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Music welcome to the multi board residential real estate contract 7.0 tutorial we will be going through the contract and as we do that we will be we will be talking about every paragraph spending a little more time on the paragraphs that are more relevant to us as the Realtors I will go through the paragraphs that are more there for the attorneys use not spend quite as much time on those so let's get started the first paragraph is the parties so we have to put in the buyers name and we have to put in the sellers name so you as the buyer agent will be the one that will be initially writing up this contract 99.9 percent of the time so you will obviously know your buyers names you will put their names in as they will be holding title so it won't be mr. and mrs. Jones it would be Sally Kay Jones and what jacksie Jones or whatever it might be the sellers name you should be able to get from the MLS if it is not in the MLS it will be in realist so when you go into realist the sellers names are there if by some chance you cannot locate the sellers names at sellers names at all it is recommended that you put in in do not take up a whole line for this just put in to be inserted to be inserted small enough that it you can read it but giving room in there to put the sellers name if you leave it blank then when the sellers names are put in it becomes a counteroffer because it would need initials if you put to be inserted you're allowing that to be inserted without creating a a counteroffer situation but that should only be on rare occasion as I said the vast majority of the time you will have the buyers you know the buyers name and you will be able to determine the sellers names if you are a dual agent in this transaction that means that you are representing both the buyer and the seller oh now by the way you absolutely have all of their names but you would check here and you will be completing and one of the optional paragraphs we are going through the contract in order so we're not jumping to that paragraph here we will talk about it when we get there but this allows both both parties to know that you are acting as a dual agent right up front which is what in fact the license law requires us to do so that's basically paragraph number one paragraph number two is the real estate this is what is it that we are selling so it starts with the approximate lot size or acreage of and again that is available through the MLS so you should be able to find in there what the lot size or the acreage is and it says approximate the only time so you don't need to worry about it being exact it's whatever is in the MLS the only time that you might want to do anything with this so just a reminder as we get started we are not supposed to make we as realtors are not supposed to be making any kind of modifications to this contract we're not supposed to be practicing the law without a license but the simple modification that I'm going to mention to you now would only be done if in fact your buyer was only going to purchase this property if it had a minimum acreage of so let's just say he was going to buy this property and he has four horses and wherever this property is located you have to have one acre of land to have a horse I'm making that up I don't know it's going to be different every place we're in horse country so he needs four acres or he can't have all four of its houses so if you leave this with the real estate with approximate lot size or acreage of four acres if it comes back slightly less than four acres you could end up with an argument as to whether or not the buyer still has to purchase this property and get rid of one of his horses so we don't want that to happen so the real estate width and you would cross out the word approximate so you would cross out the word approximate and in the blank you would write not less than four acre so if you had a buyer who was did not want to purchase the property without it being four acres it would be with lot size or acreage of not less than four acres and that would cover you that's not going to happen very often it's gonna happen with horses it's gonna happen if in fact they a developer wanted to buy a four acre plot of land with a house on it we would sell that with this contract and he would want and let's say it was one a KERS it was zoned for one acre lots he needs four acres otherwise it's not worth as much to him if it's only three acres so or three and a half so just just an example of when you might have to do that next is the address of the property no big deal the permanent index number or numbers some of the properties have more than one pin you're gonna want to put them both in there if that be the case most properties have just one pin that is also in the MLS so you can get it from there you'll then check to say whether this is a single-family attached or detached or a multi-unit building this is so that everybody knows what other documents we may be looking for in this transaction so a single-family attached such as a condo or a townhouse or a etc are going to have all kinds of condo docks that we're going to need if it's multi-unit we've got some other some other issues that we need to take a look at so it's all of that kind of stuff what we're going to be looking for if designated parking is included then you're going to put in the number of spaces that the buyer gets with this property and the space numbers and where they are located are they in the parking lot area they in the garage where are they at and is this deeded space and if it is there will be a pin for the parking space is it a limited common element or is it assigned space odds of you having either one of those either the designated storage or the designated parking checked off and used in a single-family detached is not going to happen because there is no designated parking and designated storage it's going to happen in your multi-unit more likely than anything else if you are not going to use it we are we're not supposed to leave any blanks in the contract to be filled in later so I suggest you're out rather than drawing lines in there just put n slash a in that very first line on first base on line 11 and slash a and now everybody knows we're not using either either of those designated parking or designated storage so just na and a blank makes sense because it doesn't look like you left it blank to go back and put stuff in there later so just a couple of suggestions on on paragraph to paragraph three is the fixtures and personal property paragraph and it is where we specifically state to the seller what they need to be leaving in the property and what the buyer wants to the seller to leave now we also will use this paragraph to tell the buyer that the seller is taking some things and I'm gonna walk you through that and show you how that works but before I even do that I want to remind you that the sales contract supersedes what's in the MLS so if you had if I had put a listing in the MLS and I had said that my seller was leaving the washer and dryer and all the window treatments and hardware and you did not check off washer/dryer and all the window treatments and hardware my seller would not have to leave them so it is imperative that you as a buyer agent make sure you have checked off on in this part of the contract everything that your buyer wants left it is inappropriate and a major mess if you take the lazy way out and just check everything on all four of those columns that's not that's not how it's done you need to know what the buyer wants you need to do you need to check off what they want and then the listing agent needs to go through this carefully with their seller to make sure that everything that is checked off is agreeable to the seller because when we get to the closing table the last thing I want to see happen is either you or either the listing agent or the buyer agent having to buy or pay for some of this stuff because you didn't take care of it when you wrote the contract because the flipside of this is if you check off washer and dryer and my seller had not planned on leaving it we get to the closing my seller needs to provide a washer and dryer because it was in the contract so this becomes the agents responsibility this is not the attorneys responsibility to do this so you want to make sure that you are very careful about what goes in what you check off and it says if you'll notice that the in line 18 check or enumerate applicable items if there are two refrigerators that are in the home and your buyer wants both of those you're going to check you're going to write in the number two so that would happen in any place where that might might pop up okay so most if you fill out the contract from the MLS much of this is auto filled in so when you go into the listing that you're selling and you click on a little contract icon it will pop up the contract will be there and it will auto fill into the into the contract but you want to double check all of these personal property items because the MLS and the sales contract are not they're tied together but not 100% identical in some cases so you want to make sure that everything that everything matches even when it's auto filled there is I've heard occasions where people have written in for example in refrigerator they'll write sub-zero after the refrigerator to make sure that the seller doesn't try to take that expensive one with and replace it with a less expensive one there is some place in the contract and I will show it to you when we get there that really does prohibit the seller from doing this no harm or foul if you want to go ahead and write it in there same thing with oven range or stove and you want to write what Viking or Meili or whatever it is after that but there is another place where that is taken care of and the seller would have to bring would have to bring it back so that's the the standard things that are in the contract but line 29 has other items included at no added value and just as a little aside the reason for saying at no added value both on line 15 and on light went line 29 what happens is that when the appraiser comes into the property personal property can affect your appraised value so what we're trying to say here is this is all part of the cost of the property it's typical in our marketplace that the stuff stays so it should be included in the appraised value so we're trying doesn't mean it's gonna work but we're gonna give it our best shot so line 29 is for your buyer to ask for other things this can get scary this is where buyers start to do things like asking for pool tables and what riding lawn mower is and all the rest of that stuff if your buyer wants that and you write it in and the seller is agreeing to leave it do not be surprised when the seller comes back and says that those are going to be as is when I sold my house I left my both the pool table and the writing more and I wrote in as is because if I don't put in as is then the I have to make sure they're all working and I will tell you honestly I didn't know if that was if that lawn mower was working I didn't think there was anything wrong with the pool table but I didn't know if the lawn mower was working at all my husband had done that my husband had passed away I was totally and had no idea whether or not it was working so don't be surprised to see that items not included that's where the seller might right in you as a buyer agent are probably going to put an A in there because that means that everything's included but my seller may come back and say we're not leaving the dining room chandelier we're gonna leave all the rest of the the the what ceiling fans the the all of the electrical all of that's going to stay except for my my ceiling fan so where it says light fixtures as they exist on line 19 third column over you can leave that there if I put in if exclude the dining room chandelier okay now just a little hint if you're the listing agent you should have told your seller to take the darn chandelier down and put it go to Menards and put another one up so that we don't have to have these problems but because we're supposed to be selling real estate not a whole bunch of personal property but it does happen okay then the seller warrants to buyer that everything fixtures systems personal property everything included in this contract shall be an operating condition at the possession accept and that's where a seller might if the dishwasher isn't working or if something's not working they could write in their accept dishwasher I want to remind you that FHA and VA and line 32 are not compatible when you sell a property FHA or VA and your seller accepts an FHA or VA contract you need to remember that everything has to be in working order so there's no way you're going to be able to have it's not working order if you're selling at FHA or VA this is one of the first places where we start to talk to the buyer about the condition of things that will cover that more when we get into the home inspection paragraph but it says it lied 33 a system or an item shall be deemed to operating condition if it performs the function for which it is intended regardless of age and does not constitute a threat to health or safety what that means is pretty obvious if you buy a 25 year old house and in this 25 year old this 25 year old house has a 25 year old roof the roof is not leaking nothing is wrong with the roof then you don't get a new roof if you bought a 15 year old house and it's got a 15 year old dishwasher in it and it's still washing dishes it may not be a pot scrubber but it's washing dishes then you don't get a new dishwasher so it's to let the buyers know they're getting what they what they see it goes on at line 35 to say if a home warranty applies we're going to check here and then we've got another optional paragraph to fill out because and that's if the buyer wants this Celer to provide a home warranty if the buyer decides to do his own home warranty you do not check that box the buyer just pays for himself and what you need to keep in mind when you're doing all of this is are you in a seller's market or you are are you in a buyers market if you are writing an offer on a property in a seller's market adding extra things that the buyer wants like pool tables and writing lawn mowers asking for home warranties asking for stuff the seller wasn't planning on leaving is not the best idea you've ever had because you're probably going to be in a multiple offer and very likely you're going to end up losing the house because you just filled it up with a bunch of garbage so you want to be careful now the flip side of that is that this is a buyer's market I should be preparing as a listing agent my seller for the fact that the buyers could be asking for more things so it all depends on who's who's driving the bus so that's basically how we use paragraph three so paragraph four then is the purchased price and the payment pretty straightforward the purchase price is whatever the buyer is offering to the seller and it goes on to talk about the legality of how all of it is going to be paid in other words after the payment of the earnest money the balance of the purchase price is going to be paid at closing and good funds as divided by law we don't need to worry about what good funds means that's just to make sure that everybody knows that they can't bring in what cattle and crops and all the rest of that stuff so the next thing is credit at closing and it says if applicable and I'm going to piggy back here on my comment I just made about is this a buyer's market or a seller's market in a seller's market the buyer asking for the seller to pay part of his closing costs he is not going to get him very far in trying to get his offer accepted there are times where your buyer needs that money in order to be able to afford the property in other words he's got his down payment but he does not have all of his closing costs that he doesn't have the money to pay all of his closing costs so if your buyer needs it and if the buyers lender permits the credit to happen and and there those are and if the lender says no then it's still not going to happen but that's where the seller is agreeing to credit on X amount of dollars to the buyer at closing that will pay for expenses closing costs etc so often we talk about closing costs or credit and closing as being a percentage of the sales price so we do see that sometimes written in that way instead of a dollar amount it might say three points it's much clearer if you turn the points into a dollar amount because that way there's no quarrel about how much it is the seller is going to be paying if you are not using it and I know it says if applicable but I would still suggest just to make everything perfectly clear that you put my n slash a in line forty one if the buyer is not asking for any credit at closing from the from the seller okay so the next part of this is what is the earnest money going to be and the first thing I need to say is that you need to talk to your managing brokers about how much the earnest money should be this contract is used for the entire greater Chicagoland area and we have properties that market places where the median sales price is 650 to 700 thousand and other marketplaces where the median sales price is 150 thousand how much earnest money is going to be required for those two marketplaces is drastically different and it depends on the type of financing that you're using so the earnest money that the buyer is putting up to show the seller that he really wants to purchase this property is what goes in the blank the first blank on line 42 the second blank is where it says this earnest money shall be tendered to the escrow II on or before blank business days after the date of acceptance so if I were to write this contract I might say that I'm going to earnest money of three thousand dollars shall be tendered to the escrow II on or before three business days after the date of acceptance that means that I or my buyer must make sure that we have delivered to whoever is holding the earnest money that three thousand dollars by the date in this contract if it is not delivered by that date then you run then you have the problem of your buyer being in default so you want to make sure that the date you put in there is something that your buyer can live with if you put it out too far you're going to have to be concerned not concerned but you are very likely to get a a counteroffer back because generally speaking we don't see that date in there of anything longer than five business days after the date of acceptance and typically the reason most buyer agents will put that in there is when we get to the home inspection and at the eternia modification paragraph you will see that there is a five business day time frame for those two things to be done and usually by the end of that five days we have a pretty good handle on whether or not this thing is going to stay together then we have additional earnest money if any you do not have to have two batches of earnest money but you could have so if I said I'm going to give you a thousand dollars worth of earnest money in five business days and let's just say this is a $300,000 house we're selling that's not going to be enough earnest money so I would then possibly say I will bring you an additional what three thousand more or two thousand or five whatever you're managing broker says is appropriate in blank number by a certain date not blank number of days but by a certain date and often what we put in there is 15 days roughly after written this contract because again this ties in with the five business days to do the home inspection and the attorney modification and then five business days to take care of any issues that came up the first five days now we have ten business days plus the weekends and what I'm saying is I'll give you the thousand now I'm gonna bring you the other five thousand or whatever it is after we've satisfied all of the attorney modification etc I recommend strongly that you do not put in additional earnest money of five thousand shall be tendered and then do something weird in there and write in after satisfy after AI is satisfied AI means attorney review home inspection so don't write in after AI because if we there are times we go all the way to the closing and the AI has never been what we call satisfied so you want to put a date in there if we are not done with the attorney review in the home inspection by the date of in line 44 then the buyers attorney will just extend it or ask for an extension then typically it's extended so but at least it gets us with some firm dates of when the earnest money is coming in while we're negotiating the contract all right so this paragraph does go on to the next page and at the top this is continuation of the earnest money paragraph it talks about here at line 45 who is going to be holding this earnest money so typically in our marketplace in the greater Chicagoland area where this contract is used the earnest money is held by the sellers brokerage it is a mandatory field in M read our MLS that the listing agent needs to put in there that the earnest money will be held whether or not they hold earnest money so you were in the MLS you're selling my listing and I do hold earnest money then you're just gonna check sellers brokerage your buyer will be making his his earnest money check out to the listing office then and that's where it gets delivered that's where it needs to be tendered if in fact the celery's brokerage does not hold earnest money you then and your office does you check buyers brokerage and then you hold the earnest money if neither of us do then we have the option of checking the third box which is as otherwise agreed by the parties as escrow II and that means as otherwise agreed by the parties you and I can continue to negotiate this contract when neither one of us holds earnest money because we don't need to worry about it right now we canna sell a house this weekend and we can figure out on Monday whether or not we're going to have a title company hold it or if it's going to be held by the sellers attorney or who exactly is going to hold it no worries right now although I will say that if you're gonna check box number three it is generally suggested that you put back on the how many business days to deliver the earnest money that you put five business days in there because if you don't even know who's gonna hold it and you sell the house on Saturday you better figure you've got maybe a day or two Monday or Tuesday to figure out who's gonna hold it and then you need time for you or your buyer to get that earnest money delivered to whomever is going to hold it so in the event the contract is declared null and void or it's terminated for any reason the earnest money is going to be dispersed pursuant to paragraph 26 and will give to paragraph 26 but that is the paragraph that says what happens to the earnest money if the contract is declared null and void we needed to reference that here so that the buyers and sellers all understand for example we cannot return earnest money without joint written direction of the parties and the buyers need to know that and the sellers need to know that they're probably not supposed to be hanging on to the buyers earnest money if the buyer deserves to get it back so that was just to kind of point them in the right direction so that they know what happens to the earnest money the balance due at closing is no big deal again it's more of a legal thing that says that the any credit everything has to be paid in good funds at the closing and we kind of mentioned that just a little bit before so that's the remainder of the paragraph that has to do with the purchase price and the earnest money so that brings us then to paragraph five and that's the closing so you're again you're the buyer agent when does your buyer want to close on this transaction and you're gonna see in just a couple of minutes that there are 45 days after the date of acceptance to get the mortgage or five business days prior to the date of closing but the issue here is that often the sellers aren't even wanting to close before about sixty days your buyers usually not ready to close before about sixty days but you need to talk to the lender because if you're trying to close and I'm gonna give you some statistics in just a couple of minutes if you're trying to close much before about fifty days from the date of this contract you could be aiming for a target you can't hit so just to share with you Ellie May is one of those groups that keep track of a lot of stuff that's going on with loans and just and this is the beginning of of January just this past couple of weeks they brought out their their survey that they gave of the app the average days to close a transaction so I will tell you that the average days to close a conventional transaction was 47 days the average days to close an FHA were was 48 and VA was 50 now that was for the last month the lowest days in all of 2018 was 42 days on a conventional 43 days on an FHA and 46 days on a VA so all the times that people are saying we're gonna close in 30 days you better make sure that the lender is pulling in some favors someplace along the way because it sometimes is almost impossible especially on an FHA or a VA to get the thing closed within 30 days a lot of that has to do with the time it takes to get the appraisal done so FYI talk to your buyers when do they want to close but don't be unrealistic about your closing date is my point so it goes on in this paragraph to say that we are going to close this transaction at whatever title insurance company that they're going to use whichever of those title companies is situated nearest to the real estate and that's to hopefully keep us from having to go to the other ends of the earth so to speak to do a closing so we're going to do this as close to the to the property as we possibly can we have no control over this by the way this is all done by the attorneys and the title companies so but it's in there to try to rein in a little bit that the attorneys aren't making us drive to downtown Chicago in the houses and in Aurora so that's the attempt okay so the next paragraph is the possession paragraph and unless we're going to use the optional paragraph 35 which is this post closing possession meaning the sellers going to stay in the house after the closing the seller is going to deliver possession to the buyer at the closing so they're gonna go to the closing your buyers going to get the keys and they're gonna be able to move in I will be honest and say to you that there's a couple of times where the seller will say our moving trucks are still there but you probably figured that out because you saw that on the walkthrough you might have to go to lunch first but they're going to get possession that day and possession is delivered when the seller and all of the occupants if any have vacated the real estate and delivered the keys to the buyer so if there's a tenant in the property this contract says that that tenant also has to be out of that property in order to give possession if the seller cannot give possession then the sellers in default of the contract so when we're a listing agent and we've listed a property that has a tenant in there we need to make sure that the tenant that the seller understands that the tenant to vacate the property prior to the closing the exception to that would be my investor buying your investors property and he wants the tenant to stay but that's not generally what happens okay this is generally what happens is they need to be what they need to be out everybody's out so the buyer can move in Music you