CONTRACT TO BUY AND SELL REAL ESTATE (RESIDENTIAL) Section #5-
We are continuing with our discussion of the Colorado Purchase contract. We have completed the “Agreement” portion of the contract, which included the first four sections of the contract.
The next main heading is titled “Transaction Provisions” and encompasses Sections #5-9 of the purchase contract.
Section #5 deals with financing deadlines. We have broken our discussion down according to the four parts of Section #5 as follows:
Section 5.1 Loan Application: This section sets the deadline for buyers to apply for a mortgage loan. Buyer’s must apply for a new loan by this date if they are to continue forward with the contract. We always have our buyers apply and “pre-qualify” for a mortgage loan, prior to looking for a home. So, when we submit a contract, we will Insert “Completed” into this section and also forward the written pre- qualification letter over to the listing broker. If a buyer is going to “assume” a seller’s loan and not obtain a new loan, the deadline is set to allow the buyer to apply for with the seller’s lender. We rarely see buyers assuming a seller’s loan in this market. Buyer’s will most likely be applying and qualifying for a loan from a bank, mortgage broker, credit union etc…
Section 5.2 Loan Objection: This section allows a buyer to terminate the contract - if in their “sole subjective discretion, the new loan is not satisfactory. The contract lists factors that the buyer can use to make this evaluation including loan payments, interest rate, terms, conditions, and cost of such New Loan. This deadline is usually set about 7 days prior to or even closer to, the closing date. The lender usually will not have all of the final figures, rate, terms etc… until very near to the closing date. This allows the buyer to be able to review all of these final terms in order to make a decision on moving forward to the final close. Buyers will receive a full refund of earnest $, as long as they terminate on or before this deadline.
5.3. Credit Information. The seller has the right to terminate in this section, If a buyer is obtaining seller financing ( not a new loan from an unrelated party), the seller is entitled to request financial documents including credit reports, and other applicable information The buyer must provide all of the requested financial information to the seller by this deadline. Sellers may, in their sole subjective discretion, terminate the contract, after reviewing the buyers financial information. This type of loan is also rare in this market,but it does happen, so you may encounter this.
5.4. Existing Loan Review :The buyer has the right to terminate in this section If a buyer is assuming a sellers loan, they have the right to review all of the sellers loan documents. The buyer may cancel in their sole subjective discretion, after reviewing the seller’s loan documents.
Remember, your broker is the best source to help navigate you through this section! If you do not currently have a broker, please give us a call - we are happy to help at any time !
The following is the actual Colorado Purchase Contract - Section #5:
Financial Conditions And Obligations -
5. FINANCING CONDITIONS AND OBLIGATIONS.
5.1. Loan Application. If Buyer is to pay all or part of the Purchase Price by obtaining one or more new loans (New Loan), or if an existing loan is not to be released at Closing, Buyer, if required by such lender, must make an application verifiable by such lender, on or before Loan Application Deadline and exercise reasonable efforts to obtain such loan or approval.
5.2. Loan Objection. If Buyer is to pay all or part of the Purchase Price with a New Loan, this Contract is conditional upon Buyer determining, in Buyer’s sole subjective discretion, whether the New Loan is satisfactory to Buyer, including its availability, payments, interest rate, terms, conditions, and cost of such New Loan. This condition is for the sole benefit of Buyer. Buyer has the Right to Terminate under § 25.1, on or before Loan Objection Deadline, if the New Loan is not satisfactory to Buyer, in Buyer’s sole subjective discretion. IF SELLER IS NOT IN DEFAULT AND DOES NOT TIMELY RECEIVE BUYER’S WRITTEN NOTICE TO TERMINATE, BUYER’S EARNEST MONEY WILL BE NONREFUNDABLE, except as otherwise provided in this Contract (e.g., Appraisal, Title, Survey).
5.3. Credit Information. If an existing loan is not to be released at Closing, this Contract is conditional (for the sole benefit of Seller) upon Seller’s approval of Buyer’s financial ability and creditworthiness, which approval will be at Seller’s sole subjective discretion. Accordingly: (1) Buyer must supply to Seller by Buyer’s Credit Information Deadline, at Buyer’s expense, information and documents (including a current credit report) concerning Buyer’s financial, employment and credit condition; (2) Buyer consents that Seller may verify Buyer’s financial ability and creditworthiness; and (3) any such information and documents received by Seller must be held by Seller in confidence, and not released to others except to protect Seller’s interest in this transaction. If the Cash at Closing is less than as set forth in § 4.1 of this Contract, Seller has the Right to Terminate under § 25.1, on or before Closing. If Seller disapproves of Buyer’s financial ability or creditworthiness, in Seller’s sole subjective discretion, Seller has the Right to Terminate under § 25.1, on or before Disapproval of Buyer’s Credit Information Deadline.
5.4. Existing Loan Review. If an existing loan is not to be released at Closing, Seller must deliver copies of the loan documents (including note, deed of trust, and any modifications) to Buyer by Existing Loan Documents Deadline. For the sole benefit of Buyer, this Contract is conditional upon Buyer’s review and approval of the provisions of such loan documents. Buyer has the Right to Terminate under § 25.1, on or before Existing Loan Documents Objection Deadline, based on any unsatisfactory provision of such loan documents, in Buyer’s sole subjective discretion. If the lender’s approval of a transfer of the Property is required, this Contract is conditional upon Buyer’s obtaining such approval without change in the terms of such loan, except as set forth in § 4.6. If lender’s approval is not obtained by Loan Transfer Approval Deadline, this Contract will terminate on such deadline. Seller has the Right to Terminate under § 25.1, on or before Closing, in Seller’s sole subjective discretion, if Seller is to be released from liability under such existing loan and Buyer does not obtain such compliance as set forth in § 4.6.