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Tallman Purchase Contract Language Cheat Sheet AAR Residential Purchase Contract last updated February 1, 2020 There are nine (9) sections in the AAR Residential Purchase Contract: 1) PROPERTY, p1, 2) FINANCING, p2, 3) TITLE AND ESCROW, p3, 4) DISCLOSURE, p4, 5) WARRANTIES, p5, 6) DUE DILIGENCE, p5, 7) REMEDIES, p7, 8) ADDITIONAL TERMS AND CONDITIONS, p8, 9) SELLER ACCEPTANCE, p10. 1) PROPERTY: key words or phrases: Who is signing and buying?....Upon acceptance….financial institution….availability of funds….COE occurs when the deed is recorded….failure to pay required closing funds, EM shall be subject to forfeiture….All funds are to be in US currency….existing keys...seek advice for pre or post occupancy….fixtures shall mean property attached to the Premises….existing remote controls….leased items not included in this sale...leased items shall be identified in SPDS…. (Earnest Money) Earnest Money is in the form of; personal check, wire transfer, other: p1, PROPERTY, sect 1c, Earnest Money, line #17 (Earnest Money) Upon acceptance of this offer, the EM, if any, will be deposited with; escrow co or trust account: p1, PROPERTY, sect 1c, Upon Acceptance, line #18 (Prior occupancy, Post occupancy) Possession: Broker(s) recommend that the parties seek independent counsel from insurance, legal, tax, and accounting professionals regarding the risks of pre-possession or post-possession of the Premises; p1, PROPERTY, sect 1e., Possession, line #34-35
2) FINANCING key words or phrases: AAR Pre-Qual is attached hereto….PTD Conditions….no later than 3 days prior 1) sign, 2) deliver notice of loan approval without conditions, or 3) deliver loan denial….Buyer acknowledges that prepaid items paid separately from the Earnest Money are not refundable….failure to have down payment or other funds not an unfulfilled loan contingency…LSU 10 days after contract acceptance....Loan application within 3 days (6 items)….Buyer agrees to diligently work to obtain the loan….Changes in loan program need consent if 1) affect buyers ability to obtain loan, 2) increase sellers closing costs, 3) delay COE…. No refunds for Inspections, appraisals, etc) Unfulfilled Loan Contingency; Buyer acknowledges that prepaid items paid separately from the Earnest Money are not refundable: p2, FINANCING, sect 2c, Unfulfilled Loan Contingency, line #81-82 (contract is contingent on loan approval) Loan Contincency: Buyers obligation to complete this sale is contingent upon Buyer obtaining loan approval without Priot to Document (“PTD”) conditions no later than three (3) days prior to the COE Date for the loan described in the AAR Loan Status Update (“LSU”) form or the AAR Pre-Qualification Form, whichever is delivered later: p2, FINANCING, sect 2b, Loan Contingency, line #70-72. Whichever is delivered later; p2, FINANCING, sect 2b, Loan Contingency, line # 72 Changes: Any changes, even if seem for the better! (ie, more money down, etc could possible delay underwriting, re-write loan docs, COE…) ( Changing Loan terms, 3 items to consider) Changes: Buyer shall immediately notify seller of any changes in the loan program, financing terms, or lender described in the Pre-Qualification Form attached hereto or LSU provided within ten (10) days after Contract acceptance and shall only make any such changes without the prior written consent of Seller if such changes to not 1) adversely affect Buyers ability to obtain loan approval without PTD conditions, 2) Increase Sellers closing costs, or 3) delay COE; p3, FINANCING, sect 2k, Changes, line #105-106 (Must buyer share appraisal?) No, there is no provision or stipulation in the pc that requires buyer to share appraisal. It’s an opinion of value paid for by the buyer. Line # 69, AAR pre-qual is attached Seller Concessions: Be sure to match up with pre-qual…(question on pre-qual., relying on seller concessions?) Loan Denial; make sure same lender as pre-qualification or LSU LSU, cureable
3) TITLE AND ESCROW key words or phrases: If Buyer is married and intends to take title as his/her sole and separate property, a disclaimer deed may be required:...5 daus….warranty deed,….sellers expense…. Standard Owners Title Insurance Policy….title vested in buyer…. Title and Vesting; ...If Buyer is married and intends to take title as his/her sole and separate property, a disclaimer deed may be required: TITLE AND ESCROW, sect 3b, Title and Vesting, line #120-121. (Earnest Money) Release of Earnest Money; Buyer and Seller authorize Escrow Company to release the EM pursuant to the terms and conditions of this Contract in its sole and absolute discretion: p4, TITLE AND ESCROW, sect 3f, Release of Earnest Money, line #145-146 prelim title, 5 days to disapprove, see following: (Warranty deed, Title Ins, Title Commitment and Title Insurance; Escrow Company is hereby instructed to obtain and deliver to Buyer and Seller directly, addressed pursuant to 8s and 9c or as otherwise provided, a Commitment for Title Insurance….five (5) days after receipt to provide notice to Seller of any items disapproved...Seller shall convey title by warranty deed subject to existing taxes, assessments, CC&R’s, rights of way, easements and all other matters of record. Buyer shall be provided at Sellers expense an American Land Title Association (“ALTA”) Homeowners Title Insurance Policy or, if not available, a Standard Owners Title Insurance Policy, showing title vested in buyer. Buyer may acquire extended coverage at Buyers own additional expense. If applicable, Buyer shall pay the cost of obtaining the ALTA Lender Title Insurance Policy; p3, TITLE AND ESCROW, sect 3c, Title Commitment and Title Insurance, line #123-132
4) DISCLOSURE key words or phrases: SPDS 3 days….Insurance Claims History 5 days….FIRPTA….Lead Based Paint….Affidavit of Disclosure 5 days….Changes during escrow 5 days to disapprove…. Spds, 5 days to disapprove, cureable plus must update Ins Claims History, 5 days to disapprove, cureable
5) WARRANTIES key words or phrases: (AS-IS) sold in it’s present physical condition as of the date of contract acceptance….buyer and seller acknowledge and understand they may but are not obligated to engage in negotiations for repairs/improvements to the Premises…..substantially the same condition….personal property and debris will be removed….excluding opinions of value….seller warrants that information regarding connection to sewer or septic is correct to the best of sellers knowledge Condition of Premises: (AS-IS, What you see is what you get!) BUYER AND SELLER AGREE THE PREMISES ARE BEING SOLD IN ITS PRESENT PHYSICAL CONDITION AS OF THE DATE OF CONTRACT ACCEPTANCE: p5, WARRANTIES, sect 5a, Condition of Premises, line #191-192 Condition of Premises: Buyer and Seller acknowledge and understand they may, but are not obligated to engage in negotiations for repairs/improvements to the Premises. WARRANTIES, sect 5a, Condition of Premises, line #197-198 Condition of Premises: Substantially the same condition: p5, WARRANTIES, sect 5a, Condition of Premises, line #194-195 Condition of Premises; Personal property and debris will be removed: p5, WARRANTIES, sect 5a, Condition of Premises, line #195-196 Warranties that Survive Closing; Excluding opinions of value: p5, WARRANTIES, sect 5b, Warranties that Survive Closing, line #201 Appraisal: An opinion of value. Seller is not required to disclose prior appraisals/opinions of value. See “excluding opinions of value” Warranties that Survive Closing: seller warrants that information regarding connection to sewer or septic is correct to the best of sellers knowledge: WARRANTIES, sect 5b, Warranties that Survive Closing, line #204-206. 6) DUE DILIGENCE key words or phrases: During the inspection period, Insurance...BINSR,….single notice….workmanlike manner, ANY paid receipts three (3) days prior to COE... Only a written agreement changes response times….reasonable access to conduct walkthroughs, utilities on until COE….Invalid Buyer Disapproval/Cancellation=3 day cure notice from seller….Seller BINSR response within 5 days….ANY receipts evidencing repairs within 3 days of COE….Buyer may cancel during last 5 days if seller is unwilling to correct items disapproved…. (One bite at the apple, single source) Inspection Period Notice; Prior to expiration of the Inspection Period, Buyer shall deliver to Seller a signed notice of any items disapproved. AAR’s Buyers Inspection Notice and Sellers Response form is available for this purpose. Buyer shall conduct all desired inspections and investigations prior to delivering such notice to Seller and all Inspection Period items disapproved shall be provided in a Single source: p6, DUE DILIGENCE, sect 6i, Inspection Period Notice, line #263 (One bite at the apple) (10 days) Inspection Period; Buyers Inspection Period shall be ten (10) days or _____ days after Contract acceptance.(et al, and what follows), p5, DUE DILIGENCE, sect 6a, Inspection Period, line #213-224 Inspection period; Inspections and investigations to determine the value: p5, DUE DILIGENCE, sect 6a, Inspection Period, line #214-215 (5 days) Buyer Disapproval; Seller shall respond in writing within five (5) days or _____ days after delivery to Seller of Buyers notice of items disapproved. Sellers failure to respond to Buyer in writing within the specified time period shall conclusively be deemed Sellers refusal to correct any of the items disapproved; p6, DUE DILIGENCE, sect 6j, (2)(a), Buyer Disapproval, line #275-277 (3 days) Buyer Disapproval: If seller agrees in writing to correct items disapproved, Seller shall correct the items, complete any repairs in a workmanlike manner and deliver any paid receipts evidencing the corrections and repairs to Buyer three (3) days or _____ days prior to the COE date: p6, DUE DILIGENCE, sect 6j, (2)(b), Buyer Disapproval, line #278-280 (5 days) Buyer Disapproval; If Seller is unwilling or unable to correct any of the items disapproved, Buyer may cancel this Contract within five (5) days after delivery of Sellers response or after expiration of the time for Sellers response, whichever occurs first, and the Earnest Money shall be released to Buyer. If Buyer does not cancel this Contract within the five (5) days as provided, Buyer shall close escrow without correction of those items that Seller has not agreed in writing to correct: p6, DUE DILIGENCE, sect 6j, (2)(c), Buyer Disapproval, line #281-284 (Must buyer share inspections?) Inspection Period; ...Buyer shall provide Seller and Brokrs upon receipt, at no cost, copies of all inspection reports concerning the Premises obtained by Buyer: (et al, and what follows), p5, DUE DILIGENCE, sect 6a, Inspection Period, line #222-223
7) REMEDIES key words or phrases: difficult to fix actual damages in event of buyers breach, EM may be sellers sole right to damages, mediate (not binding), arbitration (winner-loser) small claims up to $3500, Alternative Dispute Resolution (“ADR”); Arbitration: Winner-Loser, line #328, REMEDIES, Prefer trial by jury vs judge...opt out of arbitration: line Alternative Dispute Resolution (“ADR”); Mediation: Not Binding, line #325, REMEDIES Small Claims; up to $3500, p7, REMEDIES, sect 7d, Exclusions From ADR, line #335 Sellers sole right to damages, p7, REMEDIES, sect 7b, Breach, line #319-321 Penalty for filing a false lis pendens is $5000 or treble damages, whichever is higher.
8) ADDITIONAL TERMS AND CONDITIONS key words or phrases: Lead-Based Paiont Hazards may not be signed in counterpart….Cancellation shall become effective immediately upon delivery of the cancellation notice….three (3) full days, if COE date is Friday the act must be performed by 11:59pm on Monday.... Risk of Loss: The cost of repairing damage of fire, vandalism, flood, or act of God, risk of loss shall be on seller, unless the cost of repairing such loss or damage exceeds 10% of the purchase price, either Seller or Buyer may elect to cancel the Contract; p9, ADDITIONAL TERMS AND CONDITIONS, sect 8b, Risk of Loss, line #391-393 (Risk of Loss) >10% seller or buyer can cancel, <10% buyer can cancel on Changes During Escrow since update of SPDS will be required. If seller fails to update SPDS, buyer can CURE seller and then cancel on Unresolved CURE notice. Days: All references to days in this contract shall be construed as calendar days and a day shall begin at 12:00am and end at 11:59pm; p9, ADDITIONAL TERMS AND CONDITIONS, sect 8h, Days, line #409-410 Calculating Time Periods: Acts that must be performed three (3) days prior to the COE Date must be performed three (3) full days prior (ie-if the COE Date is Friday the act must be performed by 11:59pm on Monday); p9, ADDITIONAL TERMS AND CONDITIONS, sect 8i, Calculating Time Periods, line # 413-415
9) SELLER ACCEPTANCE key words or phrases: offer rejected by seller…. OFFER REJECTED BY SELLER: p10, SELLER ACCEPTANCE, sect 9c, line #473 (Do this to protect yourself! Explain ADRE Rules, ie, all offers must be presented...What if seller forgets and somewhere down the road says he/she never received offer or that is was never presented?) OFFER REJECTED BY SELLER: DO THIS! SELLER WILL FORGET IN THE FUTURE THAT HE GAVE A VERBAL NO!
CASE STUDY: SELLER & BUYER WILL NOT EXECUTE THE SEPTIC ADDENDUM: LANGUAGE. Laurie, May 11, 2020 LANGUAGE FOR CINDYXXRANGOX
We had only one other transaction wherein the parties refused to do the septic inspection. I had spoken with our attorney about it and he suggested the language below which is what we used. The top portion is for the buyer and seller to acknowledge via Addendum and the part below would be if we represent the seller. Please let me know if there any other questions. The agent should know they are not to allow a waiver again as it relates to the septic inspection. ---------- Forwarded message --------- Here’s my revision to the original language: Addendum to the PC for buyer/seller (Use actual name of agent and brokerage and title co). Buyer herein, instructs acknowledges and understands that the Septic Inspection report will be done after the close of escrow and that Buyer will be responsible for all fees in connection with the same. To the fullest extent permitted by law, Buyer agrees to defend, indemnify, and hold harmless the Seller, [listing agents and broker], [selling agents and broker], and WFG National Title Insurance Company and its agents (collectively, the “Indemnified Parties”), from any and all loss, damage, liability, attorney’s fees, claims or causes of action that may arise in connection with the septic inspection/transfer for the real property located at ___________________. This defense and indemnity shall apply regardless of any active and/or passive negligent act or omission of the Indemnified Parties. I also recommend having the seller execute a separate indemnity agreement with HomeSmart, in the event that the Seller faces liability for failing to inspect as required by AZ law: Seller hereby expressly acknowledges and agrees that [listing agent] and HomeSmart (collectively, “HomeSmart”) have instructed Seller to obtain a septic inspection and to otherwise comply with Arizona law regarding the transfer of real property with septic systems, and despite this instruction, Seller and Buyer have agreed that: (1) the septic inspection report will be obtained after the close of escrow; and (2) Buyer will be responsible for all fees in connection with the septic inspection and transfer. To the fullest extent permitted by law, Seller agrees to defend, indemnify, and hold harmless HomeSmart from any and all loss, damage, liability, attorney’s fees, claims or causes of action that may arise in connection with the septic inspection/transfer for the real property located at ___________________. This defense and indemnity shall apply regardless of any active and/or passive negligent act or omission of HomeSmart.
CASE STUDY, BUYER REQUESTS LICENSED CONTRACTOR ON BINSR:(Attach from Docs Tab) May 15, 2020, Trexidor issue Hello X: The balance of work that was completed on the BINSR was done in a workmanlike manner as per the terms of the purchase contract in section 6j. There will not be any additional inspections or repairs. Please see the following excerpts from the attached aar legal hotline articles and the AAR Residential Purchase Contract. These are available at aaronline.com. These are just a few of the numerous articles and information available. This topic has been discussed many times in settings such as AAR risk reduction meetings sponsored by Scott Drucker and Rick Mack and in various seminars and CE classes sponsored by SAAR and PAR and taught by leading instructors such as Mary Francis Coleman and Trudy Moore just to name a few. I have also discussed this with the DB of HomeSmart and with other agents and brokers both inside and outside of HomeSmart many times. Requesting a "licensed contractor" on the BINSR is an offer to Amend the Contract, which the seller did not accept. Neither party can "unilaterally" change the terms of the purchase contract. And, as per the attached articles and all of the available literature regarding using licensed contractors, ARS 32-1121 is not ambiguous. That is why we require an addendum to change any of the terms of the contract, such as price or seller concessions. And we do that frequently as when there is a credit in lieu of repairs, it's the exact same thing. As a best practice, if your client wanted a licensed contractor for all repairs, you could have written that in section 8 of the purchase contract "Additional Terms and Conditions" or you could have requested that on an Addendum.
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NOTE: The AAR Addendum form, and not the BINSR, should be used if either the seller or the buyer wants to amend the contract. Arizona REALTOR® Digest July 2006 |
