CONTRACT TO BUY AND SELL REAL ESTATE (RESIDENTIAL)Section #4 - This week we will go over Section #4 of the Colorado Residential Purchase Contract. This is the last section that falls under the "Agreement " Main Heading -in the contract. This section of the contract lays out the monetary details including the purchase price offered, earnest $ amount, down payment, loan type and amount, and the cash the buyer will bring to closing. The purchase price is always negotiable, and the seller can counter with a different amount. Sometimes buyers need to go over the list price in this market, but that is not always the case ! If you are not working with a broker, we would love to help you put your best offer together.
We would like to clarify and highlight a couple of the Paragraphs in Section #4:
4.2- Seller concession: This section is where a buyer would ask for "closing cost" assistance from a seller. Closing costs are fees related to the cost of the loan and are different from the down payment. The amount in Section 4.2 should be a specific $ amount, i.e. $5000. The lender and /or the title company will utilize the concession amount on the final settlement statements - to determine how much a buyer will need to bring(if anything) to closing. The closing cost concession is usually limited by the buyer's lender- so we will work closely with the lender to ensure an accurate figure in this section. In the great majority of our purchase contracts, we will negotiate with the seller, to pay all or a portion of the buyer's closing costs. Our goal is to put you into a home with the least $ out of pocket - so that you will have cash left after closing !
4.3 Earnest Money -The earnest $ shows the seller that a buyer is serious about going through with the transaction. The earnest $ amount is always negotiable - between buyer and seller. When submitting an offer, we will ask our clients for only a copy of their earnest $ check. Our company will never deliver an original Earnest $ check until the contract is fully agreed upon and signed by all parties. When the contract is successfully signed, we will then deliver our clients earnest $ to the title company or listing broker's office, usually within 1-3 business days. The earnest money deposit is ALWAYS credited back to the buyer at closing. If a buyer uses one of the NO Down payment community loan programs that we use, the full earnest $ deposit could be refunded to the buyer at closing !! The title company will either wire or write a check back to the buyer, depending on the final closing figures. If the contract does not move forward to a successful closing, we will protect our clients' earnest $ deposit, by properly terminating the contract. In so doing, our clients will always receive a full refund of their earnest $ in the event of cancellation.
4.5,4.6,4.7 - Financing - These sections deal with three different types of financing as follows:
- 4.5 - New Loan - this is a traditional loan product such as a convention loan, FHA Loan or VA loan. We have many trustworthy honest lenders that we can refer you to. They will go over every step of the process and help you to choose the right product for your situation.
- 4.6- Assumption- this is where a buyer would assume all or a portion of the seller's current mortgage loan. This type of loan is not very common in our current market. You would definitely want to have your broker negotiate this amount, and in many cases, would also want to seek legal advice through an attorney.
- 4.7- Seller or Private financing - this is where the seller would finance all or a portion of the buyer's purchase. For example, buyer's sometimes are expecting to receive some type of lump sum payment or bonus in the near future. Buyers can negotiate with the seller to "carry"or loan them this amount - to be paid back upon receipt of the buyers funds. This amount is usually not for the full purchase price, but again, it is all negotiation ! You would definitely want to have your broker negotiate this amount, and in many cases, would also want to seek legal advice through an attorney.
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 here to help, even if it just to answer your questions!
The following is the actual Colorado Contract - Section # 4:
|4. PURCHASE PRICE AND TERMS.|
|4.1. Price and Terms. The Purchase Price set forth below is payable in U.S. Dollars|
|by Buyer as follows:|
|9||4.4||Cash at Closing|
|4.2. Seller Concession. At Closing, Seller will credit to Buyer $ (Seller Concession). The Seller Concession may be used for any Buyer fee, cost, charge or expenditure to the extent the amount is allowed by the Buyer’s lender and is included in the Closing Statement or Closing Disclosure, at Closing. Examples of allowable items to be paid for by the Seller Concession include, but are not limited to: Buyer’s closing costs, loan discount points, loan origination fees, prepaid items and any other fee, cost, charge, expense or expenditure. Seller Concession is in addition to any sum Seller has agreed to pay or credit Buyer elsewhere in this Contract.|
| 4.3. Earnest Money. The Earnest Money set forth in this section, in the form of a , will be payable to and held by (Earnest Money Holder), in its trust account, on behalf of both Seller and Buyer. The Earnest Money deposit must be tendered, by Buyer, with this Contract unless the parties mutually agree to an Alternative Earnest Money Deadlinefor its payment. The parties authorize delivery of the Earnest Money deposit to the company conducting the Closing (Closing Company), if any, at or before Closing. In the event Earnest Money Holder has agreed to have interest on Earnest Money deposits transferred to a fund established for the purpose of providing affordable housing to Colorado residents, Seller and Buyer acknowledge and agree that any interest accruing on the Earnest Money deposited with the Earnest Money Holder in this transaction will be transferred to such fund.
4.3.1. Alternative Earnest Money Deadline. The deadline for delivering the Earnest Money, if other than at the time of tender of this Contract, is as set forth as the Alternative Earnest Money Deadline.
4.3.2. Return of Earnest Money. If Buyer has a Right to Terminate and timely terminates, Buyer is entitled to the return of Earnest Money as provided in this Contract. If this Contract is terminated as set forth in § 25 and, except as provided in § 24, if the Earnest Money has not already been returned following receipt of a Notice to Terminate, Seller agrees to execute and return to Buyer or Broker working with Buyer, written mutual instructions (e.g., Earnest Money Release form), within three days of Seller’s receipt of such form.
4.4. Form of Funds; Time of Payment; Available Funds.
4.4.1. Good Funds. All amounts payable by the parties at Closing, including any loan proceeds, Cash at Closing and closing costs, must be in funds that comply with all applicable Colorado laws, including electronic transfer funds, certified check, savings and loan teller’s check and cashier’s check (Good Funds).
4.4.2. Time of Payment; Available Funds. All funds, including the Purchase Price to be paid by Buyer, must be paid before or at Closing or as otherwise agreed in writing between the parties to allow disbursement by Closing Company at Closing OR SUCH NONPAYING PARTY WILL BE IN DEFAULT. Buyer represents that Buyer, as of the date of this Contract, Does Does Not (clr) have funds that are immediately verifiable and available in an amount not less than the amount stated as Cash at Closing in 4.1.
|New Loan -|
|4.5. New Loan.|
|4.5.1. Buyer to Pay Loan Costs. Buyer, except as provided in 4.2, if applicable, must timely|
|pay Buyer's loan costs, loan discount points, prepaid items and loan origination fees, as required by lender.|
|4.5.2. Buyer May Select Financing. Buyer may pay in cash or select financing appropriate and acceptable to Buyer, including a different loan than initially sought, except as restricted in 4.5.3 or 30 (Additional Provisions).|
|4.5.3. Loan Limitations. Buyer may purchase the Property using any of the following types|
|of loans: Conventional FHA VA Bond Other|
|4.5.4. Good Faith Estimate – Monthly Payment and Loan Costs. Buyer is advised to review|
|the terms, conditions and costs of Buyer’s New Loan carefully. If Buyer is applying for a residential loan, the lender generally must provide Buyer with a good faith estimate of Buyer’s closing costs within three days after Buyer completes a loan application. Buyer also should obtain an estimate of the amount of Buyer’s monthly mortgage payment.|
|4.6. Assumption. Buyer agrees to assume and pay an existing loan in the approximate amount of the Assumption Balance set forth in 4.1, presently payable at $ per including principal and interest presently at the rate of % per annum, and also including escrow for the following as indicated: Real Estate Taxes Property Insurance Premium Mortgage Insurance Premium and CLAUSES|
|Seller Will Will Not (clr) be released from liability on said loan. If applicable,|
|compliance with the requirements for release from liability will be evidenced by delivery on or before Loan Transfer Approval Deadline at Closing of an appropriate letter of commitment from lender. Any cost payable for release of liability will be paid by in an amount not to exceed $.|
|Seller or Private Financing - Do Not Display in Print Out|
| 4.7. Seller or Private Financing.
WARNING: Unless the transaction is exempt, federal and state laws impose licensing, other requirements and restrictions on sellers and private financiers. Contract provisions on financing and financing documents, unless exempt, should be prepared by a licensed Colorado attorney or licensed mortgage loan originator. Brokers should not prepare or advise the parties on the specifics of financing, including whether or not a party is exempt from the law.
4.7.1. Seller Financing. If Buyer is to pay all or any portion of the Purchase Price with Seller financing, Buyer Seller (clr) will deliver the proposed Seller financing documents to the other party on or before days before Seller or Private Financing Deadline.
22.214.171.124. Seller May Terminate. If Seller is to provide Seller financing, this Contract is conditional upon Seller determining whether such financing is satisfactory to the Seller, including its payments, interest rate, terms, conditions, cost and compliance with the law. Seller has the Right to Terminate under § 25.1, on or before Seller or Private Financing Deadline, if such Seller financing is not satisfactory to the Seller, in Seller’s sole subjective discretion.
4.7.2. Buyer May Terminate. If Buyer is to pay all or any portion of the Purchase Price with Seller or private financing, this Contract is conditional upon Buyer determining whether such financing is satisfactory to the Buyer, including its availability, payments, interest rate, terms, conditions and cost. Buyer has the Right to Terminate under § 25.1, on or before Seller or Private Financing Deadline, if such Seller or private financing is not satisfactory to Buyer, in Buyer’s sole subjective discretion.