amendments

Amending the Contract When Buying a Home

November 30, 2016 by khproperties 10 Comments

Amending the contract in Texas is made quite simple with the TREC Amendment form. From repair amendments to price changes or closing date changes, there are plenty of reasons why you might find yourself amending the contract. The Texas Real Estate Commission (TREC) Amendment form consists of 9 items that can be amended (one is a catch all for anything not covered in the first 8) and most are pretty straight forward, but we thought we’d take a moment to dissect the form in case you find yourself amending the contract on a residential home purchase. Remember, as a TREC promulgated form, this form is meant to be used by licensed real estate agent and attorneys even though they exist in the public domain. Always consult with your real estate agent or an attorney when amending the contract.

Amending The Contract – The Amendment Form

The Amendment to Contract starts off with a place to put the address and city of the property. As noted, there are 8 items that can be easily amended and 1 section that allows for “other modifications.”

Seller and Buyer amend the contract as follows: (check each applicable box)
(1) The Sales Price in Paragraph 3 of the contract is:
A. Cash portion of Sales Price payable by Buyer at closing ….. $ _____________
B. Sum of financing described in the contract ……………… $ _____________
C. Sales Price (Sum of A and B) ………………………….. $ _____________

The first line serves as the preamble and the instructions on how to use the form – each section has a checkbox and if that item is to be amended, you’ll need to check the box and fill out the information. Multiple items can be changed at the same time using the Amendment form.

If you need to change the agreed upon sales price of the home, this is where you would do it. You could also change downpayment and financing information. Section (1)C. should be the final sales price that you will pay for the home (total of downpayment and any financing).

(2) In addition to any repairs and treatments otherwise required by the contract, Seller, at Seller’s expense, shall complete the following repairs and treatments:

This is where items for a repair amendment would appear (although there is often not enough room, so you may see “See Attachment A” or similar language and a separate sheet attached). We cover repair amendments in depth in another post, but we recommend you always look to be precise with the language you use in this section. This is probably one of the most common ways of amending the contract as most buyers will use this to get some items taken care of during their option period.

(3) The date in Paragraph 9 of the contract is changed to _______________________ , ____.

Paragraph 9 in the 1-4 Family Residential Contract is all about closing, so this item refers to the closing date. Always remember to amend the closing date if you are going to push it out further as failure to close on the date specified in the contract can have legal consequences.

(4) The amount in Paragraph 12A(1)(b) of the contract is changed to $ ____________.

Paragraph 12.A.(1)(b) is used for seller concessions, or seller paid closing costs. This is an amount defined in the contract that the seller will pay towards the buyer’s closing costs. If this number needs to be renegotiated, it can be changed here.

(5) The cost of lender required repairs and treatment, as itemized on the attached list, will be paid as follows: $ ____________ by Seller; $ ____________ by Buyer.

If there are lender required repairs or treatments and the buyers and sellers need to define how they will be paid, this is the place to do so. The contract is clear in Paragraph 7.E. that there is no requirement for either party to pay these amounts and they must be agreed to in writing.

(6) Buyer has paid Seller an additional Option Fee of $ ________ for an extension of the unrestricted right to terminate the contract on or before 5:00 p.m. on _______________________ , ____. This additional Option Fee will will not be credited to the Sales Price.

If there is reason to extend the option period, this item will take care of that for you. Much like Paragraph 23. in the contract, you’ll need to define the amount of the option fee and whether it will or will not be credited to the sales price at closing. Unlike the contract, here you must define the date the option period will end as opposed to just naming how many days the option period will be.

(7) Buyer waives the unrestricted right to terminate the contract for which the Option Fee was paid.

Here the buyer can waive their option period, effectively removing their unrestricted right to terminate the contract (they may have other options for termination, this only cancels out the rights given to them by the option period). It is important to note that many people erroneously believe that while in the option period, if you sign off on a repair amendment, the option period ends. This is not the case. Unless the option period is waived, the buyer retains their full unrestricted right to terminate the contract until their option period expires.

(8) The date for Buyer to give written notice to Seller that Buyer cannot obtain Buyer Approval as set forth in the Third Party Financing Addendum is changed to _______________________ , ____.

The financing period as we often call it is the time it takes a buyer to receive approval from their lender on their home loan. If the buyer cannot obtain the approval, they must notify the seller in writing within the timeline set forth in the Third Party Financing Addendum or that timeline can be modified here to give the buyer some more time. Of course, any time the buyer asks for more time to get their loan approved, red flags will be raised on the seller’s side, so there will probably be some questions about this item if it is used.

(9) Other Modifications: (Insert only factual statements and business details applicable to this sale.)

The catch all of the amendment, this section is used to modify anything that you can’t change in the first eight items. The note about “factual statements and business details” is a reminder to agents to avoid the unauthorized practice of law. As we are not lawyers, we cannot modify anything that a lawyer would be needed to do. As an agent, you should always ask your Residential and Commercial Land Broker about the language you put in here to protect your clients and when in doubt, ask a lawyer to write the language in order to avoid crossing that line.

The final section of the form is an executed date and signature block for all parties to sign off on. Once the form has been signed and executed, it becomes part of the contract and modifies any of the information contained within. If you find yourself needing bigger changes or modifications to the contract, you’ll need to speak to an attorney and have them draw up any necessary documents.

image courtesy of Dean Hochman

Writing Effective Repair Amendments

November 28, 2016 by khproperties 3 Comments

You may need to think about repair amendments during the course of buying a home, typically during the option period and after your inspection. Your agent will prepare your repair amendments for you, but as a buyer, it pays to understand how to write an effective repair amendment as the language used in them can have serious effects down the road. Understanding both how to write a repair amendment with negotiations and the final outcome in mind, as well as how to write them so that what you want is really what you get, can save you a lot of time and hassle later down the road. Remember, these repair amendments become part of the contract and performance of the items contained within them is serious business. Many real estate lawsuits center around the repairs agreed to and made and whether or not they were sufficient. Know what goes into the repair amendment before you sign so you can avoid any issues that could effect your purchase.

Negotiating Repairs

After your inspection and your review of the inspection report, you’ll probably have a laundry list of items that you want fixed in order for you to continue with the purchase of this home. We understand anyone’s desire to have everything perfect in their new home, but the reality is that all homes have items that can or should be fixed. Even the inspection on a brand new home will turn up items that need corrected. The goal here is to come up with a list of items that the seller needs to fix…and that they will agree to.

Since no home is ever perfect, you’re going to need to take a look at the inspection report and decide what matters to you most and what can be negotiated by both parties to create the magical win-win situation. Simply sending over an inspection report and saying “fix everything” will more than likely get you a denial from the seller. So how do you determine what to ask for and what not to ask for?

You want to take a look at the big picture. What items do you feel are the so-called “deal killers” – those items that you cannot see past and will cause you to walk away from the home in an instant. Typically, we see these are big ticket items like roofs and HVAC units or health and safety issues such as faulty wiring or items that create a risk of fire, electrocution, or explosion (think leaking gas).

Every homebuyer is different though and what you might consider a no-go, the next homebuyer might not even flinch at. It all depends on your needs and your comfort level.

As well as your needs, you’ll need to consider where the seller is coming from. Did they just take a really low offer from you on the home? Are they trying to move quickly due to a relocation? Are the facing foreclosure or perhaps they just need to sell because they don’t have the money? There are so many factors to consider and your real estate agent can help you see some of the potential pitfalls to the negotiation before they even happen. Remember, the goal is to get the seller to repair items, not bury them in so much that they refuse to do anything.

Writing Repair Amendments

Our biggest tips to writing repair amendments are simple: be specific, don’t overuse words and don’t under explain what you need, and let the inspection report do the talking.

Be specific. We’ve seen cases where repair amendments said something along the lines of “have sprinkler system checked.” The seller did exactly that. They paid to have someone come out and inspect the sprinkler system…and nothing more. There were issues with the sprinkler system (in this particular case a broken pipe under a sidewalk which was causing a major loss of water) and because of the language in the inspection report, the seller merely confirmed what everyone already knew, the sprinkler system needed repair. The two strongest words you can use in a repair amendment are repair and replace. For example, if there are extensive roof damages, a roof replacement may be more practical than roof repair.

Over/under explaining things. Be succinct in your wording. Don’t become a junior inspector or plumber or electrician. Let the experts determine what is wrong and fix it. If the property has a septic system, let a septic tank services company inspect and repair the damages if any or see if a new septic system installation is needed. Sometimes people try to use a lot of big words or even legalese to make the repair amendment sound official. You want to write clearly and in simple, plain language to get to the heart of what it is you want done.

Let the inspection report do the talking. Quote items in the inspection report and give reference numbers for pages or sections of the report where the item appears. Let the inspector’s words inform what needs done.

Remember, that all repairs must be done by a licensed person if the trade requires a license (plumbing and electrical are two examples) or by someone regularly employed in a trade that reflects what they are doing like Shower regrouting melbourne . For plumbing examples, read more about BFMD, LLC Plumbing here.In other words, if you hire a handyman to fix items on a repair amendment, they need to be a handyman as their regular job, not just Uncle Bob who says he can fix it. These two requirements can be overruled if agreed to by both parties and put into writing. One can rely on experts and for plumbing service San Diego see PIC Plumbing.

The more precise you are with repair amendments, the better your results will be. Remember to think items through as well, what are the consequences of the action you’re requesting? We see a lot of arguments over removing items like TV brackets. If someone requests “remove TV brackets” on a repair amendment, they might get exactly that. What’s left when you remove TV brackets? Big holes and mismatched paint. You may want to use something more along the lines of “remove TV brackets and repair, patch, texture, and paint to match current walls” so that you have a more detailed explanation of what you want done. Remember, there is no “they should have known what I meant” clause in contracts.

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Repair Amendments: Be Precise for Better Results

November 22, 2013 by khproperties Leave a Comment

Make Solid Repair Amendments So That They Stick

Repair amendments typically come up during the option period. During this time, a buyer will bring out an inspector to check out the home. The items that the inspector finds often form the core of a repair amendment – a buyer can elect to ask for all of the items to be repaired or none at all, it all depends on what they feel is important. These items are written onto a form (simply titled “Amendment” – it can also be used to amend other items in a contract such as sales price, closing date, seller paid closing costs, etc.) and submitted to the seller. The two parties then negotiate the repairs and come to an agreement (or the buyer can terminate the contract under their “unrestricted right” to termination afforded them by the option period). During the time it takes to get to closing, these repairs are to be performed and at closing, the newly repaired home should be ready for the buyers. Side note: the repairs can be negotiated a lot of different ways – who pays, when they have to be completed by, money in lieu of repairs, who has to perform the repairs, etc.

Pick the Repairs That Matter Most

We all want a house that is in perfect condition, but most sellers most likely won’t repair everything on your list. While you may want to ask for everything on your repair amendment, know that the seller will likely try and negotiate with you for terms favorable to them. The trick is to come to a mutually beneficial agreement. Make a list of repairs that are “deal killers” for you and work to get those included in the negotiations. For instance, if there are extensive damages on the roof, you may ask the seller to prioritize residential roof replacement. Some smaller items might need to be traded for the bigger items you really want and need repaired.

Be Precise With Your Repair Requests

Repair amendments are read in a literal manner. Make sure your agent is precise with their wording so that you get exactly what you want. We’ve seen cases where someone wrote “have AC unit checked” and the listing agent did exactly that. They paid someone to “check the AC unit” – it wasn’t working properly, but because of the wording, the seller had no responsibility to have the unit repaired. Be precise and get the results you want.

Ask for Receipts and Warranties

Be sure to request receipts and any transferable warranties in your repair amendment. This a) proves the work was done and b) gives you something to fall back on should there be any problems after the sale.

image courtesy of thetorpedodog