Colorado Contract to Buy and Sell Real Estate - Residential with Peter Psotny


all right guys welcome back

i'm here with pete sonic uh managing

broker owner of colorado home sales

metro brokers

welcome pete thank you john and it's uh

pete sultany oh that's a hard one

for just take on the realtor that's a

tough one but anyway guys we're going

right into

the contracts today so let's go in we're

back at ctme contracts

you got your login password let's log in

so last time we did uh peter here

so let's look for peter


oh oh i there you go there you are

okay so we found you so we had the

definition signed

we had exclusive exclusive right to buy


pete looked in 10 minutes we found the


so let's write an offer for peace so


what you do is when you're in this page

you just click create

new contract for this client so that's

pretty easy

click that button so what are we looking

for we're looking for

sale contracts right here and we're

looking for

residential the very first one so click

on that one

for residential deals create selected


there we go today's date we already have


name on here so peter why don't you

explain to us the difference between

joint tenants tenants in common and etc

so this is an important section of the

contract that you want to have a

conversation with your clients

if there's just one person buying it

i typically mark the other and put in


or in severalty if you have a

husband and wife and or multiple friends

or business associates purchasing


it's important to have that conversation

with the difference between joint

tenancy and tenants in common

uh so the best way i find that i can

explain this

is tenants in common is like a business


there's a percentage owned by multiple

parties and that doesn't necessarily

mean it's 50 50.

let's say i i'm in a hundred thousand

dollar transaction and

i'm putting up seventy thousand dollars

and john's gonna put up thirty thousand

dollars in that transaction

but john and i are not married so it's

usually a good idea for us to purchase

this property in tenants in common

meaning we both own a portion of the

home and we can actually convey

title to those portions of the home

separately without us commanding title


so think of tenants in common as like a

business arrangement for the property

joint tenancy is a little different

joint tenancy um

would be as though my wife and i were

purchasing a home

we both own this home 100

if i was to pass away the title of this

home would automatically transfer to my


without any type of probate type of


if john and i own property together and

i happened to pass away

and we held an intent to comment there

would actually be a probate situation

where my portion of title could either

be purchased by john transfer to john

and or transfer to my family so it

becomes a lot more complicated situation

they could join tenants as married

couples everybody owns 100 of the home

tenants in common more like a business

relationship where you have to piece the

home off

to multiple buyers for multiple

percentages of ownership

perfect and even married people

could also end up doing tenants in

common if there is

second marriage or third marriage or

they will they have their separate

assets separated

so if they want to keep that


and they you know what if one of them

passed away or something and

they want their own children to get that

portion of the house

then they may choose to do tenants in

common as well

correct um one of my associates

mentioned right of survivorship joint


um you know those two are associated

together so

okay so let's go to 2.2

no assignability so it's a big deal for

us investors here

uh john um i'm actually uh when you have

investors from other states

uh they're still assigning a lot of

contracts right before closing

um because the buyer is not the entity

that will be closing at the

at the table um this also falls into

play with wholesalers

so if you're seeing those cash offers

with 30 day closes

and assignability clauses and additional

provisions you know

there's a good chance that your property

might be wholesaled you need to be

cautious of that right

you're receiving contracts on the

listing side that's what i wanted to

touch base on assignability

so let's go down to additional

provisions which is towards the bottom

paragraph 30 so let's just go ahead and

add this this contract

is assignable

how's that correct and some of your

investors might be asking to do that

because they haven't decided who all

their partners were

or what entity is going to take title to

the property perfect

all right let's go to 2.3 click here to

enter seller's name but typically i

just go right into save time button at


uh let's let me go ahead and press that

so here we go so what you do is actually

i have my own listing i'm going to sell

you today

okay so street number

and street name

okay it's not a million dollar listing

so unfortunately

and then you have to add the city so

this one is in

aurora okay so either you could do it by

ctme contracts so

i would say 95 of listing brokers will

probably have it in here

but if you don't find it here you could

also search it through

re colorado a search mls by address

or you could do if you have the uh

listing id

which is numeric typically seven digit


you could search it through here or


mls's you could try to see if you could

find them

99 of the time you'll find it here

if not you may have to do an actual

printout of the mls and go from there

the old-fashioned way but anyway

so 90 of the time this should give us

the contract that we're looking for so

here we go john park is the listing


uh so that is sometimes you have more

than one if you have

you know two listing brokers that used

to sell or

or try to sell so you want to make sure

you find the right listing agent

so click the one and then the screen


and then what do you want to copy over

from the listing contract

so typically i will do select

all so that all this stuff will come

over to

my contract that i'm writing how about

you pete do you bring everything or do

you check

uncheck some of these stuff teaching

with you john i get to learn new things

so i'm uh old-fashioned way i i

go through every field i'm just kind of

used to it that way so this is i know

i am the i'm the lazy broker

so i will import everything over and

then that would auto populate

all the legal all the address all the

stuff that was already on the listing

contract on ctme or

mls and it will all pretty much autofill

stuff it doesn't mean you have to use

those you could always

change it but at least it will give you


the base for your contract and nice

thing is it gives

you know if pre-fills your listing

broker's information

and the sell easily sellers information

as well so

there we go we'll go back to the top

sorry for moving around here

um so let's back

so this is where the county goes arapaho

county and this

is what you call legal address so you

could use this legal which is

who did this guys who put this in

so this legal is populated through our

realist program

right so the person who put this in at

the county records office

right was this one actually day or a bad

day or

yeah so this one is actually this

inputted by the listing broker however

he got that

info you know he could have got it

directly from county assessors data

he could have done uh what o e search

from the title company

he could have gone in many different

places so it's your job as a buyer's

agent to verify this correct

correct and that's why i actually coach

my agents to go to

realist outside of the mls to grab the

legal description

and copy it from that particular section

now we don't have to be boundary


okay no one's expecting you to know

exactly what section township and range

is going to be

there's this will be insured by a title


and the title company will be ensuring

the legal description and making sure

that you're

paying the proper uh property through

their title attorneys

okay so oh one quick mention

here john actually so if you're buying

and selling within the city

and if you could see the end of the

legal description where it lands in lot

and block

so it's important to kind of understand

the difference between a lot and block

legal description

and something called meets and bounds so

if you see a lot and block

legal description your assumption that

the title is going to get transferred


is is pretty okay and the title company

is going to ensure that

that policy and that lawn block um

transfer but if you see meets and bounds

which is basically uh you know take a 45


angle go 150 feet uh then

go south southeast another 15 degrees

at that point in time it's important

that you get a surveyor involved

in the transfer of the property because

that meats and balance description may

be off you may be buying something


usually you'll see this in mountain

properties not

in local city lots so just something to

keep in mind

right especially if you're selling stuff

in ss park or winter park or

breckenridge aspen that'll be nice to

sell something in aspen have you ever

sold in it

i think i sold one in my career but

anyway it is kind of nice well the

storage shed for two and a half million

dollars over there still

needs a boundary survey and let me

remind you that there is a

uh a transfer tax uh in aspen so

we'll do that section 15. okay so let's


uh just make sure everything i just did

a deal i'm actually

under contract on a deal where listing

agent actually

put the wrong zip code here so we had to

do an

amendment to the contract to change the

last digit of the zitco because they put

the wrong zip code so

make sure your address looks good make

sure you verify

on google map and make sure they're good

all right let's go

the first thing here is 2.5 which is

inclusions so can you help us with this


sure inclusions is an extremely

important section

um we'll start at the beginning of


and the ultimate argument that you have

on how many garage

remote controls are at the

property so usually a two-car garage i'm

asking for two remote controls

um this automatically populated because

john had a place that he has a two-car

garage into his mls listing so it'll

automatically populate from there

um one of the bigger things here is

solar panels water softeners security


satellite systems that might be included

in the property

now let me mind you that a lot of these

systems will also come with service


and leases and things like that so

that's why they're outlined

right away in section 2.5.1

if you do have one of these uh boxes

checked you will likely want to follow

up with some due diligence language

asking for a copy of those types of

agreements and we'll get into that when

we discuss our due diligence deadline


um solar panels mainly being the big one

um going a little bit further down

uh 2.5.2 inclusions that are

not attached um you know we're covering

we're covering window treatments storm

doors awnings blinds

um one of the things i coach my uh

my sellers is if you don't want it


if you don't want your shelves or your

your family chandelier conveyed with the

property take it down

prior to this property so that we're not

negotiating the family chandelier

who in your eyes is worth fifty thousand

dollars and your buyer's eyes is worth a

hundred dollars

in this particular sections on

inclusions and exclusions

um 2.5.3 personal property conveyed

and this is personal property that's

being conveyed that has liens and

encumbrances against them

um i like to put except none here

yeah i i usually put none this is not

where you write

refrigerator stove oven range dishwasher

unless of course for some reason you you

have it on a line of credit and that


uh would for some reason come and take

the property

if you didn't pay for it i think the

only uh

thing that i couldn't think of that i've

ever put in here john and

if you want to fill this in is uh we

have conveyed some larger properties

that have tractors

and large heavy equipment that might

still have

a loan against that equipment so they

may need to

absorb that lean or encumbrance against

that heavy equipment

any experiences there john no no

or existing loan or something like that

and then uh 2.5 2.5.4


is something that you want to be really

careful with um

depending on the property if i

am conveying the two million dollar

property in washington park

i will actually set a separate showing

without my client

and go back into the property with my


and catalog the inclusions

and in those higher end properties when

i'm conveying a twenty five thousand

dollar stove

i will actually say wolf stove typically

really easy to grab a serial number off

of one of those they're usually really

easy to

find um and i will get that detailed

when i'm in the higher price points now

if i'm conveying your typical 400

000 house i'm not necessarily looking

for the serial number of every single

whirlpool or kenwood appliance in there

but if they are stainless steel i do

think it's important that you reference

the stainless steel kitchen refrigerator

white or black appliances you want to be

as specific as you can

one of the things that i'm seeing a lot

a lot of

sellers try to take right now is the

ring doorbell

or the nest thermostat where you walk

the property and you haven't included

the next thermostat

they haven't excluded the nest

thermostat but when your client comes in

after they're closing it's no longer

there and it's been replaced with a 30

thermostat from home depot so those are

some of the things that i'm seeing

that we have to be cognizant of so do

try to be very

thorough when you're including your


and if you think it's questionable like

oh gosh you know that bookshelf over

there john does it look like it's


if it's questionable put it in here

great those are good stuff okay so

uh i'm just gonna put for you


i'm just gonna do kitchen and

stainless steel

i say new and stainless

all right and washer

and dryer or let's actually exclude

those two

just for our sake just for fun so let's

go here 2.5.5

or oh i'm sorry there's a box here if

the box is checked

there's a separate agreement for

personal property

again when you get into higher end

properties estates farms

um i've conveyed several hundreds of

thousands of dollars of personal

property with those

transactions and those usually require a

separate bill of sale

yes so we need to have the bill of sale

filled out by the seller

and the buyer in agreement so that will

go into play but for this one we'll

remove it because typically that won't


how about here 2.5.5 parking and storage


you know really the only thing here that

i have i mean obvious outside of the

obvious the two-car garage

or anything like that but it's out

buildings yeah story

yeah if there's a tough shed in the back

this is where you want to put that in


um they are easily removable with a


so you know if your client sees three

large sheds in the back

you want to make sure that you've

included those three large sheds in the

back in section 2.5.5

okay so let's jump onto exclusions

so i said the seller is taking washer

and dryer

how about other stuff sellers personal


tenants personal property um

and usually a listing agent is going to

do a pretty good job of defining this in

the ad

um and i personally most 95

of the time cut and paste from the mls


how about uh wife not just

i had to throw that in there it was

getting too boring okay

okay all right water rice well rice yeah

uh typically n a n a n a for most of our

properties that we

we deal with i'm doing one right now

with well rice well permit

but do you want to cover this section a

little bit

sure john i i would wouldn't mind um i

lived out in bailey for

a while and i probably convey about five

or six properties uh down the 285


and obviously we run into wells quite


so a couple things to understand with a

well a well permit number

is going to be issued by the colorado

division of water resources

whenever you have a well you should

cross reference

any information with the colorado

division of water resources

and mainly call john and i um

but one of the things that you need to

know is the well permit number is about

six digits long

yes that six digits has a dash and a

letter after it

there's actually water rights that are

associated with that permit number

and when you have water rights it's very

important that you stop right there and

call an attorney

yes including myself will call an

attorney every single time

and that attorney will then talk about

how you need to deed the water rights

over which is usually done with the


claim deed and that's in section 2.7.1

so if you see that dash in a letter

you should automatically think attorney


if that well permit number is only six

digits long

then you know that you don't have any

water rights but you have a permit to


a certain amount of water from a certain

type of aquifer

and that could be a number of different

things it could be a household use it

could be a domestic

use um it could even be a commercial or

agricultural use

all of those have very different types

of well permits

and it's very important that you can

contact john and i when you're working

with the well

because the use of the water may not be

what your client is looking for

not every property in the mountains has

the ability

to give water to your livestock

those types of things so very very

important that you then seek some

additional information

and before i give you a whole lot of

stuff that can get you into trouble

um those are the only two things that i

really want you to know

if there's a dash in a letter you need

an attorney

right here so if it's one two three four


six dash a letter

b then or dash

a f or any of those automatically should

reference you to

the fact that you need to talk to your

client that you have some water rights

and you need to get an attorney involved

they're not that expensive they're only

about 350 dollars to convey the water


and do the water rights research because

just because that's in there

doesn't mean that you're going to get

water rights either

yes okay perfect so flutter stock

certificates have you run into that at

all john

no not really no i haven't either so

again an attorney if that comes to play

listing agent will usually let you know

that there's some kind of stock

certificate associated

but 95 of our deals probably don't have

well involved in our market so

you guys should be okay but when you do

see water rice well rice yeah talk to

talk to pete my associates talk to pete

okay john i'm sure you've got plenty of

practice there

okay all right let's go to the dates and


exciting oh my most important part of

the contract here john

okay let's see i like

to do this i don't know if you agree how


two plus mec on the first one

so john i guess we're just going to do

mec all the way through right

no just the first one

um we could do mec i guess we could do

mec all the way through

that way they know like the top line i

think okay we could do a range of what

we do sure

so i i usually use three days personally


i think two to three days yeah okay

let's go to record title deadline

we're not going to cover what any of

these things are until we will yeah

because we're going to go to those

paragraphs later so this is just to

cover the dates

so i'm doing seven to ten days john what

are you doing

that's about i do about seven so let's


do seven seven and then ten yeah

okay i'm objecting a ten

okay now if you're doing your actual

contract you could actually click here

and find the date so you click on that

calendar icon it will give you that so

seven days from now

you could just go how about next you

know you could put in the date you could

eliminate this

but for the sake of this class we're

just gonna do

just the mac so that you guys can learn

timeline okay next one off record

matters again i'm doing seven on

presenting 10 days on objection

okay so

and one important thing here john if you


just open up one of the calendars for me

again sure

so this is just kind of general

timelines that we want you to fall into


um when you're a very busy broker

and you have 10 or 15 deals at any given


this is where you plan your days on how

you're going to manage your transactions

and i know that if my objection

deadlines are on a monday

it's usually a really really bad idea

because you're trying to get a plumber

or another roofer to call you back

or something along those lines so try to

be cognizant of the way that you write

your contracts and then write all of

them the same way

so i know that on a tuesday are going to

be all of my objection deadlines

got you and then all of my resolution


are either going to fall on a thursday

or a friday

and i write every single one of my

contracts the same

because when i'm managing multiple


i know that i don't have to throw

objections out on a monday

and i can schedule a lot of appointments

into my days

i know that every tuesday morning i

better be sitting behind my computer

because i likely have three or four

different objections that i have to get

out as a buyer's agent

and then i know that by friday i'm gonna

have to be resolving those so i have to

go through all of my

resolutions by that thursday or friday

so make sure that you're stacking your

contract accordingly

when you have one or two buyers it's not

going to impact you as much

when you have 15 at any given time now

structuring those dates and contracts

and being

consistent with them is going to help

you be a better agent

great tip great tip all right i like

that so let's go to title resolution

so maybe 12 days

12 to 14 somewhere in there all right

let's do 14 for this one

okay all right usually this

is n a we'll we'll talk about it when we

get there

all right association documents deadline

how many days

seven seven days okay

and i usually want to give my clients

some time to read those john

mm-hmm because they are a very

convenient read of 190 pages long

yeah so i usually give them 14 days to


okay terminate

all right how about sellers property

disclosure two days

two to three days let's just do two

okay let same

two now this only applies if your house

that you're buying

is older than 1979

78 so from 79 you don't need to do it i

should say so it's 78 or

prior that you will need to do that

based paint disclosure

should we we'll go over that when we get

to that section again

how about new loan application

two days two days usually mine is

done complete complete yeah

all right and that's not a bad idea you

can put completed in there so that they

know that they've already had a tbd or

to be determined type of loan yeah so

they have already been pre-approved

complete okay all right how about

how about here i'm doing 27 days john


okay and again this section

is probably in a because this is an

assumption you're assuming your seller's

loan or the buyer is assuming the

sellers know

and we can cover that in when we get to

the section yeah we're going to go there

i'll praise the deadline so i'm doing

that uh

25 days okay

you can do it as fast as 20 but our

appraisers are getting a little more

backed up

right objection resolution the day next


yeah you want to do same day or

i usually do the same day because my uh


termination deadline is 27 days so okay

how about

ilc ilcs are going to take some time

again if you get into the uh the

meets and bounds you will likely

actually have to completely extend your

contract you're probably looking more

into a 45-day contract

because surveyors are not going to get

out there faster than three weeks

so you're looking at three to four weeks

um and we would be writing a little bit

of a different contract

if we were in a survey situation john

that's my opinion what do you think

i agree with you yep absolutely okay so

i'm just going to make a note for

people taking this class

meaning you have to adjust your period

of your contract accordingly

so know that it's going to take you

three to four weeks you could put mec

plus 21 days there

but reach out to your surveyors and see

how backed up they are

okay so for this intent and purposes

we're going to go back to n a

because most of their deals probably

will be any what do you think

i agree okay all right inspection


anywhere between seven and ten days so

let's go with

eight days okay

it's termination uh

again 10 to 14 days depending on how

tight your inspection objection deadline

is so i'll take the middle

okay resolution and i do the resolution

on the same day as a termination day

okay all right have a property insurance


uh same day i i don't like to scatter my


again for the purpose of organizing my


so uh you will do eight days or 12.

yeah i usually do it at the termination


all right due diligence documents um

so this again i'm at seven days for


and i usually do 14 days for objection

and resolution

okay i don't find myself really

objecting a whole lot in the due

diligence documents i'm just really

looking for supporting documentation

for things like solar leases and permits

pooled and

warranties and things like that okay so

conditional sale

deadline so uh what do you do here if

you have a house to sell

well ultimately i would probably put in

the closing date of the subject proper

or the conditional property

so if that property is closing in two

weeks i might give myself a day or two

buffer there

on the conditional sale to make sure

that you're not in a position of let's

say the house closes in escrow

and won't be funding for a day but yet

your conditional deadline is the same

exact day as that house was supposed to


so give yourself a couple of days there

in my opinion

two or three days after the conditional

sale contract

or if you don't have a house to sell

then put n a

correct okay left-based pain termination


so lining up with my determination on


okay so 12 days

okay closing date

i'd say most of us says 30 days okay

again there may be some exceptions to


right and then depending on loan types

too right

you want to talk about that a little bit

or should we wait we should wait

there's a lending section i think yeah

let's wait possession

all depends but maybe we'll keep

it the same day i usually put um

a delivery of deed in funding here okay

unless there's some kind of uh post


or sometimes i put after closing and


whatever works i guess

and under time i usually copy the same

okay so you could define the time

delivery of deed

okay all right so we're to give the


till tomorrow sunday monday

again it depends on if you want to work

on sundays you can put a sunday deadline

in there

um although john practices uh checking

the will extend box

yeah um so let's do you have an

intention of your

uh uh contract getting accepted on a


yeah i do probably mark will not later

on in the contract because if you mark


then you're not really getting that

acceptance timeline

it'll automatically default into the

following day

and i'm a kind of a stickler on the

timelines as well

i do think that you should follow them

although there's many people that say

that if a counter is

executed that the intent goes forward

you don't have to keep changing the

timeline over and over again

um but i i do put that in there as well

okay so i'm just gonna leave it there

for now

okay so we'll just do we'll just do


or monday yeah we'll just do monday for

now uh

time it really depends i'm just gonna

put 5 p.m for now

all right we're done yay

all right dates and deadlines now i

guess we get the meat of the contract

here yes

okay so you know you want to talk about

different things here

um i mean section 3.2 applicable

terms this basically says that if uh

there's no dates and deadlines in that

section and that section

shall not apply right n a so

if you put in a

no inspection objection date

into the contract then you and your

clients are not going to be objecting to


inspection and if you've done that in


then you may be paying for some of those

items out of your commission check

yes or if if sellers

nice enough they'll do an amendment to

the contract and put in the date for


yes correct the important thing is is

make sure you double check

section three that's why uh when we

started that i said this is the most

important section of the contract as

the fact that if none or n a is present

in one of those boxes

it will automatically remove that

section from the contract correct

yes perfect let's go to

paragraph four purchase price and terms

so the first box is pretty explanatory

you just

submit your price okay um we're offering

a million dollars right right they're

asking for

469 000 but you're going to offer a


i i like that okay we're being really

aggressive in this market

okay we're low on inventory all right

typically you'll probably see

ten thousand dollars ten thousand to a

hundred thousand on a million yes

uh you're not getting a loan for

probably not buying an fha john

for the purpose of the paragraphs i

think we should at least borrow a

hundred thousand

yes yes uh assumption this is where if

you're doing

owner carry or uh if you're

taking over the seller's loan here but

typically you won't see that in this


no but what five six years from now when

all these notes have been originated at

three percent

uh we might be seeing assumptions a

little bit later on down the road

right so you have to look at the

seller's note

to see if it's assumable or

non-assumable loan

depending on their so but i think under

private financing is the appropriate

place to put a hard money loan

not representing yourself as a complete

cash buyer

right any people tend to do because a

hard money loan is private financing

and then as john mentioned seller

financing is the seller carry

meaning that the seller is going to

carry back a loan on the property after


so if they own the house free and clear

which actually this

this seller of mine actually owned this

house free and clear

they may decide to work out a loan

for you so you're probably gonna have to

carry the 530 thousand dollars that was

short of the appraisal

done done zero percent interest

all right so 4.2 seller concession what

is this

so this is a seller paid closing costs


any type of concessions that we're going

to be asking from the seller

back when i started real estate in 2008

this is an automatic three percent

um however in the current market


you're very unlikely to represent that

your seller needs any type of closing

costs or concessions

um now if you're representing let's say

a va borrower who wants to purchase this


with a hundred dollars or a thousand

dollars i think they have to have

then you would need to have some type of

concession when you're writing this


right so different types of loans may

require some form of concession

just know that you want to make your

buyers strong so most time seeing this

is zero

yes yes all right so let's go to

4.3 earnest money this one to be held by

equity title so who majority of the time

the title company

majority of the time or a realtor yes

never should you put the seller's name

in there no

never should you uh i would say

98 of the time it's a title company

uh but what do you do if it's like one

of the

companies i mean instead of title

companies actually real estate company

so i don't mind giving it to re max

or 8z or one of the larger players

out there that i know hold earnest money


um but and i run into this sometimes

john with my off market deals so i'm

representing an

unrepresented buyer um who has not

picked a title company

or sorry unrepresented seller who has

not picked the title company

nor do they have representation well my

firm is set up

to the point where we can hold the

earnest money as well

uh that needs to be held in a separate

trust account right

a deposits account um and you need to

definitely talk to your managing broker

to make sure that they're comfortable

doing that

i'm much more comfortable holding it as

a third party

uh on my buyer's side than to give it to

a random for sale by owner

and or a title company i'm not familiar


i like that okay i think that's good

enough uh

for that uh let's go to

4.3.1 um

we that is when uh deadline

usually we used to deliver earnest money


along with our contract i would say 99

of that

is not happening nowadays so we use this


mec like after buyer and seller agrees

and signs a contract

then we'll deliver the earnest money in

two days or three days depending on what

we put

right up here which on this one we said

three days

so let's say seller and buyer they agree


so before the three days up we have to

deliver the earnings money and who does

that for us

but typically i'm either going to do it

an assistant and or a buyer can do it as


but the three days is three days if you

do not

have that in by that third day and you

got stuck in traffic

and missed the title company um you know

what at the end of the day this contract

uh terminates

and you are out of contract until that

earnest money is then put back into play

and you should probably even amend your

contract date as sorry

so yeah we have a new thing that once

the deadline is terminated

instead of doing it all over again now

there is a way to save that

contract by oh that's right the contract

revitalization form

yes so you could use that form to bring

life back to the contract

okay so um


i think we're okay there so let's go to

does or does not a lot of the realtors

actually or

brokers they forget to check this box

but what is this box

pete yeah and you're absolutely right

it's an easy one to

flutter right over and i do see it not

checked in many cases

so in this case you're actually

representing whether your client

has the funds available to go

to a closing and that those funds

are verifiable um

a lot of times i will get well i'll have

that money

as soon as uncle jim sells his house

or as soon as i get a loan from grandma

or selling my primary residence

just because you have half a million

dollars of equity in your primary home

doesn't mean you have half a million

dollars in cash

and it's argumentably also said that if

you haven't liquidated your securities

yet that you do not have funds

immediately available

but that is up to the question because

securities are a lot more

um liquid than a non-liquid asset and

that's usually where i run into this


where they don't have it because an

asset needs to be liquidated in order

for them to have it so

make sure you fill this out

okay it's probably a good idea to know

if your client has the money to close

it or not as well talk to your lender

your your

uh yeah make sure they have the money

okay so

here if you're buying it cash we could

delete all this that's how you delete a

section of the contract

by clicking this box on but for this

case we're going to leave it in the

contract so we're not going to delete

this section

so we'll leave that not checked and then

we'll go to

what are you getting a conventional loan

for this

three and a half percent down on my

million bucks right okay fha which stuff

usually is

that doesn't exist people uh the loan

limits on fha

um are just around a half a million

dollars so just be careful

this yeah this section should be pretty


depending on which loan your buyer is

getting so

we'll leave it that assumption we're

usually not going to see much

uh for now but so

this is how you delete this out so when

you mark that box

this whole section here is no longer

shown to your buyer

with the respect to time john if anyone

is doing an assumption it's very

important that you reach out to us


um it's far more complicated than you

may think and the loans may or may not

be assumable so

please talk to us if you're gonna assume

something same thing with the next


sellers or private financing we


you guys to not do this at all but if

you do have to

come to that time talk to pete or me

so that we could talk to you about that

but it should always be not part of the


all right so let's go to financial

conditions and obligations can you

explain this a little bit

so this is your typically your final

out to the contract as well um so the

new loan application

um you have to have that application

filled out within two days of the

contract period


you have a right to review that loan

and to understand all of those loan


uh the out that we put into the contract

is mec plus 27 days that's the new loan

termination deadline

uh this is a very strong section of the


and it's in many times used uh to

terminate at the very end of the deal

if for some reason your buyer could not


financing or um

the sentence just below where you

highlighted new loan termination

it says that uh if the new loan is not

satisfactory to buyer

and buyers sole subjective discretion

meaning if you as the buyer expected a

four percent interest rate

and your lender decided to give you only

a five percent interest rate

you do have a right to terminate this

contract on the new loan termination


and get your earnest money back and get

your earnest money back now what i want

you to understand that this is not a

free for all

final out to your contract this is not

to be used

because your buyer decided that they're

going to buy another property

this is should be used solely in the

event that your buyer doesn't qualify

and or your buyers terms become um under

their sole discretion

unacceptable to that buyer that's what

this doubt is used for it is not your

final wave your white flag and get out

of this contract type of valve you


truly be using it for the loan okay uh

next section

usually you will delete this app so mark

that section because this

applies to people who are doing seller

financing or

owner carry and things like that

all right so let's go section six


um so basically anybody getting a loan

is going to need us

an appraisal um the important thing here

to note

is that the appraisal must be done by


appraisal deadline and if the property

did not appraise

you need to make sure that you have uh


an appraisal objection by the appraisal

objection deadline

yes there is only one exception to this


actually two and that is if you're doing

an fha or a va loan

so an fha loan will also make you

sign uh fha mandatory clause

which basically states that if a

property does not appraise at the

purchase price

this buyer has a right to terminate this


um and get their earnest money back that

is the only other provision

that's not withstanding the appraisal

objection and resolution deadlines

any other type of financing conventional


uh private financing uh you do need to

make sure that you're within your

appraisal deadline your appraisal

objection deadline

if you have an fha loan it's also

important that you reference section


and you put the purchase contract in

that little box right there

so our uh we'll just do a million

dollars here

okay i think the amendatory clause is

going to fall into play here


okay uh va has the same rights as fha so

if a property does not appraise on a va

deal and it's past your appraisal

objection and resolution deadline that

does not matter for va

and fha loans because you're going to

sign in the mandatory clause that allows

them to do such okay 6.4

determines who's going to pay for the

appraisal whether it's the buyer or the


what do you see most um if you want your

contract signed by a seller

you should probably mark the box buyer


rarely will you see a seller paying for

an appraisal 99 of the time

so uh we have about 10 minutes to go

pete so i think

i don't think we could cover everything

but we'll still go on but i think we can

get through section seven

i've got some things to touch on here

okay all right let's go to sleep

homeowners association

this is very important i.e

important enough to be an all bold caps


so right here all bold yep

and one of the most important things to

understand here

is that an hoa will have covenants in a


that you have to follow and those are

rules that will encumber that property

whether you like it or not

if you want to paint your house purple

and the rules do not allow you to do

that you should probably not live in

that community

yes if you choose to do so

then that community can find you and can


ultimately even go to the extent of

foreclosing or taking possession of your


yes and i know that because i've

represented some hoas where we've done


so it's a very very strong paragraph now


my example of painting the house purple

is one thing

but more commonly do we see uh pet


um the age restriction

violations another big one

for all you investors is a lot of these

condominium complexes are now enacting


limiting rentals in the communities

so if you're buying it as an investment

property and then you put a tenant in


then you will be fined very heavily to

the point where you will not want to

have a tenant and you'll be forced to

sell the home

so covenants are extremely extremely


to the rules of the home and can even

impact the value of a home

depending on how an hoa is being ran


and so forth and my

favorite favorite one is voluntary hoas


okay this covers that mean that i can


decide to follow the rules no

there's no voluntary about that exactly

so a voluntary hoa is simply the fact

that you can volunteer to pay for it or


it does not mean that the rules and

covenants don't encumber the property

it does not mean that you don't have to

follow those ruling encumbrances and it

also doesn't mean

that the hoa can't take action against

you if you decide to voluntarily not pay

them any money

which is a big misperception that a lot

of people have they say oh well the hoa

doesn't matter it's voluntary

that still means that you have to follow

the rules and covenants of the community

just means that it's voluntary whether

you decide to pay for it or not

great explanation and the importance of

all caps here

like pete said because this is so

important to the

part of the contract so let's go to um

other stuff here do you want to cover

anything else the minutes

uh declaration article of incorporation

bylaws you kind of covered that already

yeah and you know one thing here is uh

this goes back to us not being attorneys

um these contracts these rules and regs

they were drafted by lawyers

it's not our job to interpret legal


outside of the contract to buy and sell

or contracts that are approved by dora

for us to interpret um so if there's

some language that your clients need

interpreting of if there's some specific

rules and bylaws

that your clients um have very special

needs to

this may be a time where you should

actually refer something out to an


the other thing that i do is you can

look at the sections

and if your client wants a 56 plus


and there's no section excluding that

then you should bring that to their

attention but by no means

should you try to interpret 98 pages of


no that's impossible for us to do yes

so again refer those out to an attorney

now if it's black and white

and i know that they have a pet that

they love very dearly

and i see that section 26 and the bylaws

say no pets and capital letters

i think it's also important for us to

point out to our buyers

that they should probably read section


but i shouldn't be interpreting the

section word for word

no no that's not our job all right so

this is conditional

on buyer's review all these hoa docks

and also one thing to point out is who


these financials from the uh hoa who

else needs it is you know bio should

know it but somebody really critical in

the transaction here

yes good point to bring up here and i'm

glad you did because i was actually kind

of mowing that one over

so um one of the most important things

with an hoa

is that your lender needs to qualify the

hoa just as much as your borrower needs

to qualify to purchase that home

and they do it through the hoa


so any loan fha or va

the condo complex actually has to be

approved by hud

for you to get financing there meaning

that the hoa

has to have a certain amount of money in

reserves a certain amount of homeowner

occupants have to live there

a certain amount of delinquencies can't

be present

and a lot of that needs to be

communicated between you and your lender

and the complex that you're riding on

there's also

condo questionnaires for conventional

financing that aren't as scrutinous

as they are for va or fha and

there's also private money financers who

can finance around

bad condo questionnaires however if an

hoa is in default you should seriously

consider whether or not it's worth

purchasing there

because it again will encumber the


and you do have to pay the dues even if

the hoa does go into default

and your dues go up to 800 a month you

still have to pay that

to get the hoa out of that type of


lenders are looking at the hoa

financials to make sure that they're


right even if it's single-family homes

if you have an

uh hoa and they're very weak financially

that could pose trouble for your clients

in the future absolutely

john i think that's a good stopping