Purchase Agreement

When is “immediately”

The purchase agreement states that upon acceptance of an offer, the “buyer or buyer’s agent will deliver immediately upon notice of the acceptance of the offer a deposit in the amount of…”

When is “immediately”? Does it mean an hour, a day, a few days. If the buyer’s agent and listing agent have different interpretations of “immediately” it could lead to confusion on whether or not there is a binding contract in place, especially if the seller is considering multiple offers.

There is no clear, legal definition (so far) on what immediately means with regards to the real estate purchase agreement. Instead, the circumstances of the parties would dictate when immediately is. If the purchaser is in town and can deliver a check to the broker’s office, immediately would probably mean within 24 hours of an acceptance of the offer. Checks can be dropped through mail slots in the door after hours, even putting it in the mail shouldn’t take more than a day or two to make it to the broker’s office. If the buyer is out of town, then sellers should at least allow for mail delivery of the check.

As is often the case in real estate, each deal will be considered on a case by case basis. The actions of the parties and circumstances are all taken into account in deciding whether the parties have entered into a binding contract.

CFPB

TILA-RESPA Integrated Disclosure Rule

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 The CFPB has set a date of August 1, 2015 for implementation of the TILA-RESPA Integrated Disclosure Rule. This sets new Loan Estimate and Closing Disclosure rules with the aim to make mortgage disclosure easier for borrowers to understand and use. The biggest changes that borrowers will see will be in the requirements for lenders to get certain information to the borrower within a certain amount of time after the application is made and before the loan is closed.

The new rule also puts lenders in a position of ultimate responsibility. Lenders will not only be responsible for their disclosures, but also the actions of all third party vendors that are used in closing the loan, notably title companies. In some cases this will affect who the borrower will be getting their information from and how they will be receiving it.

The HUD-1 Settlement Statement will now be called the Closing Disclosure and will be a 5 page document combining the HUD, Truth in Lending statement and Good Faith Estimate. Lenders will use a new Loan Estimate form to give borrowers an idea of the terms of their proposed loan.

In the coming months this site will continue to update the changes that are being made. In the meantime you can check out the CFPB website for the TILA-RESPA Integrated Disclosure Rule for more information.

Corporations, LLCs, Purchase Agreement, Successions

Signing authority

signing contractWhen meeting with clients to sign a listing agreement or the purchase agreement, it’s important to make sure you have the correct person signing the documents. Most of the time this will be clear but in some cases it’s not apparent who has the authority to sell the property.

If the property is owned by a Corporation or LLC you will need to look to the Articles of Incorporation or Organization, or the Operating Agreement if there is one, to determine who has the authority to bind the company to the contract.

If the owner of the property is deceased, who has the authority to sign on behalf of the estate will be determined by the type of succession.  It could be an administrator or executor, or if the succession is completed you would need the signatures of all the heirs that were placed in possession of the property. Court authority will be required in some circumstances when the succession is selling property.

Best practice is to always ask for a copy of the seller’s Act of Sale, which shows who purchased the property. If you’re in doubt about who needs to sign the purchase agreement, make a disclosure and make the contract contingent on all necessary parties signing off on the purchase agreement.

Jason

Purchase Agreement

Hurricane addendum

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hurricaneThe standard purchase agreement does not contain a Force Majeure (more commonly known as an “Act of God”) clause which provides for an extension of the closing date should a hurricane or other natural disaster prohibit the parties from closing on time.

During hurricane season you should consider adding the following language to your purchase agreement:

“Should a hurricane or tropical disturbance in the Gulf of Mexico prevent the timely closing of a sale or the binding of insurance, all parties agree to and here by extend the act of sale to a date within ______ days after insurance can be bound and closing services are available, provided said date does not exceed 14 days.”

We recommend a time frame of 5 – 7 days for the blank.

Remember that insurance companies may not bind insurance when there is a named storm in the Gulf of Mexico. The “box” starts at 20° North Latitude and 80° West Longitude.

Communication is critical during a hurricane threat. Remind your buyers to speak with their lender and insurance agent about any impacts an approaching storm will have on their closing and what their options are.

If you have any questions, please don’t hesitate to call or email.

Jason