We are all looking forward to a productive and profitable summer and rest of year. Please keep Action Title Company in mind and Stephen J. Straley, Esq. in connection with your real estate needs. We will always go the extra mile for you, as you know.
We have had a few situations come up on a regular basis and Steve felt that it would be best if he provided you with some suggested language on these matters, which might be helpful.
In a previous blast we had pointed out that most people are not aware of the fact that the inspection portion of the As-Is Far Bar Contract, specifically the last sentence, states that upon the end of the inspection period the buyer becomes responsible for all governmental matters. That would mean matters such as open permits, violations, and municipal liens. This is very surprising to most realtors. There are two ways to avoid this, the first is putting sufficient time in the blank space for Inspections on line 1 in paragraph 12 for Action Title Company to obtain a lien search, which is often up to 15 days, which is longer than most listing agents would like to see in the contract, or alternatively add the following clause to Paragraph 20 in all of your contracts, which is the method that we suggest. The clause is as follows “Seller will be responsible to close any open or expired permits and pay any fines associated with same. Seller will correct and pay for any violations or governmental liens associated with any building, environmental, safety codes, restrictions or requirements, prior to closing.”
The second issue which comes up frequently is that many buyers want to be certain that the property appraises out in order to be obligated to go forward with the contract and loan. Sometimes they wish to have an appraisal even if there is no loan involved. As you know under paragraph 8 the buyer can cancel the contract and receive a return of deposit if the property does not appraise, if they are getting financing. Both parties, however, must wait, typically 30 days, for the loan approval, which includes the appraisal. Many buyers and sellers want to know the value quicker and decide whether they are in or out of the contract. If you wish to do that, you could add the following clause “The appraisal shall be completed and provided to Seller within 10 days (or use 15 days if the lender or appraiser cannot get the appraisal done in 10 days ) from the Effective Date of the contract or Seller may, at Sellers option, cancel the contract and return deposit monies to Buyer. Provided the property appraises for at least __________ (you would insert the amount), Buyer agrees to close the transaction and pay the difference between the purchase price of _____________ and the appraised value. If the appraised value is less than ____________ then in such event the Buyer may within 48 hours of receiving the appraisal report cancel the contract and receive a return of the Buyers’ deposit.” As you can see this example provides language where the buyer agrees to make up the difference in the appraisal if it appraises under the purchase price. Otherwise you can use a more simpler version using the language above to state that if the appraisal does not come in equal to the purchase price then the contract can be canceled and the deposit returned.
The final matter we wish to point out is that many contracts (especially the initial offer) contain a single buyer without a marital status who need financing. As you may know, under Florida law, especially if the property is homestead, the buyer’s spouse must join on the mortgage. We have seen situations where the buyer has attempted to cancel the contract because their spouse will not cooperate, or in reality they want to get out of the contract at the last minute and use this as a way to do so and receive return of deposit. We would suggest you always have the buyer’s marital status in the parties name section stated at the beginning of each contract, and if married, use the following clause in those circumstances to avoid those things happening “Buyer’s spouse agrees to cooperate fully with Buyers’ Lender with respect to executing documents and otherwise, both prior to closing and at closing, and failing to do so will be a default under the contract.”
Hopefully these clauses will help you down the road work through some difficult situations and thereby save a deal or two, which puts more money in your pocket. Action Title Company is dedicated to its realtors and their success. If you have any questions or need assistance, please do not hesitate to contact us today.