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SOUTHERN MARYLAND ADDENDUM TO STATE CONTRACT - southernmarylandrealtors form

hello everybody and welcome to today's training session on the purchase contract that is the Maryland residential contract of sale today we're going to go over the core contract which are the first 11 pages of this Maryland purchase agreement my name is Tim Brooks with the Brooks group and the ultimate selling team at Keller Williams Realty once again welcome and let's get started ok so let's start out by defining what exactly a purchase contract is a residential contract of sale functions is a legally binding agreement between two parties concerning the terms of purchase or transfer of real property that means that everything in this purchase agreement is going to set out the terms the price what everybody must do who's a party to this contract the buyer and the seller this spells out all of the legalities of their obligations and what they must do to to execute and finally perform on this agreement if there's ever a dispute usually each one of these sections will tell you exactly what to do now before we get started with what's in the nuts-and-bolts or in the weeds of the contract if you will I want to just talk to you real quick about how to think about the contract because this can be very overwhelming especially for a new agent where it just seems like 50 pages of paperwork without any rhyme or reason and it actually is very simple if you can break it down and think about it in the right way so like our illustration shows there is the cour contract in the middle which is what we're going to go over now this is the core and everything else is simply an addition an addendum is an addition to our core contract depending on what are the special needs and circumstances of the deal now for example there may be an inspection addendum if the buyer chooses to have a home inspection or there may not be if they waive it there may be a seller contribution addenda if the buyer needs a seller contribution towards their closing costs or there may not be there may be property condition disclosures if the seller is obligated to disclose the condition of the property or they may not be if there are certain circumstances financing addendum depending on if it's FHA or VA or conventional then there will be an addendum to handle the financing portion and then any other addendum or disclosure as needed such as lead-based paint or any other circumstance that may show up but those are all the the addenda of the contract or all things that may or may not be there but it's adding something to the original core contract which is always going to stay the same for the most part so I want you just to think about it that way these eleven pages or the core and then everything else is just added on as needed if the circumstance fits it's no more complicated than that with that let's jump right in let's go to the top of the page page one that is time is of the essence time is of the essence in this contract the performance of every contractual obligation within the timeframe designated in the contract is essential to avoid a breach or default of the contract paragraph one date of offer this is the date when the offer is written when the seller accepts the offer then the parties will have a ratified contract paragraphs two and three seller and buyer identifies the seller and buyer all parties should legibly fill in their full name paragraph four property description this provision requires only the street address if available the legal description the lot block subdivision etc can be included this helps to avoid confusion regarding the precise location of the property to be transferred paragraph five estate most properties in Maryland are sold in fees simple that means that you will own the house and the land if ground mint applies it means you are only leasing the land this is most common in Baltimore but Baltimore has been getting rid of these ground leases paragraph six purchase price the total price to be paid for the land and/or house paragraph seven payment terms this provision describes the amount of money initially paid by the buyers to secure its performance under the contract this is commonly known as the deposit now you'll see that there are two sections in there you're going to put in the deposit amount you're going to actually write it out in words and then the numeric figure for what the initial deposit is by way of check or whatever other legal device that you're going to be submitting that deposit and then there's a second section if you want to get real fancy and that's that's if there's going to be a second deposit made after some sort of performance in the property meaning after the inspection term you'll put additional money into it or after the some sort of performance is required paragraph eight settlement this is the exact date for settlement or sooner if agreed to by the parties compared graph nine financing the various types of available financing are described and addendum is required for the particular type of financing to be used in paragraph ten financing application and commitment this paragraph requires the buyer to make application for financing within a certain number of days and makes the contract contingent on the buyer obtaining the describe financing within a specific time frame if a loan commitment is not issued in the required time the contract may become null and void and the buyer may be entitled to a refund of the deposit previously paid provided that the buyer diligently pursued financing usually output three days for application in 25 days for a loan commitment but you don't have to do that you can put whatever is reasonable or whatever is acceptable to the buyer and seller alternate financing the buyer may obtain financing which differs from the spit from that specified impaired f 9 even so the buyer is not relieved of the buyer's obligation to pursue the financing specified in paragraph 9 if the buyer accepts alternate financing from that specified in paragraph 9 then this change must not increase the sellers settlement costs paragraph 12 home and/or environmental inspection the buyer is advised of its right to request a home inspection and addendum to the contract is necessary if the buyer desires to have the purchase contingent upon a property inspection so in paragraph 12 there the buyer is going to initial if they want the inspection or if the inspection is declined they've got to initial one of those paragraph 13 inclusions and exclusions this section describes the appliances fixtures and equipment that convey or do not convey with the sale it is important to carefully inspect the property and identify any items that will be removed from the property by the seller or any items that the buyer believes will be conveyed now there should be a disclosure that is sent with this uploaded into the MLS system for your buyers to look at now in that disclosure will be inclusions and exclusions and usually you'll simply transfer whatever was on that disclosure onto paragraph 13 in the contract make sure that they match but be mindful of what is actually in there because what ends up on this contract is what goes paragraph 14 agriculturally assess property if the property is assessed agricultural this provision states whether the buyer or seller will pay the additional agricultural transfer tax so there's an additional tax for that so make sure that you have on there what is appropriate I usually personally put seller if applicable paragraph 15 forced conservation and management program this paragraph discloses whether there are additional forced conservation taxes assessed as a result of the sant the transfer and i write the same seller if applicable paragraph sixteen lead-based paint hazards federal law requires the disclosure of general information on lead paint also the seller must disclose any information they have regarding lead-based paint in the property the buyer has the right to make the contract contingent upon a lead paint inspection so in paragraph sixteen this is where the buyer is actually going to you're going to initial three times here you're going to initial after section a let's see section b there's going to be another set of initials in section C each one of those is basically going to say that the buyer acknowledges or has read what was in the previous paragraph 17 notice regarding deferred water and sewer assessment now this one is new this year and this has to do with if there is deferred water and sewer assessments the seller is obligated to notify the buyer and the buyer has five days to review that and can withdraw from the contract if the contract was all the way through settlement and closes and it turns out there is an assessment that was not disclosed to the buyer that seller the seller shall be liable for whatever that cost is paragraph eighteen addenda this section itemizes a number of possible contingencies or disclosures that the buyer or seller might request to be incorporated into the contract a separate addendum must be incorporated to spill out the terms of any special request also if the buyer has any special contingencies which the buyer needs assistance in drafting an attorney with the title company can assist that buyer now real quick paragraph eighteen is an interesting one I actually when I first started with real estate I use paragraph eighteen as kind of a cheat sheet to know which addenda I should be using in the contract I would just go write down like it was a checklist okay it says property as is for example or as a cache is their conservation easement disclosure of licensees status first-time Maryland homebuyer recreation tax HOA all those things I would just go through and see do any of these apply and then that tells me I need to include that in this contract beyond the core contract itself so that was just kind of a little little cheat sheet that I used to use and it's incorporated right into this contract now at the top of page four we're still under paragraph 18 under other addenda for us specifically our broker requires that we use a general addendum that discloses a bunch of things it's very similar to the Baltimore County or Montgomery County addendum so I click other and put general addendum in there and I also like to use the Montgomery County addendum of clauses even in all of the other counties just because it's it's one addendum that marks all these other contingencies so if you're going to use that addendum of clauses you also have to write that in under other addenda or special conditions paragraph 19 wood destroying insects inspection this section provides for an inspection of the house garage or within three feet of the house or garage outbuildings located within three feet of the residence or garage and any portion of any fence located within three feet of the residence or garage for wood destroying insects the seller is required to have any infestation treated and any damages repaired if the repairs are extremely expensive the contract provides that the buyer or seller may have the right to limit their expenditures or cancel the contract paragraph 20 deposit this paragraph provides for the placement of the deposit in escrow the deposit may be placed in an interest-bearing account paragraph 21 deed and title the seller must deliver clear title to the property subject to the normal recorded easements covenants and other matters of record 22 condition of property and possession the property condition paragraph states that the property shall be vacant at settlement and clear of trash and debris the property should be delivered in substantially the same condition as existed on the day the contract was accepted unless otherwise specified the property is sold as is paragraph 23 adjustments this paragraph requires the buyer and seller to prorate and adjust the date of settlement the various charges such as taxes and homeowners association fees any heating oil remaining in the tank will become the property of the buyer without reimbursement to the seller paragraph 24 settlement costs the buyer is responsible for paying all settlement costs charges and lender fees unless the parties negotiate otherwise the seller will pay for the clearing of existing loans paragraph 25 transfer charges unless otherwise agreed all transfer and recordation taxes are shared equally between the buyer and seller if the buyer is a first-time Maryland home buyer then it is presumed unless otherwise negotiated that all transfer and recordation taxes will be paid by the seller also for a first-time buyer the buyer is exempt from paying the state transfer tax and the seller must pay a 1/4 percent state transfer tax paragraph 26 broker liability the parties acknowledge that the agents cannot be responsible for the condition of the property paragraph 27 brokers feed the settlement attorney is directed to disperse the real estate commission in accordance with the listing agreement paragraph 28 seller responsibility seller agrees to keep existing loans from falling into default and to correct any notices of violations from government agencies regarding the property paragraph 29 buyer responsibility the buyer is obligated to diligently pursue the financing described in the contract if the buyer misrepresents its financial status then the seller may treat this as a breach of contract and the buyer could lose its deposit all right moving along to page six paragraph 30 homeowners association this paragraph states the need for a contract addendum if the property is within a mandatory homeowners association paragraph 31 Graham read this states that the property is subject to a ground rent and that if it is not timely paid the ground rent lease holder can bring an action against the party paragraph 32 sale or settlement or lease of other real estates this provision expressed expressly states that the contract is not contingent on the sale or rental of other real estate unless an addendum to the contract sets forth such a condition paragraph 33 leases the seller agrees not to renew any leases beyond settlement paragraph 34 default this section provides remedies for either party in the event of a default by the other party if the buyer fails to settle the seller may elect to retain the deposit or sue the buyer for additional monetary damages if the seller fails to settle the buyer can sue to force the seller to perform its contractual obligations and/or for monetary damages paragraph 35 mediation of disputes this provision provides for mandatory mediation in the event that a dispute arises between any parties to the contract page 7 paragraph 36 attorneys fees in the event of a lawsuit relating to the contract the losing party can be required to pay the attorney's fees of the winning party so if a party sues the other and wins and gets a monetary damage they may also have to pay the attorney's fees on top of that paragraph 37 settlement attorney the buyer is advised that they have the right to select the settlement attorney sometimes that gets a little hairy when it's a foreclosure and oftentimes these foreclosure companies insist you use their settlement company but if you press it and insist on using your own title company they have to comply with that by state law paragraph 38 owners title insurance the buyer has the right to obtain an owner's title insurance policy the lender is instructed to quote the premium for an enhanced policy paragraph 39 authorization to provide settlement disclosures and statements to the agents this is new where with these ulta statements that came out last year they didn't provide any mechanism to provide them to the agents and thus to the broker so we could close out our files and so now they've added paragraph 39 that allows the buyer and seller to do just that so that we can close out our accounts properly paragraph 40 limited warranty the buyer is advised that any home warranty plan provided by the seller may be a limited warranty paragraph 41 property insurance brochure self-explanatory that just gives a disclosure about property insurance brochure 42 flood disclosure notice same thing that's a notice on fled to school sure flood plain and a link to go check it out to see if they're in a flood plain and page 8 paragraph 43 guarantee fund the buyer is notified of the protection afforded by the real estate guarantee fund paragraph 44 disclosure notice the buyer is advised of its right to receive a property condition disclosure or disclaimer statement from the seller which obviously we include as part of our initial disclosures paragraph 45 Maryland non-resident seller if the property is not the sellers principal residence and the seller is a non Maryland resident money may be held back at settlement for capital gains taxes non-resident sellers should contact the title company well in advance of the settlement for additional instructions paragraph 46 Internal Revenue servus filing the parties agree to cooperate with the settlement attorney in completing the required IRS 1099 report paragraph 48 wetlands notice wetlands are described and buyers are given information on how to obtain further information regarding wetlands paragraph 49 force conservation act to notice the seller represents that the property is not subject to a forest conservation plan if the owner of the property is subject to obligations under a forest conservation plan this must be disclosed in a separate addendum page 9 paragraph 50 notice concerning conservation easements the buyer must be advised of certain conservation easements paragraph 51 foreign investment taxes under federal law a non-resident alien of the US may be required to escrow money to pay capital gains taxes paragraph 52 criminal activity and sexual offenders the buyer is advised of its right to review the public information regarding any criminal activity near the property paragraph 54 notice to the parties this paragraph explains to all parties that the agents and brokers cannot make representations as to a number of factors regarding the property such as water quality availability of utilities septic systems lot size or zoning and page 10 paragraph 55 property tax notice this paragraph advises the buyer that they have the right to appeal the tax assessment during certain time periods paragraph 56 non assign ability the contract cannot be assigned to a different buyer without the sellers consent paragraph 57 paragraph headings paragraph headings are for reference only and are not part of the contract paragraph 58 computation of days this provision explains how days are calculated in the contract paragraph 59 entire agreement written contract contains the complete agreement of the parties only written modifications or amendments to the contract will be valid the party should not rely on oral promises or representations paragraph 60 electronic delivery in addition to signing the original document the contract can be ratified by facsimile or Kella copier and finally at the bottom signs it and there's the date of contract acceptance make sure the last person who signs it and actually ratifies that contract puts in the date of contract acceptance in there it'll get kicked back if a date is not written in there and then below that broker information page 11 actually has the same thing as page 10 here it just got broken up so you'll have two spots for the agents here broker information this provision identifies who the real estate agents are and discloses their status representing either the seller the buyer or bolt and as we know we can't represent both but it means that if you were handling one as an actual the agent and the other as a intra company agent so this section is not sufficient however to satisfy the disclosure requirements of the Maryland agency disclosure law just remember that and with that we are finished I just wanted to remind you again we have a core contract and then whatever addendum applies remember you can use paragraph 18 is a little cheat sheet to go down the list and see if any of those apply to your situation once again I'm Tim Brooks with the Brooks group and the ultimate selling team at Keller Williams Realty I hope that you enjoyed this training session I try to keep it under a half-hour and make what seems complicated simple because in the end it really is simple and if ever there's something you don't understand in there or there's a dispute just read it in the contract will tell you what to do or what the Meccan 'im mechanism is to resolve the situation I hope you got a lot out of this training session and look forward to having you in the next session which will be the / disagreement addendum