Book : California Real Estate Practice [Third Edition] By Robert L. Herd and Bruce A. Southstone
Chapter 8 : Writing And Presenting Effective Purchase Contracts
Class Discussion Topics
1. Use the following information to complete a Residential Purchase Agreement for the property where you currently live on behalf of Ralph and Mary Jenkins.
• Deposit: $7,000 with an increase to 3 percent of the purchase price within fifteen days after final acceptance of the offer.
• Purchase price: $500,000.
• Total down payment: $100,000.
• Financing: Contingent on obtaining a new first loan for $400,000 at an interest rate not to exceed 6 percent, with a loan fee not to exceed 1 percent of the loan amount. Loan qualification by the buyers shall be provided to the owners within five days after final acceptance of the offer.
• Appraisal contingency: The offer is contingent on obtaining an appraisal for at least the purchase price.
• Escrow closing: The escrow shall close within forty-five days after final acceptance of the offer.
• Occupancy: This will be the buyer's primary residence.
• Home warranty: The cost of a home warranty, which shall include the swimming pool and air conditioning, shall be split equally by the parties and shall not exceed a cost of $500.
• Personal property: Refrigerator, washer, dryer, and pool equipment.
• Fees and costs: The sellers shall pay the owner's title policy and any transfer fees. Catalina Escrow Company will conduct the escrow and the parties will split their fees. Sellers will pay for the required zone disclosure report. Sewer and well costs are not applicable and the sellers will pay to have smoke detectors installed and the water heater properly braced.
• Conditions: The seller warrants the condition of the premises pursuant to paragraph 9B(1) through (7), except for (5), which does not apply, and the time periods specified in paragraph 16 are adequate.
2. Using another student as a buyer, role-play an assumptive close.
3. How would you overcome the following buyer objections?
a. I don't want to sign the offer until my attorney looks it over.
b. The price is way too high.
c. We want to think about it overnight; we'll call you tomorrow.
d. My rent is cheaper than the loan payment.
e. The HOA fees are really high.
f. I think I'll wait until interest rates drop a little more.
g. I'm not crazy about the location.
h. I don't want to sell until I find a house to buy.
i. I wanted an older home with charm; this is too new.
4. Describe the materials you would gather in preparing an offer presentation to a seller and listing licensee.
5. What action would you take if you are presenting an offer and the sellers tell you that they won't sell for that low price?
6. By role-playing with another student, explain your boundaries of conduct in selling your own listing.
7. Discuss what should be included in an escrow timeline.
Chapter 8 Quiz
1. All of the following are buying signals except
a. asking when they can leave to see the next house.
b. measuring a room.
c. rubbing the kitchen countertop.
d. whispering with a spouse.
2. Which of the following describes a good salesperson?
a. One who approaches every customer according to her personality type.
b. One who uses real estate jargon and legal terminology.
c. One who shows homes above the buyer's preapproved loan amount.
d. One who uses terms the buyers can understand.
3. Which of the following should you do when writing a purchase agreement?
a. Always present the agency disclosure after signing the purchase agreement.
b. Initial any changes.
c. Use the contract to ask for a higher commission.
d. Ask the buyers to read it carefully before signing it.
4. According to paragraph 14B(1) of the purchase contract, how many days does the buyer have to complete a lead-based paint inspection?
a. 7
b. 17
c. 10
d. 5
5. Which of following is true regarding selling your own listing?
a. It's easy to discuss price and terms.
b. It is generally approved by most attorneys.
c. It is a great way to receive a full commission.
d. It requires special care in disclosing your dual role to all parties.
6. What should you do before you present a counteroffer to your buyers?
a. Call the buyers and tell them the terms of the counteroffer.
b. Start with the price if it's been changed by the owners.
c. Read the counteroffer to the buyers and immediately suggest another counter.
d. See the buyers in person and go over each change made by the sellers, starting with the easiest one first.
7. Which of the following is not true about a multiple counteroffer?
a. If there are multiple offers, the owners are obligated to counter all of the offers.
b. The counteroffer is not fully accepted until it is signed by the buyers and acknowledged in writing by the sellers.
c. Many buyers will walk away from a multiple counteroffer situation to avoid a bidding war.
d. Using the multiple counteroffer form (SMCO) will help avoid the possibility of selling a house to two or more people at the same time.
8. Which of the following refers to a short sale?
a. An all-cash sale that is discounted because there is no financing contingency.
b. A sale in which the appraisal contingency has been waived.
c. A sale with a quick close of escrow.
d. A sale in which the lender agrees to take the net proceeds from the sale as loan satisfaction.
9. Which of the following does not appear on an estimated buyers closing cost sheet?
a. Loan origination fee
b. Existing loan balance
c. Prorated real property taxes
d. Prorated HOA dues
10. Which of the following is a function of an escrow timeline?
a. Certifies deed restrictions.
b. Notifies all parties of the documents required to be given to whom.
c. Determines commission rates.
d. Acts as a reminder of important dates to all parties.