REINCheck

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VO [00:00:06] You're listening to REINCheck with Andrea Rice, Contracts and Industry Specialist at REIN, where you get the latest member news and information delivered straight from the source, REIN MLS.

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Andrea Rice [00:00:20] Hello and welcome to REINCheck. I am your host, Andrea Rice, and today we are checking in with former SMAC member Becky Claggett to discuss the top five things that would be helpful for new agents to know. Becky, thank you so much for joining me today.

Becky Claggett [00:00:35] Absolutely. Thank you for having me.

Andrea Rice [00:00:37] Yes. And for those of you listening, Becky, she has joined us on the podcast several times so always happy to have you here. So, I asked our current SMAC members what they thought would be helpful for new agents to know and they gave me five items. So, Becky, let's just go ahead and hit each of these five topics real briefly. And before we get started, I do want to mention you know always check with your broker. They're an excellent resource for you. But the first is understanding the purchase agreement and the applicable addendums. Becky, what advice would you give to new agents on this?

Becky Claggett [00:01:16] Wow, that's a great topic. We have so many addendums and every transaction is different. So let me start by introducing a form that is not often used to help. It's called the PA-C. This optional form is the standard purchase agreement checklist, and although you could have other addenda, it's a pretty good list of all of our addendums. Take the time to familiarize yourself with each one on that list. Some you will see often; some you may rarely see. Understanding the purchase agreement and the applicable addendum. So, our purchase agreement is currently 16 pages and often two or more addendums are required. Not to mention, in addition to the seller disclosures. The best way to understand the purchase agreement, in my opinion, is to carefully read it, but also apply it to the situation for better understanding. I've always believed that education without application is difficult. So, if you hear a story in your office about, say, the property inspection, go pull the form and read the pertinent sections to see what the contract says about it. Or if you hear the settlement was bumped because of whatever reason, go look at the section of the purchase agreement and see what the remedy is for the seller. And then what's the remedy for the buyer? When I first started real estate, my broker told me to read a little of the contract every single day. I asked him until when. He said, until you don't need to anymore. And still today, I'm always digging in and reading and rereading various paragraphs that apply to various situations. When it comes to the addendums, each time you check a box is, you know, where it says is or is not, or you check a box it says has when it says, has or has not. Look for these words at the end of the sentence: addendum which shall be incorporated into this agreement or attach request for whatever kind of addendum it is. Then be sure to attach it along with your purchase offer. Make sure when you're preparing the offer for your buyer that you pull down all of the seller disclosures as well provided to you with the listing and have your buyer sign along with their offer and then add your appropriate addendums. And last if you're the listing agent, don't delay in getting those forms uploaded with the listing. The lead-based paint, the AICUZ, the DPOR disclosures and more are important and not just meant to be caught up later.

Andrea Rice [00:03:45] Excellent. Excellent. I love that you, your broker says keep reading it until you didn't need to anymore.

Becky Claggett [00:03:53] I'm still reading.

Andrea Rice [00:03:55] And it's always changing, right? I mean.

[00:03:58] Yes.

[00:03:58] A little bit here and there would be wise. So, yeah, that's great advice. Now, the next topic that they said it would be great for new agents to know is understanding the cap. And this comes up a lot. Is the cap as it's referenced in the purchase agreement versus what it means with the PICRA.

Becky Claggett [00:04:20] Correct. It confuses so many people. So first, let's do a quick overview and address the cap. Paragraph 13 of the purchase agreement obligates the seller to make repairs subject to the cap, which is 1% unless the parties agree to a different amount. This cap covers four things and four things only. I think that's where the confusion comes in. Number one, it covers appraisal and lender required repairs. Number two, it covers wood destroying insect infestation and moisture inspection. Number three, drinking water and septic. Number four, walkthrough inspection. All of these subject to the cap collectively. So as an example, if the appraiser calls for railings on the back porch, that repair is subject to the cap. If the lender wants the gutters replaced, the seller is obligated to do it if it falls within the cap. As far as treatment for repairs to get a clear termite or moisture letter, the seller is obligated if it falls within the cap. Well and septic. Same thing. Subject to the cap. Walkthrough, any needed repairs new not previously negotiated, I'll cover that in a minute, are subject to the cap. Bottom line, there's no cap on the PICRA. However, appraisal, wood destroying, infestation and moisture, and well and septic could come into play regardless of the PICRA due to appraisal, required repairs, and other inspections. Anything not asked for on the PICRA that is noted on the home inspection, is removed from the walkthrough or waived. So that's an important thing to pay attention to. I hear so often that PICRA items are subject to the cap and that is just not so. The only time the cap will come into play is with appraisal, wood destroying infestation and moisture, well and septic, and walkthrough is subject to the cap unless you have negotiated otherwise.

Andrea Rice [00:06:29] Yeah, we get a lot of confusion on that. So hopefully that clears it up for people. And if you need to, just rewind and listen to it again. Very important information there. And then let's see, number three, we have the walkthrough. So, what should new agents know about handling the walkthrough?

Becky Claggett [00:06:49] The buyer is given the right to have a walkthrough in paragraph 13 of the purchase agreement. The purpose of the walkthrough is to determine that all appliances, heating and cooling equipment, plumbing, electrical systems, and all other equipment are in working order should they convey. As well as any negotiated repairs or conveyances. Plus, paragraph 12 on the purchase agreement states that the seller shall deliver the property at settlement in substantially the same condition as of the date of the purchase agreement. Free from any personal property. All debris and trash need to be gone. That means they need to take all the trash and the debris out of the house and all of their personal property. There may be some agreed upon repairs to check on as well as other negotiated condition items. It's important to remember that if there was an item listed on the home inspection and not negotiated for repair, it is exempt now at the walkthrough unless other provisions were made. And finally, utilities and keys need to be discussed with clients and with cobroks prior to walkthrough to ensure a smooth closing for everyone. And listing agents need to remove their signs and their lockboxes. Communicate when this will happen to the buyer's agent and let's get everything going smoothly for that walkthrough in closing.

Andrea Rice [00:08:09] All right, great. A lot of great tips and information there. Now, number four, what should new agents know about the difference between termination and release? And we get this. There's a lot of confusion on that.

Becky Claggett [00:08:24] Yeah, I think there would be. I think I can see that. So, termination is defined as the action of bringing something to an end. That's simply what a termination is. And there's several places in the purchase agreement throughout the process of the sale where it would be appropriate to use termination versus a release. Generally, it'll tell you. It's written in the body of the purchase agreement that one party or the other may terminate the agreement by written notice to the other. As an example, page one line 27 in regards to earnest money, if not paid as agreed, the seller has the option to terminate and it spells out how. A termination is only exercised by one party. That's the thing to remember. A release is when both parties agree to release each other, often determining what happens to the earnest money. You may always need a release, but you will not always need a termination and a release. Terminating as one party has the right to declare the contract is at its end. Releasing the contract means both parties agree that it's over and for most deals addresses the disposition of the earnest money.

Andrea Rice [00:09:36] Okay. Yes, good points there in differentiating the two and how you can have one without the other know. I think that's where a lot of the confusion comes in. And lastly, what should new agents know about the CDIF or Consumer Disclosure Information Form.

Becky Claggett [00:09:58] All right. The CDIF is provided to both prospective buyers and sellers, first of all. It's a comprehensive form that gives the buyer insight to many of the laws, as well as those buyer beware items they may come up against in the transaction and allows them the opportunity to investigate any of those disclosures before purchasing. It can be such a great tool to start those conversations of what's important to the buyer and what may impact their use and enjoyment of the property they're purchasing. It also clearly advises the buyer to be diligent in their research and use the appropriate professionals or experts to get more information about a topic they may be concerned with. Used up front, as the buyer begins their search, it can start great conversations between the agent and the buyer to educate and make appropriate decisions for their purchase. And for the seller, it's giving them an entire list of what we're disclosing to the buyer. And on that list, some things that may be some reasons that somebody is interested in their house or is not interested in their house, because some of those disclosures and you can show them this is what the buyer is going to be concerned with and these portions apply to your house.

Andrea Rice [00:11:12] Yes. Probably one of the most important forms that we have. And alight so those are the five. Thank you, Becky. You know, when you're a new agent, there's a lot of information and, you know, our SMAC committee felt that these were really the type five things that would be helpful for new agents to know. And thank you for hitting those really quickly and, you know, in an easy way to digest. And like I said, always check with your broker if you have any questions. They're a great resource for you. Again, thank you, Becky. Thank all of you for listening. I hope you enjoyed this episode of REINCheck. And if you missed any of the previous episodes, I do invite you to go to REINMLS.com to take a listen. Thank you and have a great rest of your day.

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VO [00:11:59] You've been listening to REINCheck with Andrea Rice. Stay in the know from those who know. Delivered straight from the source, REIN MLS.

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