Chapter 5 Flashcards
SETTLEMENT AND OTHER EXPENSES
“paragraph 12, in The One to Four Family Residential Contract (Resale). It contains vital information about seller and buyer expenses and who is responsible for which expenses.”
ESCROW paragraph
1.How much earnest money is to be paid by the buyer.
2.How those funds are handled by the broker.
3.How the funds are released.
addresses the situation if one party refuses to release the earnest money when they should.
Mediation
A method of resolving conflicts in which a mediator listens to each side and helps make a mutually agreeable decision BUT is NOT legally binding.
buyers and sellers must agree upon a closing date which is recorded in
CLOSINGS paragraph on the contract.
Bill of Sale or the Non-Realty Items Addendum
contracts contain a Special Provisions paragraph for inclusion of “factual statements or business details”. Some agents list in this paragraph any personal items the buyer wants the seller to leave. Although not a direct violation, this could create problems if there are several personal property items, or the items are of great value. instead use the non realty item addendum !
Paragraph A.1.b ( Settlements and other expenses )
seller is willing to pay towards the buyer’s closing costs.Failure to include (This cost for the seller could be considered misrepresentation. As a result, you could possibly pay for these costs. If the buyer wants the seller to pay a percentage, you must make a change to this paragraph, and at any time the sales price changes. Failure to appropriately change this paragraph could cost you. If the buyer asks for more than the lender will allow, this would result in a rejection of the loan by the lender. The agent for the buyer should check with the lender for acceptable amounts to be allowed in the blank.)
paragraph A.2 (Settlements and other expenses)
Paragraph A.2
This paragraph lists the buyer’s expenses and states that the buyer is to pay for any mortgage insurance.
Escrow Paragraph
A. Expense = HOW earnest money will be paid out
b.Demand = HOW earnest money will be released, if one party demands EARNEST MONEY, the other does not respond within 15 days , title company release the money to the demanding party.
c. Damage = If one party refuses to release the earnest money, liable 3 times amount of the earnest money later
D. Notice = WHEN notices will be effective.
EDDN
FIRPTA ( Foreign Investment in Real Property Act )
on the close of the transaction if the tax are owed , the IRS will be paid. if the person is a foreign person , the IRS cannot go after them to collect the taxes owed. SO the IRS will put lien on the property to get it from the buyer!
which stems from FIRPTA. and the title company will be sure about the compliance.
Foreign seller need to have TIN number
Repairs
Always use an itemized repair list.
If there are only a few items, use the appropriate amendment form.
If the list is extensive, develop a separate list and note it in the amendment.
Be aware of the option period, and be prepared to get the Buyer to cancel the contract, extend the option, or accept that the seller will not have to perform repairs past the termination date.
legal sense, an executed contract
In most cases, this happens on closing day when the buyer pays for the property and the seller delivers the deed. Therefore, when a buyer and seller “close” on a house, that contract is fully executed.
