Purchase agreement?

Question

Hello all,

I am looking to buy a property in Indiana. My first question is where can I find the IN Purchase Agreement online? Is that something I have to buy or can I download for free from a website?

My other question is, can I use a self created purchase agreement with the seller or do I need to use the IN purchase agreement that is commonly used for residential properties.

The reason I ask is because I looking to buy a house FSBO and I want to use an agent to represent me, but the agent just sent me the offer letter. And along with offer letter he sent me "Buyer's Exclusive Agency Contract" and in that it says that:

Commission: In consideration for the services to be performed by Broker, Buyer agrees to pay Broker a commission of $1,000 or $2.5% of the total purchase price; however, the total commission paid to Broker shall not be less than $1,000. In the event Seller pays a commission under a listing agreement and Broker, with the consent of buyer, is to receive any portion thereof, that portion shall be credited against Buyer's financial obligations to Broker.

The offer is for less than $20,000. Can you guys provide some guidance on this one. Thanks in advance!

Matt Eilers · Answer

No need for an agent as Seller will not want to pay and it sounds like neither will you.
Earnest $ goes to title company and held there.

Call a good home inspector prior to writing up contract (if you have time) and see how soon he/she can get out to the property.  Then use this as a guideline for your Home Inspection Date and Resolution Deadline.

Not sure if you are financing, but if you are, ask lendor how long they need for a comfortable closing date as well as a Loan Conditions Deadline and the Appraisal Deadline. (I assume IA contract my not have exact same wording but something similar.).

Once you are under contract, you are now under the whims and availability of
-Home Inspector
-Appraiser
-Lendor
Lendor will hire Appraiser. Talk to Home Inspector and Lendor to see what dates they recommend putting in so they can accomplish what they need to to satisfy the contract.

Good luck

Matt Eilers · Answer

Agent commissions:
Most of the time, Sellers do pay commissions with the advertised rate of what they will pay an agent that brings a Buyer listed on the MLS (which you probably would not see as this is usually on the Agent Detail report, not the Client Detail report that you would get.)

Since this is normally what happens, agents may get a little lax about explaining to a Buyer their financial obligation to the agent and go with the standard "Seller will pay Commissions" which in turn is what becomes the expected norm.

Technically what should happen is this, if you were dealing with an agent, you would sign some type of agreement between you and the agent where it basically says you commit to work solely with the agent, the agent promises to do their utmost best for you and that their fee is X% of the purchase price (or a certain success fee independant of the purchase price) if they find you a suitable property that you buy.  Then right after that, there is a box that is checked that says, agent should try to get his/her X% from the Seller or Listing Company 1st.

Now the part that is often glossed over.
IF they cannot get this fee or can only get part of this agreed upon fee from the Seller or Listing Company, then you as the Buyer are responsible for the balance.  
Technically, you are hiring an agent to work for you, agree to pay him/her X% for this work, but request that they try to get X% from the Seller/Listing Company 1st but if this should fail, you as the Buyer are responsible for this fee.

Next issue: If the property is on the MLS, then the Seller pays everything?  
Possibly not.
This of course opens a whole another issue amongst agents where if there are 20 properties listed at X% commission and 1 listed at say .5% less than the others and the agent is going to pick 5 properties to show you, guess which one will probably not make the cut?  Why is that? If you happen to pick the one with the less commission rate the agent does not want to have an uncomfortable talk with you later that you now owe them $$ at closing for the balance of the agreed upon fee (since they probably told you initially that the Seller will pay).  Unfortunately, this is really the agents issue since they did not explain this well up front but might affect which properties you see and don't see.

This is why some agents are wary of showing FSBO units to clients.  What happens if the Seller will not pay the X% (some might, but many don't. Most normally go FSBO to avoid agent fees)?  Then the agent has to have an awkward talk with his/her client that they found the home they love at a certain price, but now they need to come up with another X% to pay the agent since the FSBO seller will not.

A good agent will explain this upfront. Some don't, hence the misconception that the Seller always pays.

Another misconception- Earnest $ automatically is returned to Buyer. 
You should ask the holder of your earnest $ (title company...) about what needs to be done to have your earnest $ returned if the contract terminates through one of your "outs" in the contract.  
Most think if a Buyer uses one of their "outs" (say Home Inspection) to terminate the contract, earnest $$ is automatically returned to them asap.
Here in Colorado, a title company will not release an earnest $ deposit until BOTH parties have signed off on who the $$ is supposed to go to. 
So, if the Seller is bitter that you left the contract and takes his/her sweet time signing off on the Earnest $ release form, it may take some time for you to get it back.  (this hardly ever happens but I have had it happen to a client of mine once).  Worth checking to know the rules in your state although again this does not happen that often (just pointing out another misconception that some have).

banks- I would go hit a couple of banks asap to talk to them about the ?'s you are posing here.  
Banks that keep the loans in house may not be under as severe loan guidelines/restrictions as banks that end up selling your loan later to someone else.  So check around as rules (for you, a loan under $50K) may vary from bank to bank depending what guidelines they are forced to follow.

Matt Eilers · Answer

Appraisal- done due to satisfy the bank's requirements to lend on the property and your peace of mind.
Since a bank is out of the mix, it comes down to do you want to spend the money to see what an appraiser says?

If you are content with your due diligence on prices around you, then totally up to you.

Finance now vs. refi later?
I would talk to a bank and see what the fees are for the 2, if there are interest rate differences for the type of property you are buying, basically see if there is an advantage to finance now or later.

I am of the opinion that rates are going up, so if it was easy to get a loan now as opposed to later, I personally would get one now as I think the rates now will be lower than in a year. But that is just my own speculation.

Kenneth Johnson · Answer

1) What's my due diligence when it comes to choosing a title company to work with?

Due Diligence better be done before you need a Title Company. They are pretty cool, they help me look up transaction history, find owners, do CMA, run property profiles.

3) There's also no bank involved in the transaction, so how do I make sure that there are no issues with the title?

Title Insurance - it is called that because it guarantees clear title or the insurance covers you for their errors on their Preliminary Title Report..

4) Is it worth calling an agent and offering the agent couple of hundred dollars to help with the contract. I have already found the property and negotiated with the seller, I just need guidance with the remainder of the transaction.

The Buying Agent should help you for no bucks, but remember the Buying Agent is biased towards the Buyer.

Better yet the Title Company escrow officer has helped me many times on the wording of P&S agreement and caught a few mistakes on the HUD-1.

Sharad M. · Answer

So I am going to make an offer on this house with no real estate agent or attorney involved from either side. As people on this forum suggested that I can use a title company to send the earnest money check to, I am planning to call couple of title companies to find out how to go about doing this.
          
          1) What's my due diligence when it comes to choosing a title company to work with?
          2) Does the title company I choose to work with simply acts as an independent third party, or since I am choosing them, they will tend to be slightly bias towards me?
          3) There's also no bank involved in the transaction, so how do I make sure that there are no issues with the title?
4) Is it worth calling an agent and offering the agent couple of hundred dollars to help with the contract. I have already found the property and negotiated with the seller, I just need guidance with the remainder of the transaction.          
5) Any thing else I need to be aware of with this transaction, since it is just buyer and seller involved?

Thanks in advance for all the help.

Sharad M. · Answer

Matt-

Thanks a lot for the detailed response. It makes a lot of sense now.

I am going to call a few banks and understand the process and requirement.

Thanks again!

John Hensly · Answer

You may have a problem with the cash out refinance. I see that the purchase price is $20,000. Most banks won't deal with loan under $50,000.  Some may do it. you will have to shop around. Why not talk to mortgage brokers/bankers now to make sure unless you want your $20,000 stuck in the house.

Sharad M. · Answer

Matt-You make a very valid point about interest rate and the fee involved.

John-You are right that I didn't consider the loan being under $50k.

Brian-I thought the agent will be paid by the seller and not by the buyer. At least that's what happens in IL. I am a new investor, so I could be wrong. But hey, you live and learn.

You have all made very valid points. I had contacted a few local banks about refi and they said they will be able to do a refi after 6-12 mos, but it doesn't hurt to just confirm with the banks about the procedure.

In case the bank says they won't do a loan under $50k, then what are my options? The properties I am looking at are all under $50k, so can I buy say 3 properties for $20k each for a total of $60k, and then take my properties to a bank and have them do a blanket loan of some sort? Is that something that's possible?

Thanks again for all the great replies. They are much appreciated. I can't tell you guys how fortunate I am to have come across this website.

Brian Haskins · Answer

You can use any contract you want, you donâ€™t have to use your IN purchase agreement. Any agent you will work with will charge a fee so I'm a little confused, did you think an agent would just help you out for free? You should and easily could do this deal by yourself since its fsbo and not get an agent involved in my opinion. It will just complicate things. Write up a contract, take it to a title company with your earnest money and they will help you with the rest.

Brian Haskins

Sharad M. · Answer

Thanks Matt and Steve for responses. Yes, the seller and I are both going without an agent. I will put 7 days inspection contingency in the contact. I am making a cash offer and then doing a cash out refinance after 6-12 months depending on the bank. Do you guys see anything wrong with that plan?

I have looked at the comps of the property and I am getting it below market, should I still get an appraisal done? I am planning to hold the property for a very long term.

Thanks!

Purchase agreement?

Most Popular Reply