Loan Commitment paragraph; Gas & Termite paragraph; Buyer's Notice of Termination; New & Revised Contracts
Bill Clifford, Chair
Standard Forms Committee
Loan Commitment Paragraph
We have had agents who have received a document titled loan commitment from a lender. Then, they go back to the exceptions area on the last page and see the following: Contingent on an appraisal, contingent on final underwriting approval, contingent on pay off of past due debt, or contingent on final review of credit report.
With these exceptions in the loan commitment, you do not really have a loan commitment. If the house does not appraise or if you do not have final underwriting approval, etc., the loan commitment is no good.
What the seller and the selling agent are looking for is a loan commitment that has final underwriting approval. That means everything is ready for a closing. All the lender needs to know is where to send the documents and when to fund the loan.
Please read the loan commitment the lender is sending you to make sure you have a loan commitment.
To help the lender and the Buyer, at time of loan application, tell the lender what you need by when. If the lender cannot provide a commitment, with final underwriting approval, within the time frame in the contract, then write an addendum to extend the time frame in the contract for the loan commitment.
Also under the privacy act that lenders must follow, they cannot disclose certain financial information about the borrower. A loan commitment does not have to disclose the financial information on the Buyer and the loan. What the lender should be providing is a copy of the loan commitment with certain information blocked out that falls under the privacy act.
If the lender is not going to do an appraisal until the home inspection is resolved, please allow your buyer's lender enough time to provide a loan commitment in paragraph 1.2. The lender will need the appraisal done to obtain the final underwriting approval.
Gas and Termite paragraph
We have seen some agents write into the gas warranty paragraph 5.2 a dollar amount and the following words "to include termite inspection". This paragraph is intended for the gas line warranty only. If you want a termite inspection paid for by the seller, you need to write that as an additional term in paragraph 1.3.
Also, be sure to read the contract and see if there are any additional terms in paragraph 1.3.
Buyer's Notice of Termination
If a Buyer wishes to terminate a contract, per the paragraphs 1.1, 1.2, 4.4, or 9 in the contract, the Buyer needs to follow this procedure. First, the Buyer submits a "Buyer's Notice of Termination of the Contract" form stating why the Buyer is terminating the contract.
Then the Broker attaches a copy of this request from the Buyer to the "Broker's Intent to Release the Deposit" and mails them to the Seller.
The Seller has 10 days to respond after the Broker's delivery of the "Broker's Intent to Release the Deposit".
If the Seller does not respond within the time frame of 10 days then the Broker may release the deposit. If the
Seller objects to the release then the Broker must follow the directions in paragraph 10 of the contract.
New and Revised Contracts
There will be a new Land/Lot contract coming out and a revised Real Estate Purchased contract. They are at the Bar Association now for their review and comments. The real estate purchase contract form has minor adjustments based on comments and input from agents. Both should go before the CBR Board of Directors in November.
The following four new forms are now available through the online form program.
- Additional Terms and Conditions (for continuation of terms in paragraph 1.3)
- Contract Addendum (for changes to the contact after it has been accepted by both parties)
- Counter offer (for counters while negotiating the offer)
- Buyer Notice of Termination of the Contract (for those paragraphs in the contract where the Buyer has the option to terminate the contract, paragraphs1.1, 1.2, 4, and 9).
Additional Articles on the new Residential Purchase Contract
Gas Line Inspections, Vacant Lots and Auction Contracts - Bill Clifford
New Residential Purchase Contract reduces need for additional contingency clauses - James A. Zitesman
Q&A from Purchase Contract Classes
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