PA Agreement of Sale Part 2
Continuing with our explanation of the PA Agreement of Sale (AOS) we will start at the top of page 2. If you want to read other parts of this explanation
Paragraph 4 A deals with Fixtures and personal property, this paragraph was revised in September 2005. It deals with items included in the sale of the home. Anything permanently installed which is free of liens, such as plumbing, heating lighting fixtures (including chandeliers and ceiling fans) etc. I will tell prospective sellers if they want to take something with them, take it down before listing your home so it does not become a deal breaker, even if you itemize it as something excluded from the sale buyers often fall in love with what you want to take with you. Remove the obstacle beforehand and put up a fixture that will stay with the house and avoid any arguments. Here items such as refrigerators, washers and dryers are added if they are being included in the sale. Items being leased and not owned by the seller are identified here in sub paragraph B. Sub-paragraph C identifies any fixtures and items not included in the sale.
Paragraph 5 explains that Dates and Time is of Essence revised in September 2005. There are four sub paragraphs that explain this concept, make sure you understand this and that your mortgage provider and any contractors such as home inspectors understand this. It is important. In Pennsylvania, if you say in the contract you will do something by or on a certain date at a certain time it is binding and you are in breach of contract if you do not comply. This is not the case in other states, and mortgage providers as an example sitting in another state may drag their feet unaware that time and dates are of essence as this is not the case where they live. So you need to make sure they are aware and that you stay on top of them to perform their duties by the time you have entered in the contract. This is not a time to understand the problems they are having, you need to bring pressure to bear upon them to meet the deadlines. Certain paragraphs are pre-printed with time periods for convenience, like everything else these are all negotiable and can be changed. Just remember to initial and date any changes that are made to the contract.
Paragraph 6 deals with the Mortgage Contingency revised in September 2005. If your offer is conditional upon you getting a mortgage you do not waive this contingency. Sometimes it is waived if a buyer will be getting a mortgage for tax reasons but does not need the mortgage to settle. Some buyers have sufficient funds that they can simply waive this contingency. If you choose to use the contingency sub-paragraph A the details of your first and second mortgage are outlined. If the mortgage lender is identified you must make application and follow through with that lender. If you change lenders you need to notify the seller of this change. Whilst a mortgage rate is identified a maximum rate is also identified that the buyer will accept. Discount points, loan origination fees etc are also identified as a percentage of the mortgage loan. In the current market, who is financing the deal is just as important as how much is being paid. Sellers want to know that the funds will be at settlement, and buyers want to know that they will not be left at the settlement table with no friends in the room.
Sub-paragraph B details when the mortgage application will be made, 10 days is the default, and mentions that the broker for the buyer, or if there buyer is not represented the broker for the seller is authorized to communicate with the mortgage lender to assist in the loan process.
Sub-paragraph C explains that false statements or incomplete information furnished by the buyer to the seller or the brokers or mortgage lenders or failure to cooperate in good faith in the process resulting in the mortgage not being approved puts the buyer in default.
Sub-paragraph D has 4 parts and begins with the mortgage commitment date. This is when your lender has reviewed the application, appraised the home and commits to the rate and fees offered and will fund the mortgage. This commitment needs to be provided to the seller by the date entered here. This is where time and date become important. If the seller does not receive this commitment the mortgage commitment date is extended until the Seller terminates the Agreement in writing to the buyer. So if your mortgage company drags their feet you can lose the home of your dreams, especially if the sellers have a back up offer.
It continues that as soon as the buyer has the commitment they will deliver a copy to the buyer. The seller can terminate the agreement in writing after the mortgage commitment date IF the mortgage commitment is not valid till the date of settlement, OR is conditional upon the sale and settlement of other property, OR does not satisfy all the terms outlined in paragraph 6 A, OR if it contains any other condition not specified in the AOS that is not satisfied or removed within 7 (pre-printed, remember this can be changed) days after the mortgage commitment date in paragraph 6 D 1 other than certain terms that are usually done closer to settlement such as insurance and confirming employment status.
If the agreement is terminated for any of these reasons the deposit monies are returned to the buyer according to the terms of paragraph 30 and the agreement is VOID. Buyer is responsible for their costs incurred for inspections, title insurance, appraisal fees etc as outlined here.
Sub-paragraph E discusses what happens if the mortgage lender or insurance company requires repairs to the property. Buyer is required to deliver a copy to the seller who will within 5 (pre-printed, remember this can be changed) days seller will notify the buyer if the seller will make these repairs. If the seller will make the repairs to the satisfaction of the mortgage lender or insurer the buyer accepts the property and agrees to the release in Paragraph 27. If the seller will not make the repairs, the buyer can choose within 5 (pre-printed, remember this can be changed) days to make the repairs or terminate the agreement in writing with all monies returned to the buyer as outlined in Paragraph 30.
Sub-paragraph F deals with any seller assist given to the buyer. Remember mortgage lenders must be made aware of any funds being given to the buyer by the seller to complete the deal so that there is no fraud in the mortgage application in relation to loan to value ratios.
There is also a boxed paragraph here dealing with FHA/VA loans if this is applicable with sub-paragraphs G, H and I. These deal with the property appraising, that an inspection can be carried out and a certification that the terms of the contract for purchase are true.