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WARD & TAYLOR, LLC PRESENTS: UNDERSTANDING THE AGREEMENT OF SALE (AOS)
PRESENTED TO YOU BY… WARD & TAYLOR, L. L. C.
WHAT IS THE PURPOSE OF THE AOS? • Roadmap to your destination… • Be Careful!!!! – Don’t practice law! • Educate, Anticipate and Rely on past experiences!
Question 1 In order to have a valid contract in Delaware, there must be consideration, offer and acceptance, legal object and competent parties. T or F
WHAT MAKES A VALID CONTRACT? • Offer • Acceptance • Consideration • Legal Object • Competent parties – KNOW YOUR SELLER !
WHO’S YOUR SELLER? • Company? • Estate/Heir? • Married vs. Not Married? • New Castle County land records
Question 2 A buyer makes an offer on a bank owned property using the standard Delaware Agreement of Sale stating a settlement date of 9/28/12. The bank tells the buyer that the price is good, but buyer must sign a bank Addendum. Buyer signs a Bank Addendum which states that it supersedes any inconsistent parts of the original Agreement of Sale. The buyer signs and returns the Bank Addendum with a blank where the settlement date should be. The Bank signs the original Agreement of Sale and the Addendum and adds the settlement date of 9/15/12 to the blank in the Addendum. The buyer is now bound to a 9/15/12 settlement date. T or F
Question 3 A property in New Castle County has been on the market for 2 years and is listed for $2, 000. An offer finally comes in for $1, 950, 000. , but the seller is hesitant to sign because he thinks a higher offer will come. Lo and behold, a second buyer’s agent shows the property and the seller does not want to sign the first contract until he finds out if the second prospect will submit an offer. The listing agent convinces the seller to sign the first contract and she will hold the contract until the following day to see if a second offer comes in. The seller agrees. That night, the buyer’s agent for the first buyer calls the listing agent and inquires into the status of the contract. The listing agent says “They signed it. ” An hour later, the second prospect submits an offer for $2, 500, 000. ($500, 000. over the asking price). Which contract has priority?
Question 4 An electric animal fencing system is included with the property. T or F
INCLUSIONS & EXCLUSIONS • Be crystal clear (and we’re not just talking about the chandelier) • What happens when an item is removed (replaced or left empty? ) • Want to keep that fixture?
Question 5 The description sheet at the house indicates that the refrigerator is included; however, the inclusion does not get carried over to the agreement of sale. At settlement, the attorney asks how the walkthrough went and the buyer says that the seller did not leave the refrigerator. The seller is in default as a result. T or F
GOOD FUNDS…? • Certified funds required? • Deposit checks over $25, 000. • PA/MD title company checks – good or no good?
Question 6 Under Delaware law, the seller and buyer must share the transfer tax equally. T or F
TRANSFER TAX/PRO-RATIONS • What’s the law say? – 50/50 split? – Taxes – Sewer – Oil – HOA – Rentals • PROPANE TANKS – Rent vs. Own
Question 7 The buyer purchases a residential property in Sussex County, DE which has a 16, 000 gallon oil tank. The seller fills the oil tank before settlement and presents the buyer with an oil reading showing that $50, 000. is due at closing for the fuel. Buyer is obligated to pay for the oil. T or F
TIME IS OF THE ESSENCE! • Really? When? • Are extensions possible? • Don’t forget the time!
Question 8 Buyer and seller have a valid agreement of sale. The settlement date is May 11, 2013. On October 5, 2013, there is fire damage to the property. Seller is willing to fix the damage, but the repairs will not be completed until October 31, 2013. Buyer cancel the contract. T or F
Question 9 Under the Agreement of Sale, a buyer gets an automatic extension of the settlement date for a reasonable time if: A. His mortgage company has the appraisal, but hasn’t issued the commitment yet. T or F
Question 9 (Cont. ) Under the Agreement of Sale, a buyer gets an automatic extension of the settlement date for a reasonable time if: B. His mortgage company has issued a commitment, but the settlement papers are not prepared on time. T or F
Question 9 (Cont. ) Under the Agreement of Sale, a buyer gets an automatic extension of the settlement date for a reasonable time if: C. His mortgage company is ready to settle, but there is an outstanding title issue that his attorney and seller are trying to fix. T or F
Question 9 (Cont. ) Under the Agreement of Sale, a buyer gets an automatic extension of the settlement date for a reasonable time if: D. His mortgage company is ready and there are no title issues, but the survey is not in yet. T or F
Question 9 (Cont. ) Under the Agreement of Sale, a buyer gets an automatic extension of the settlement date for a reasonable time if: E. He hired an attorney at the last minute and the deed is not ready yet. T or F
Automatic Extension of Settlement Date • Paragraph 7, 2 nd sentence – • It is expressly agreed if a longer time is necessary to secure a survey, or to prepare the necessary legal or financial settlement documents, the date of settlement shall be extended for a reasonable time to effect these conditions.
Question 10 A buyer and seller enter into an agreement of sale for a property in Delaware. In paragraph 21, the dates are as follows: • 1 st date for list of repairs – 10/1/12 • 2 nd date for seller’s response – 10/15/12 • 3 rd date for negotiations – 10/20/12 The radon test is completed and the buyer gives the report showing high radon to seller on 10/1/12. The seller does not respond until 10/14/12 when he agrees to fix the radon. The buyer is upset that it took seller so long to respond and cancels the contract. Buyer is in default. T or F
Question 11 The buyer submits a list of defects to the seller under paragraph 21 and the seller agrees to fix them all. The listing agent submits copies of the receipts and invoices 3 days before settlement. The buyer wants to have his home inspector look at the repairs to make sure they were done properly. The seller refuses. The buyer cancels the agreement of sale and sends over a release. The buyer is in default. T or F
Question 12 Same facts as 11, but now the repairs are termite structural repairs. Is the answer any different?
INSPECTIONS – Dates/times mean everything – What is a major defect? – Does Seller have to fix? – Can a home inspector do the termite inspection? Radon? – Be sure to include the relevant portion of the inspection report! – Be careful – subsequent inspections must make the deadline!
SPECIAL SITUATIONS… A. SEPTIC SYSTEMS – Escrow, maybe. But how much? – Is hooking up to the County ever a possibility? – Make sure you have a Class H System inspector B. STUCCO – where are we in 2014
Question 13 A seller discloses that an underground oil tank exists on a property. The buyer’s home inspector indicates that the ground should be tested for contamination, although the inspector could not tell if there was a problem. Is the seller obligated to allow this testing? What paragraph, if any, in the agreement of sale supports an argument by the seller that he does not have to allow the buyer to test for contamination?
DISCLOSE, DISCLOSE! • Is there anything you should not disclose? • Buyer’s cause of action – How to avoid it
Question 14 A buyer sues a seller after settlement claiming that the seller failed to disclose a defect. The cost of the repair is around $4000. The buyer prevails in court and seeks reimbursement for legal fees. The buyer is entitled to reimbursement for legal fees. T or F
Question 15 Bob “Big Money” Buyer signs a contract to purchase a home from Jack “Mr. Cash” Markell for $5, 500, 000. in Bethany Beach, DE. His deposit is $99. Bob then finds another property he likes better and walks from the deal. Jack states that he will sue Bob for all Jack’s damages and Bob says that Jack is only entitled to keep the deposit. Who is correct?
DAMAGES…? • How much of a deposit? • Specific Performance • Obligations to mitigate • When do you release that deposit? • Deposits (are they even required? )
Question 16 Neither Bob nor Jack will sign a release of the deposit. Bob consults a lawyer and finds out that the legal fees will be $5, 000. and decides not to do anything. Jack also consults with an attorney and gets a quote of $100, 000. to take the case. A year goes by and nobody does anything. Bob then writes to the broker and requests the deposit check. The broker can release the check to Bob. T or F
Question 17 The seller agrees to pay $5, 000. towards the buyer’s closing costs. The buyer’s lender only allows the seller to contribute $4000. The buyer is entitled to the extra $1, 000. from the seller. T or F
Question 18 A buyer purchases a property in Kent County, DE where there are mandatory dues covered by the Delaware Uniform Common Ownership Interest Act. The association documents and resale certificate are given to him 3 weeks before settlement and he reviews them. They only allow “fu-fu” dogs and buyer has a 200 pound St. Bernard. He notifies the seller 11 days after getting the documents that he wants to cancel. Buyer is in default. T or F
DO YOU HAVE…. ANY QUESTIONS? CONCERNS? THOUGHTS?
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