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Fax esign termination

all right now we're going to talk about the addendum concerning right to terminate due to lender's appraisal interesting story do you know why this whole form came out yeah yeah me too because there are so many people writing in special provisions all kinds of different things that we're trying to cover the ability if and if it did appraise or if it didn't appraise and what was going to happen so the real estate commission took information and suggestions from people uh about what was actually going to end up being the trek approved form promulgated by the real estate commission uh and this is what it is so it is probably one of the most confusing forms of that is out there and we're going to do our best today to educate you on what it truly means so i want you to re i'm going to go ahead and read something right up here at the very top of this form because it's important the first thing it says addendum concerning right to terminate due to lender's appraisal right underneath that here's what it says this is important y'all use of the third-party financing addendum is attached to the contract and the con of the transaction does not involve fha insured or va guaranteed financing so that means you cannot use this form for fha or va financing so if on the third party financing addendum you checked those boxes you cannot use this form probably one of the most uh common mistakes that we see is we get this form sometimes with those contracts now our effects are the cash and they want to get an appraisal yeah exactly or if it's cash they want to do an appraisal exactly okay so here's the way that i want you to remember this if you choose check box one here you're writing a blank check you have no idea how much you're writing a check for but basically what it says is if you're under contract for two hundred thousand dollars and for some reason that house comes in and appraises for a hundred thousand dollars you're agreeing to write a check for a hundred grand you have no yeah 100 extra to make up that difference so that you can get that loan okay now that's something i wouldn't recommend i would never under any circumstance recommend paragraph one here because you have no protection for how much you're going to actually bring the most common one you're going to use here is paragraph two a partial waiver and what this one says right here is buyer waves buyer's right to terminate the contract under paragraph 2b which is the of the third party financing of them which is the portion where it says property approval and then it says property approval is not obtained because the opinion of value in the appraisal does not satisfy a lender's underwriting requirements and the opinion of value is blank or more so let's use that two hundred thousand dollar example here uh that you're under contract for right here if you're willing to bring a total of ten thousand dollars to closing the amount that you're going to put in here is a hundred and ninety thousand dollars so right here you're mitigating your risk that's right you're putting in the most amount of money that you'd be willing to bring and once again it's a basic math problem so if you're what if your clients are willing to make up a difference of ten thousand dollars take your contract price you're under contract for to purchase the home and subtract it by the most amount of money that they'd be willing to bring and that's what's going to go in paragraph 2 here and that's why you're going to check box 2. and then paragraph 3 additional right to terminate kim what in the world does this one mean additional ride to terminate is most buyer's agents most buyers favorite favorite one yeah in addition to buyers right to terminate under paragraph 2b in the third party financing addendum buyer may terminate the contract within blank days after the effective date if the appraisal value according to the appraisal obtained by buyer's lender is less than blank which is usually the contract price and buyer delivers a copy of the appraisal to the seller i cannot begin to tell you important that is yeah if buyer terminates under this paragraph the earnest money will be refunded by buyer so this right here is saying that it must qualify for a minimum amount uh in in one of the most common ways you're going to see this use is if a buyer is putting more than 20 percent down because they want to guarantee that they have the protection to back out of the contract because many lenders if you're putting 20 down and it comes in a little bit low most lenders are going to say you're good to go we're going to finance it this just gives that extra layer of protection uh so that's the easiest way to understand what this means check box one blank check check box two i'm gonna bring up to this amount and check box three i wanna protect myself in the event that it doesn't appraise and i'm putting a high amount of money down anything you want to add in most multiple offers listing agents and sellers are wanting one checked yes so please explain to your buyer if they check that it is truly a blank check for for box one yep yeah yep so because a lot of listing agents will counter that correct yeah especially if you're going over what the listing price is uh we we put a listing price on it most of the time because we've done research and figured out hey you know if an appraisal we're done this is the area we think it's going to come back so if you have people going 10 15 20 000 above what it's listed at as a listing agent you want to see one of these and you want at the very least check box number two checked to protect your your sellers in the event that it doesn't appraise so that you have somebody who has agreed to bring the money to closing now is it possible they could find other ways in the contract to find a way out of it it is possible yet this reduces the risk based upon the third-party financing of them absolutely all right perfect see it's not really that confusing there you go yeah it's not that confusing it's just that confusing if you haven't read it alright