed date, all money advanced by the buyer will be returned to the buyer unless buyer and seller agree on a new completion date for the sale.
Any security systems on the property will become the property of the buyer at the close of the sale. No trees, plants, shrubbery will be removed from the property between the acceptance of this offer and the close of the sale.
If title to this property is not insurable, this agreement is terminated and all earnest money shall be refunded to the buyer.
Seller and seller's agents, if there are any seller's agent, warrants that all deed restrictions have been disclosed to the buyer. Seller shall execute and deliver all such instruments as may be required to transfer title to subject property. The seller will pay for all stamps required to transfer ownership of this property to the buyer. Sellers interest in all special utilities districts shall be transferred to the buyer.
Seller to pay for a one year home warranty if there is a home located on the property.
Seller or seller's agents, if there are any seller's agents, will deliver to buyer no later that ten working days before the close of the sale, a copy of the latest information available from all lenders as to the amount of the encumbrances on the property. Seller agrees not to further encumber this property or any interest therein after acceptance of this offer. If any such encumbrance, either voluntary or involuntary, occurs buyer at his option may void this purchase contract and receive back all monies deposited.
Seller will give to the buyer through the closing agent/escrow all loan payment cards, booklets, etc.
Seller will keep insurance in force until the sale is completed. Seller will bear the risk of loss by fire or other casualty until the sale is completed. In the event of any loss, any insurance proceeds will be deducted from the down payment.
Seller warrants that no notice has been given by any insurance company which has issued a policy with respect to any portion of the property requesting the performance of any repairs, alterations, or other work which has not been complied with. Seller and seller's agents ,if there are any sellers agents, warrant that no eminent domain action has been instituted against any portion of the property. Seller warrants that no lis pendens has been filed on the property.
Seller and seller's agent, if there are any seller's agents, jointly and severally warrant that all information provided the buyer by either of them is true and correct, and the information provided and to be provided does not and will not contain any statement which at the time and in light of circumstances under which it is made, is false or misleading, or omits to state any material fact which is known, or in the exercise of reasonable diligence by the seller or seller's agent should have been know. All of the seller's representations and warranties set forth in this agreement shall be construed to apply at the date of the closing unless stated otherwise herein.
Sellers warrant that no owner of this property has a real estate sales license from any state. All seller's agents ,if there are any seller's agents, warrants that they have 1) A valid real estate sales license from the state of California, 2) A valid employment contract with a licensed California real estate broker 3) They have not had any claim made against them with the California Real Estate Recovery Fund. The name, address, and telephone number of all brokers, agents, and sub agents that participated in this sale will be furnished to the buyer before the close of the sale.
Seller and seller's agents, if there are any sellers agents, jointly and severally warrant 1) A water shortage has not been declared by the agency that furnishes water to this property, 2) No modifications have been made to the property after July 26, 1992 that would conflict with the Americans With Disabilities Act, 3) They have inspected the property and they have no knowledge that lead based paint has been applied to any part of any structure on the property, 4) They have no knowledge that hazardous materials have or are now being stored on the property, 5) The property is not located in a flood hazard zone 6) There are no underground storage tanks on the property 7) They have no knowledge of any illegal drug activity ever have taken place on the property 8) They have no knowledge of any material on the property that contains FORMALDEHYDE or ASBESTOS 9) They have no knowledge of RADON GAS occurring on the property 10) They have no knowledge of any leakage from any underground storage tank 11) Any house on the property complies with section 13113.8(a) of the California Health and Safety code in regards to smoke detectors 12) No notice of default or notice of sale have been filed for this property 13) They have no knowledge of sinkhole or voids on or near the property 14) They have no knowledge of any prior commercial or industrial use 15) There are no options or leases on the property that have not been disclosed to the buyer 16) They have no knowledge of any pending legal action that would have any effect on this property 17) They have no knowledge of any pipelines carrying oil, gas, or chemicals underneath or adjacent to the property 18) They have no knowledge of any boundary disputes concerning the property 19) This property is not subject to the California Special Studies Act 20) This property is not sold AS IS 21) The sale of the property does not require approval of any probate court 22) They have disclosed all facts know materially affecting the value or desirability of the property 23) They have no ownership interest in any escrow agency or business whose primary business is to make loans.
Physical possession of the property, with keys to all locks, alarms, and garage door openers, shall be delivered to buyer on the date of recordation of the deed not later than 4:00PM. In the event possession is delivered after recordation, seller agrees they will not receive the proceeds from the sale closing and to pay buyer in escrow or to closing agent as a day-to-day tenant one hundred dollars a day rent until possession is given to the buyer. Seller understands that continued occupancy beyond the date specified above constitutes a breach of this agreement in the absence of any written agreement between the parties to the contrary. The above mentioned rent will be credited to the buyer and debited to the seller.
The following additional personal property is included in the sale and will be left on the property:
Thank you so much. I'm sorry I didn't replay sooner. This is such a great website.