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CLIENT RESOURCES


Real Estate FAQs
   
Attorney Review & Inspection Periods - Buyer

1. What is an attorney review & inspection letter?

The attorney review provision of the contract allows a purchaser’s attorney to submit contract modification requests to the sellers within a timely manner. The inspection provision of the contract allows the purchaser to include within the letter requests for any repairs the property may need. Even though the attorney review and inspection provisions often run on the same timeline, they are two separate contingencies in the contract.

2. Does the letter need to be submitted within a certain amount of time?

The deadline to submit an attorney review & inspection letter depends on the contract used.  For example, a contract commonly used, known as the “Multi-Board Residential Real Estate Contract 5.0”, allows 5 business days from the date of the contract’s acceptance to submit a letter to the seller’s attorney.  In order to avoid passing the deadline, an accepted contract should be forwarded to our office immediately upon receipt.

3. What if I am unable to submit my inspection requests prior to the deadline?

As long as our office is informed prior to the deadline, our office is able to request an extension on behalf of our buyers.  Sellers will usually accept an extension request as long as it is submitted prior to the deadline and the extension is for a reasonable amount of time.  Should you need an attorney review or inspection extension please notify our office as soon as possible and provide the reason for your request.

4. What information does an attorney need from a buyer before submitting the letter?

We need a copy of the purchase contract and any property disclosures or contract addendums.  If the buyer sees anything in the contract that they wish to have modified, the buyer should inform our office immediately.

Also, after the buyer has an inspection performed on the property they wish to purchase, our office needs to know specific repairs the buyer would like to request.  It is often helpful to email our office a list of the items to be requested while attaching the inspection report to the email.

Finally, our office needs the buyer’s contact information, including phone number and email address, so that we may discuss the letter with the buyer.  Our office may provide a draft of the letter to the buyer via email for their approval before our office submits it to the seller’s attorney.

5. After the letter is submitted, what is the next step?

After the letter has been submitted to the seller’s attorney, the seller’s attorney will respond.  This response can take up to several business days to receive.  Often, the sellers approve some of the buyer’s requests while denying others.  Our office forwards this response to our buyers via email immediately upon receipt.

6. How does a buyer proceed after receiving a seller’s response?

Our office will discuss the seller’s response with the buyer and address any questions they may have.  However, it is ultimately up to the buyer as to whether or not they wish to proceed by choosing one of the following options:

a)    Agree to the seller’s response;
b)    Request that certain items be reconsidered by the seller;
c)    Request an alternative means of resolution (such as a credit from the seller to the buyer in lieu of having inspection items repaired prior to closing); or
d)    Terminate the Contract for failure to reach agreement (under the Mutli Board Residential Real Estate Contract 4.0 you might not be able to do this until after the 10th business day, consult with your attorney for more specific advice).

7. What if the parties do not reach agreement within a certain amount of time?

While it depends on the contract used, the contract can sometimes be declared null & void if the parties do not reach agreement to the attorney review & inspection provisions within a certain amount of time. For the contract commonly used, known as the “Multi-Board Residential Real Estate Contract 4.0”, the parties have 10 business days from the date of acceptance to reach agreement; if no agreement is reached by then, the contract may be declared null & void by either party.

8. What can I do to avoid the automatic cancellation described in the previous item?

In order to avoid this, our office requests a response from the sellers by the 8th business day and we try to have attorney review & inspection provisions concluded by the 10th business day.  If no seller response is received approximately 3 days after the letter has been submitted, please contact our office so that we may request a response from the sellers.  We may request an extension to reach agreement prior to the automatic cancellation date.  If it becomes evident that the parties are not going to reach agreement before the automatic cancellation date listed in the contract, either the buyer or the seller can request an extension to the attorney review and inspection review periods.

Attorney Review & Inspection Periods - Seller

1. What is an attorney review & inspection letter?

The attorney review provision of the contract allows a purchaser or seller’s attorney to submit contract modification requests to the other party’s attorney within a timely manner.

The inspection provision of the contract allows the purchaser to request any repairs that they think the property may need.

2. When do Sellers need to submit an attorney review letter to the buyers?

Generally, if the seller or seller’s attorney finds any contract modifications are necessary to make the contract more evenhanded, or that would help to clarify any discrepancies or unclear language in the contract, our office will submit a seller’s attorney review letter.  A seller should contact our office immediately with any questions regarding the contract or requests for modification.

3. Does the letter need to be submitted within a certain amount of time?

The deadline to submit an attorney review & inspection letter depends on the contract used.  For example, a contract commonly used, known as the “Multi-Board Residential Real Estate Contract 5.0”, allows 5 business days from the date of the contract’s acceptance to submit a letter to the seller’s attorney.  In order to avoid passing the deadline, an accepted contract should be forwarded to our office immediately upon receipt.

4. How do sellers know when the buyer has submitted a letter?

When representing sellers, our office requests the seller provide us with their email address.  We forward all letters from the buyers’ side to our sellers for their review and record via email as an attachment in PDF format.

If you do not have an email address we can fax or mail these documents to you.

5. How do sellers respond to a buyer’s attorney review & inspection letter?

Once the seller has reviewed the buyer’s requests, please contact our office via email, fax or phone with any questions.  We will respond to a seller’s questions and work with them to draft a response.

For the inspection requests, when the buyer requests certain repairs, it is up to the seller to evaluate, and approve or deny each request.  A seller may wish to obtain estimates for the costs of repairs before agreeing or declining said repairs.  A seller may also decide to offer to provide a buyer with a closing cost credit for a given dollar amount in lieu of repair(s).

6. What if the parties do not reach agreement within a certain amount of time?

While it depends on the contract used, the contract can sometimes be declared null & void if the parties do not reach agreement to the attorney review & inspection provisions within a certain amount of time. For the contract commonly used, known as the “Multi-Board Residential Real Estate Contract 4.0”, the parties have 10 business days from the date of acceptance to reach agreement; if no agreement is reached by then, the contract may be declared null & void by either party.

7. What can I do to avoid the automatic cancellation described in the previous item?

In order to avoid this, our office strongly recommends the sellers contact us to discuss their response immediately after they receive our emails so that we have attorney review & inspection provisions concluded by the 10th business day.  If it becomes evident that the parties are not going to reach agreement before the automatic cancellation date listed in the contract, either the buyer or the seller can request an extension to the attorney review and inspection review periods.

Mortgage Contingency - Buyer

1. What is a mortgage contingency?

It is a contingency based on the buyer obtaining a loan under the terms set forth in the contract.  If a loan cannot be obtained under these terms, the buyer reserves the right to terminate the contract for failure to obtain financing and seek return of all earnest money.  (Some contracts may allow for the seller to attempt to obtain financing on the buyer's behalf which may prevent the contract from terminating.)

2. What is a reasonable amount of time to ask for to obtain a full loan commitment?

Generally 3 to 4 weeks is standard amount of time after the date of acceptance.  However, in some instances, if additional time is necessary, an extension may be sent to preserve the Purchaser’s rights and earnest money.

3. How long do I have to apply for a loan?

The Multi-Board Residential Real Estate Contract 5.0 and several others allow 5 business days from the date of acceptance of the contract.  If a loan is not applied for within the 5 business days, you are voiding the protection that the mortgage contingency provides.  If additional time is necessary to apply for a loan, contact your realtor and attorney immediately so that a proper notice and an extension is given on your behalf.

4. Why would a mortgage contingency extension be necessary?

To preserve the rights of the Purchasers to obtain a loan under the terms set forth in the contract, or more favorable terms.  If a loan cannot be obtained, the purchasers may cancel the contract with return of earnest money.

5. If the sellers deny the mortgage contingency, what options do I have?

A buyer can do 1 of 2 things if this happens:

1)    The buyer can elect to proceed without the financing or mortgage contingency.  However, if the buyer makes this election and is unable to close because of financing problems, the buyer would be in default of contract and may forfeit their earnest money; or

2)    The buyers can send notice to the sellers terminating the contract for failure to procure loan financing.  If the sellers agree, the buyer is entitled to a return of all their earnest money.  Most contracts allow for the seller to obtain financing on the buyer's behalf, at seller cost and expense.  Thus, if the buyer elects to terminate the contract for failure to obtain loan financing, the seller may attempt to obtain financing on the buyer's behalf.  Per the contract, the buyer would be obligated to provide any necessary information to the sellers' lender so as to try to obtain a mortgage commitment and close the loan.

6. What can I do to ensure that my loan is being processed in a timely manner?

Provide all necessary paperwork to your lender as soon as it is requested (i.e loan application, bank statements, pay stubs etc.)  Also, you can set up weekly phone conferences with your loan officer/processor to obtain updates.  You may also seek the advice of the professionals you work with which includes our office and your real estate agent.

Mortgage Contingency - Seller

1. What is a mortgage contingency?

It is a contingency based on the buyer obtaining a loan under the terms set forth in the contract.  If a loan cannot be obtained under these terms, the buyer reserves the right to terminate the contract for failure to obtain financing and seek return of all earnest money.  (Some contracts may allow for the seller to attempt to obtain financing on the buyer's behalf which may prevent the contract from terminating.)

2. Why would a mortgage contingency extension be requested?

It is requested when the lender is missing information that he/she needs to grant an unconditional loan commitment.

3. Why must this request be put in writing?

They must put this in writing due to the fact that the mortgage contingency date was agreed upon in the real estate contract so it will protect the purchaser’s right to the return of the earnest money in the event of no loan approval.

4. What happens if I do not accept the mortgage contingency extension?

It is common practice to grant the first mortgage extension if it is for a reasonable amount of time.  However, if you wish to deny the extension, the purchaser has an opportunity to withdraw/waive the contingency and proceed with the closing or the purchaser may cancel the contract if buyer feels they will not be able to obtain a loan and do not wish to risk their earnest money.

5. What happens if the Purchaser does not have a mortgage commitment by the contracted date?

The purchaser’s attorney may send an extension request in writing for additional time or waive the contingency.

6. What happens if the Purchaser’s loan is denied within the mortgage contingency date?

If purchaser is still denied a loan the purchaser may cancel the contract with full return of earnest money provided back to the purchaser. In the 5.0 Multi-Board Residential Real Estate contract and other contracts, it states that the seller at their expense may obtain a loan with the same terms or more favorable terms of the contract for the purchaser.

7. What happens if the loan is denied outside the mtg. cont. date and an extension has been requested?

If an extension was never requested and notice was not provided within the mortgage contingency, the contingency is then waived.  However, if an extension is requested outside the contingency, Purchaser is in breach of contract and could forfeit their earnest money and you may elect to cancel the contract or you may grant the extension and proceed with the closing.