The Business Cycle



Contract Writing

( Learn the contract script for the Conventional Contract, FHA Contract, and VA Contract

( Add another source of business to your Real Estate Business Source Chart (Chapter 3)

( Using the Conventional case study, fill out the Conventional Contract

( Using the FHA Contract case study, fill out a FHA Contract

( Using the VA case study, fill out a VA Contract

( Preview homes in your Target Geographic area

( Print out the MLS listings from your geographic area

Don’t forget you must give the buyer the Information about Brokerage Services notice prior to showing any property. It is up to you to explain agency relationships. Remember – we prefer to represent the buyer on any transaction where we do not have an existing agency agreement with the seller.

I never see failure as failure but as an opportunity to practice my technique, and perfect my performance.

- Tom Hopkins

The Conventional Contract

The Scripts to better explain the contract to your buyer

Prologue: Well, Bob & Betty, I’d like to go over the sections of the contract which I’ve filled out and show you what we are offering the sellers. I’ll review these sections, and then give you all the time you need to read the contract if you’d like.

Section 1: The sellers, Sam & Sylvia, agree to sell to you, Bob & Betty, the following property.

Section 2: This is the legal description of the property, in the city of Garland, in Dallas County, also known as 1234 Street Place.

This other line below is just a place to list any property which would not go with the home. As you can see, in your case, we haven’t excluded anything from the sale.

This last line is regarding mandatory membership in a homeowner’s association. The home you are purchasing is not subject to a mandatory homeowner’s association.

Section 3: This section shows how much we are offering for the home.

Line A: $ 5,000 is the amount you are putting down. As you may know this is not all the money involved in buying the home. This is just what you will need to put down to get the financing.

Line B: $ 95,000 is the what the loan should be for, since you are putting 5% down

Line C: $ 100,000 is the total sales price

Section 4: This section is where we discuss the financing. As you can see, we are going for an Third Party loan, of which the loan will not be less than (the loan amount) $ 95,000. We are seeking 30 year financing for 8% and, again this note is fixed for 30 years. This loan is with PMI.

This space states that after the contract is negotiated, that is, after everyone has agreed to the contract, that you will apply for financing within 2 days. The second space states that your financing should only take within 30 days to complete or your are entitled to your earnest money back.

Section 5: This section refers to the Earnest Money which we must provide to show the seller we are in earnest trying to purchase the property. In this case, we are making a check for $ 500.00 to deposit with Safeco Land Title at 170000 Preston Rd, in Dallas.

What you should understand is that this check is made out to Safeco and Safeco is a Title Company, which is a neutral third party to this contract. What that means to you is that they are not going to give the money to the seller. As a matter of fact, without your authorization, they will not do anything with this earnest money.

Furthermore, I won’t deposit this check until everyone signs this contract and agrees to everything in it. If something happens, and you and the seller don’t agree, I will give you this same check back. If the seller and you do agree, then I will give the contract and the check to the title company, and you will have a credit for that amount at closing. This check is not a payment for anything, it is still your money on deposit at the title company.

The only way you can really lose this money is if you don’t fulfill the contract, for example, you don’t apply for the financing when you said you will, or if you are approved for the loan, and you decide for no reason that you do not want the house. You will not lose your money if you cannot qualify for a loan.

Section 6:

Line A: This section refers to the title and the title company will insure the title to be good, marketable, and indefeasible.

Line B: A survey will be required since we are obtaining a new loan. I have checked BOX 1, so that after you have had receipt of the survey you will have 3 days to object to something you do not like. Actually, the survey will not be ordered until you receive loan approval, to make sure you are not spending money until you’re ready to close. Usually, the title company presents us with the survey at closing and we review it there. The title company also faxes it to the mortgage company to make sure there is nothing there which they object to.

Section 7:

Line A: This section is about inspections. When I say the “general inspection,” I mean the inspector you hire to make sure that everything that is supposed to work in the house does. Basically, the inspector will only look at things that function, like windows, electric plugs, foundation, etc. He will note which are not functioning at that time. Of course, we are only looking for major items – like foundation, structural, or plumbing.

Since general home inspectors are licensed by the state of Texas, you can find them in the phone book under “Home Inspections.” I’m sorry I’m not allowed to recommend anyone in particular, because I would not want it to look like I have an interest in a :good: report. Basically, it removes any appearance of wrong doing on my part. Besides, it is best to get a disinterested party’s opinion, isn’t it?

Line B: We have checked Box 1, because you have the disclosure on the property which we picked up while we were looking at it.

Line C: Since this home was built before 1978, we do need the Lead Based Paint Disclosure. We take a look at that in a minute.

Line D: There are two options here. First, we can pay an option fee to be able to terminate this offer within 7 days, or we can accept the propertyas it is. In this case, it ti better for us to offer the seller $50.00 for 7 days, and try to inspect the property as soon as possible. If the inspector finds something we didn’t expect, then we can terminate the contract or attempt to re-negotiate. As you can see, I also marked the box which will credit us with the option amount if we proceed with the sale.

Section 9: We are setting the closing date for on or before December 25, 1995.

Section 10: Possession is when you will actually get the keys. In this case, the home is empty, so we have “Closing & Funding.” What that means is that everyone has to OK the paperwork and the money has to be distributed to the various entities on the contract. You see, what can happen, is that if you move in without it funding, your insurance would not be in place. So if an accident occurred, you would not be covered.

Section 11: This section is for any special issues which are not otherwise directed in the main body of the contract.

Section 12:

Line A (1): The appraisal will be paid by you at loan application.

(2) This section is for the points, which in this case is 2, of which the seller will pay 1 and you the remainder. Are you clear about what points are? Points are what you pay to get the interest rate you want. Basically, one point equals one percent of the loan amount, so in our example, 2 points would be $1900, but you will only pay 1 point so you will only pay $950. Do you understand how that works?

Section 13-20 I invite you to read these sections. If you have any questions, please feel free to ask me.

Section 21: This section include any forms which are part of this contract. You’ll notice that I have included the Agreement for Mediation Addendum. I’ll tell you what that one does in a minute.

Signature Page: And finally, this is where I’d like to make clear to you that this is a legal document, and should you like to have your attorney review this, you are welcomed to take it with you. These forms are promulgated by the Texas Real Estate Commission, and are the only contracts we as agents are allowed to fill out. Would you like to do that? If you decide not to, please initial here. This insures my brokerage firm that I have told you about this option.

After you read through this contract, please OK the paperwork at the back, and initial at the bottom of each page.

Let me get a copy of everything you have signed, so you can review it later, if you like.

Conventional Case Study

|Buyer |Paul Bermudez |

|Seller |See MLS Printout |

|Address |See MLS Printout |

|Legal Description |See MLS Printout |

|Title Company |Texas Title |

| |13604 Midway Rd., Suite 165 |

| |Dallas, Texas 75244 |

|Title Policy |Seller |

|Survey |Buyer |

|Appraisal |Buyer |

|Closing |30 days from today, at the end of the month |

|Possession |Closing & Funding |

| | |

| | |

• Buyer is obtaining a 95% fixed rate conventional loan for 30 years, and locked in at

8.5%.

• Buyer will offer full price for the property

• Buyer will be putting up $500 earnest money

• Buyer wants to install a 10’ x 12’ storage building in the backyard after closing.

• Buyer has not received the “Seller Disclosure Notice”

• Buyer chooses the option period of $25 for a 10 termination

• Buyer needs closing cost assistance for about $1000

• Buyer would like a home warranty

The FHA Contract

The Scripts to better explain the contract to your buyer

Prologue: Well, Bob & Betty, I’d like to go over the sections of the contract which I’ve filled out and show you what we are offering them. I’ll review these sections, and then give you all the time you need to read the contract if you’d like.

Section 1: The sellers name, agrees to sell to you, Bob & Betty the following property.

Section 2: This is the legal description of the property, in the city of Garland, in Dallas County, also known as 1234 Street Place.

This other line below is just a place to list any property which would not go with the home. As you can see, in your case, we haven’t excluded anything from the sale.

This last line is regarding mandatory membership in a homeowner’s association. The home you are purchasing is not subject to a mandatory homeowner’s association.

Section 3: This section shows how much we are offering for the home.

Line A: $ 2,550 is the amount you are putting down. As you may know this is not all the money involved in buying the home. This is just what you will need to put down to get the financing.

Line B: $ 97,350 is the what the loan should be for, since you are putting 5% down

Line C: $ 100,000 is the total sales price

Section 4: This space states that after the contract is negotiated, that is, after everyone has agreed to the contract, that you will apply for financing within 3 days. The second space states that your financing should only take within 60 days to complete or your are entitled to your earnest money back.

This section is where we discuss the financing. As you can see, we are going for an FHA loan, and this type of loan is a 203B, of which the loan will not be less than (the loan amount) $ 97,350. You are seeking 30 year financing for 7% and, again this note is fixed for 30 years. In the middle of this paragraph, you see this “SALES PRICE” written in. That is to insure that the home we are purchasing is going to be worth what we are paying for it. In other words, when the appraisal is done, the bank will make sure the home is worth at least what the sales price is on the contract. After all, you wouldn’t want to be stuck buying a home that is worth less than what you are paying for, would you?

Section 5: This section refers to the Earnest Money which we must provide to show the seller we are in earnest trying to purchase the property. In this case, we are making a check for $ 500.00 to deposit with Safeco Land Title at 170000 Preston Rd, in Dallas. In our situation, we won’t be providing any additional earnest money.

What you should understand is that this check is made out to Safeco and Safeco is a Title Company, which is a neutral third party to this contract. What that means to you is that they are not going to give the money to the seller. As a matter of fact, without your authorization, they will not do anything with this earnest money.

Furthermore, I won’t deposit this check until everyone signs this contract and agrees to everything in it. If something happens, and you and the seller don’t agree, I will give you this same check back. If the seller and you do agree, then I will give the contract and the check to the title company, and you will have a credit for that amount at closing. This check is not a payment for anything, it is still your money on deposit at the title company.

The only way you can really lose this money is if you don’t fulfill the contract, for example, you don’t apply for the financing when you said you would, or if you are approved for the loan, and you decide that you do not want the house. You will not lose your money if you cannot qualify for a loan.

Section 6:

Line A: This section refers to the title and the title company will insure the title to be good, marketable, and indefeasible. We have asked the seller to pay for the Title Policy.

Line B: A survey will be required since we are obtaining a new loan. I have filled it in, so that after you have had receipt of the survey you will have 1 days to object to something you do not like. Actually, the survey will not be ordered until you receive loan approval, to make sure you are not spending money until you’re ready to close. Usually, the Title Company presents us with the survey at closing and we review it there. The title company also faxes it to the mortgage company to make sure there is nothing there which they object to. On the last line, you can see I wrote “Residential” since you will be living in the property.

Section 7:

Line A: This section is about inspections. When I say the “general inspection,” I mean the inspector you hire to make sure that everything that is supposed to work in the house does. Basically, the inspector will only look at things that function, like windows, electric plugs, foundation, etc. He will note which are not functioning at that time. Of course, we are only looking for major items – like foundation, structural, or plumbing.

Since general home inspectors are licensed by the state of Texas, you can find them in the phone book under “Home Inspections.” I’m sorry I’m not allowed to recommend anyone in particular, because I would not want it to look like I have an interest in a :good: report. Basically, it removes any appearance of wrong doing on my part. Besides, it is best to get a disinterested party’s opinion, isn’t it?

Line B: We have checked Box 1, because you have the disclosure on the property which we picked up while we were looking at it.

Line C: Since this home was built before 1978, we do need the Lead Based Paint Disclosure. We take a look at that in a minute.

Line D: There are two options here. First, we can pay an option fee to be able to terminate this offer within 7 days, or we can accept the propertyas it is. In this case, it ti better for us to offer the seller $50.00 for 7 days, and try to inspect the property as soon as possible. If the inspector finds something we didn’t expect, then we can terminate the contract or attempt to re-negotiate. As you can see, I also marked the box which will credit us with the option amount if we proceed with the sale.

Section 9: We are setting the closing date for on or before December 25, 1995.

Section 10: Possession is when you will actually get the keys. In this case, the home is empty, so we have “Closing & Funding.” What that means is that everyone has to OK the paperwork and the money has to be distributed to the various entities on the contract. You see, what can happen, is that if you move in without it funding, your insurance would not be in place. So if an accident occurred, you would not be covered.

Section 11: This section is for any special issues, which are not otherwise directed, in the main body of the contract.

Section 12:

Line A:

(1) The appraisal will be paid by you at loan application.

(2) This section is for the points, which in this case is 2, of which the seller will pay 1 and you the remainder. Are you clear about what points are? Points are what you pay to get the interest rate you want. Basically, one point equals one percent of the loan amount, so in our example, 2 points would be $ 1900, but you will only pay 1 point so you will only pay $950.00. Do you understand how that works? There are no buydown fees so I have put n/a for Not Applicable” on both blanks.

Line B: This section is in regard to the FHA Mortgage Insurance Premium of .0225 which is to be added to the amount of the loan. Please understand that this is not homeowner’s insurance. This MIP, is what it is called, is the insurance you pay for obtaining an FHA Mortgage. Basically, the insurance is to the Mortgage Company, that if you do not pay the mortgage, FHA will make it up to them. This fee is usually financed into the loan, unless you want to pay for it at closing, but that will make you come up with more money at closing.

Section 13-20 I invite you to read these sections. If you have any questions, please feel free to ask me.

Section 21: This section includes all the Texas Real Estate Commission forms that we will use in this contract. You’ll notice I have included the Agreement for Mediation. I’ll tell you what that one does in a minute.

Signature Page: And finally, this is where I’d like to make clear to you that this is a legal document, and should you like to have your attorney review this, you are welcomed to take it with you. These forms are promulgated by the Texas Real Estate Commission, and are the only contracts we as agents are allowed to fill out. Would you like to do that? If you decide not to, please initial here. This insures my brokerage firm that I have told you this option.

After you read through this contract, please OK the paperwork at the back, and initial at the bottom of each page.

Let me get a copy of everything you have signed, so you can review it later, if you like.

FHA Case Study

|Buyer |Paul & Judi Bermudez, a married couple |

|Seller |See MLS Printout |

|Address |See MLS Printout |

|Legal Description |See MLS Printout |

|Title Company |Texas Title |

| |13604 Midway Rd., Suite 165 |

| |Dallas, Texas 75244 |

|Title Policy |Seller |

|Survey |Buyer |

|Appraisal |Buyer |

|Closing |30 days from today, at the end of the month |

|Possession |Closing & Funding |

| | |

| | |

• Buyer is obtaining a 97% fixed rate loan for 30 years, and locked in at 8.25%.

• The FHA loan is a 203b, for 30 years

• Buyer is offering the listed price plus 3%

• Buyer will be putting up $500 earnest money

• Buyer has received the “Seller Disclosure Notice”

• Buyer chooses the option period of $50 for a 10 termination

• Buyer needs closing cost assistance for about 3% of the salesprice

• Buyer would like a home warranty

• 1% Discount point to be split by both buyer and seller

• MIP of 2.25% to be added to the loan

The VA Contract

Prologue: Well, Bob & Betty, I’d like to go over the sections of the contract which I’ve filled out and show you what we are offering them. I’ll review these sections, and then give you all the time you need to read the contract if you’d like.

Section 1: The seller’s name, agrees to sell to you, Bob & Betty the following property.

Section 2: This is the legal description of the property, in the city of Garland, in Dallas County, also known as 1234 Street Place.

This other line below is just a place to list any property which would not go with the home. As you can see, in your case, we’ve excluded the antique light fixture from the sale.

This last line is regarding mandatory membership in a homeowner’s association. The home you are purchasing is not subject to a mandatory homeowner’s association.

Section 3: This section shows how much we are offering for the home.

Line A: $ 0 is the amount you are putting down. As you may know this is not all the money involved in buying the home. This is just what you will need to put down to get the financing.

Line B: $ 100,000 is the what the loan should be for, since you are putting nothing down

Line C: $ 100,000 is the total sales price

Section 4: This space states that after the contract is negotiated, that is, after everyone has agreed to the contract, that you will apply for financing within 5 days. The second space states that your financing should only take within 60 days to complete or your are entitled to your earnest money back.

This section is where we discuss the financing. As you can see we are going for an VA loan, , of which the loan will not be less than (the loan amount) $ 100,000. You are seeking 30 year financing for 8% and, again this note is fixed for 30 years. You should understand that on a VA Contract on the interest rate is not “locked in.” You will be given the interest rate that is effective for veterans on the day of closing.

Section 5: This section refers to the Earnest Money which we must provide to show the seller we are in earnest trying to purchase the property. In this case, we are making a check for $ 500.00 to deposit with Safeco Land Title at 170000 Preston Rd, in Dallas.

What you should understand is that this check is made out to Safeco and Safeco is a Title Company, which is a neutral third party to this contract. What that means to you is that they are not going to give the money to the seller. As a matter of fact, without your authorization, they will not do anything with this money.

Furthermore, I won’t deposit this check until everyone signs this contract and agrees to everything in it. If something happens, and you and the seller don’t agree, I will give you this same check back. If the seller and you do agree, then I will give the contract and the check to the title company, and you will have a credit for that amount at closing. This check is not a payment for anything, it is still your money on deposit at the title company.

The only way you can really lose this money is if you don’t fulfill the contract, for example, you don’t apply for the financing when you said you will, or if you are approved for the loan, and you decide for no reason that you do not want the house. You will not lose your money if you cannot qualify for a loan.

Section 6:

Line A: This section refers to the title and the title company will insure the title to be good, marketable, and indefeasible.

Line B: A survey will be required since we are obtaining a new loan. We have written it so that after you have had receipt of the survey you will have 3 days to object to something you do not like. Actually, the survey will not be ordered until you receive loan approval, to make sure you are not spending money until you’re ready to close. Usually, the Title Company presents us with the survey at closing and we review it there. The Title Company also faxes a copy to the Mortgage Company to make sure there is nothing there, which they object to.

Section 7:

Line A: This section is about inspections. When I say the “general inspection,” I mean the inspector you hire to make sure that everything that is supposed to work in the house does. Basically, the inspector will only look at things that function, like windows, electric plugs, foundation, etc. He will note which are not functioning at that time. Of course, we are only looking for major items – like foundation, structural, or plumbing.

Since general home inspectors are licensed by the state of Texas, you can find them in the phone book under “Home Inspections.” I’m sorry I’m not allowed to recommend anyone in particular, because I would not want it to look like I have an interest in a :good: report. Basically, it removes any appearance of wrong doing on my part. Besides, it is best to get a disinterested party’s opinion, isn’t it?

Line B: We have checked Box 1, because you have the disclosure on the property which we picked up while we were looking at it.

Line C: Since this home was built before 1978, we do need the Lead Based Paint Disclosure. We take a look at that in a minute.

Line D: There are two options here. First, we can pay an option fee to be able to terminate this offer within 7 days, or we can accept the property as it is. In this case, it ti better for us to offer the seller $50.00 for 7 days, and try to inspect the property as soon as possible. If the inspector finds something we didn’t expect, then we can terminate the contract or attempt to re-negotiate. As you can see, I also marked the box which will credit us with the option amount if we proceed with the sale.

Section 9: We are setting the closing date for on or before December 25, 1995.

Section 10: Possession means when you will actually get the keys. In this case, the sellers will give you the keys at closing, that is why we call it closing and funding. That means that the lender has provided the money to the Title Company, and they are disbursing it.

Section 11: This section is for any special issues that are not otherwise directed in the main body of the contract. In our case, we’re informing everyone, that we desire to use the VA No Down Payment Program. Furthermore, the seller is to pay all your Prepaid Expenses and Closing costs.

Section 12:

Line A: The appraisal will be paid by you at loan application, but you will be reimbursed at closing.

This section is for the points, which in this case is 0, of which the seller will pay 0 and you the remainder. Are you clear about what points are? Points are what you pay to get the interest rate you want. Basically, one point equals one percent of the loan amount, so, for example, 1 points would be $1000, on a $100,000 loan.

Line B: Is in regard to the VA Funding Fee which is to be added to the amount of the loan. This fee is what you pay for obtaining a VA Mortgage. Basically, the fee is to guarantee the Mortgage Company, that if you do not pay the mortgage, VA will make it up to them. This fee is usually financed into the loan, unless you want to pay for it at closing, but that will make you come up with more money at closing.

Section 13-20 I invite you to read these sections. If you have any questions, please feel free to ask me.

Section 21: This section includes all the Texas Real Estate Commission forms and other addendum to this contract which we will use in this contract. You’ll notice I have included the Agreement for Mediation. I’ll tell you what that one does in a minute.

Section 22: And finally, this is where I’d like to make clear to you that this is a legal document, and should you like to have your attorney review this, you are welcomed to take it with you. These forms are promulgated by the Texas Real Estate Commission, and are the only contracts we as agents are allowed to fill out. Would you like to do that?

If not, please initial here, that I pointed out this information to you.

Signature Page: After you read through this contract, please OK the paperwork at the back, and initial at the bottom of each page.

Let me get a copy of everything you have signed, so you can review it later, if you like.

VA Case Study

|Buyer |Craig Gant |

|Seller |See MLS Printout |

|Address |See MLS Printout |

|Legal Description |See MLS Printout |

|Title Company |Texas Title |

| |13604 Midway Rd., Suite 165 |

| |Dallas, Texas 75244 |

|Title Policy |Seller |

|Survey |Seller |

|Appraisal |Buyer |

|Closing |30 days from today, at the end of the month |

|Possession |3 days after closing |

| | |

| | |

• Buyer is obtaining a 100% fixed rate loan for 30 years, and locked in at 8.5%.

• Buyer will also be using the Texas Vet Assistance Program

• Buyer will be putting up $500 earnest money

• Buyer wants to install a 10’ x 12’ storage building in the backyard after closing.

• Seller is not required to provide the “Seller Disclosure Notice”

• Buyer chooses the option period of $25 for a 10 termination

• Seller to pay all of buyer’s closing costs and prepaid items at closing

• Buyer would like a home warranty

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