Category — Documents

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When buying and selling real property in Utah, the standard form to use is called Real Estate Purchase Contract,  a.k.a.  the REPC (pronounced rep-see).

This is the form that licensed real estate agents must use. Buyers and sellers may use any form they choose, however if there is a real estate agent involved, then this is the form.  This form is approved by the Utah Real Estate Commission and the Office of the Utah Attorney General, effective August 5, 2003. It replaces and supersedes all previously approved versions of this form. There will be a new one in the next year or so. When that happens I will talk about the changes and post a copy of the new one.

It is actually a very good document and covers most circumstances that could arise. It is a very win-win and allows a buyer and seller to enter into an agreement to sell-buy real property and allows the buyer to do their diligence with deadlines. It covers things like inspection, appraisal, loan and remedies for defaults.

Your three main issues are covered:

The inspection clause. You have the right to inspect the property, cancel the contract and get your earnest money back. No questions asked.

The appraisal clause. If the property appraises for less than the agreed purchase price you may cancel the contract and get your earnest money back.

Loan denial. Even though you have been pre-qualified or pre-approved, there is still the outside chance the loan can be denied. If you are denied you can cancel the contract and get your earnest money back.

All of these conditions have deadlines. As long as you complete the condition and make your claim in writing prior to the deadline, you are good to go. Go here to read about deadlines.

Look at a copy of the Real Estate Purchase Contract.

Everything must be in writing no matter how much you know or like someone or how nice they seem to be.

Remember Money Changes Everything

One of the documents used in selling and buying a home is the Seller’s Property Condition Disclosure.

The seller is obligated under law to disclose to buyers defects in the property known to seller that materially and adversely affect the value of the property that cannot be discovered by a reasonable inspection by an ordinary prudent buyer. This disclosure form is designed to assist seller in complying with these disclosure requirements. Sellers, please thoroughly disclose your actual knowledge regarding the condition of the property.

This document is a comprehensive questionnaire that walks through the physical aspects of a home. The seller will complete this document and present to a buyer as part of their disclosures. A non-occupant owner may not be able to disclose such information. For example, a bank that foreclosed has no way of really knowing the condition and issues that can come with a home. Such sellers will have a NON-Disclosure agreement.

• 1. Occupancy. Does the seller currently occupy the property? A non-occupant owner may have less knowledge of the condition.
• 2. Roof. Does it leak? Has it ever leaked? Any other problems?
• 3. Utilities.
• 4. Water. This about water and irrigation rights.
• 5. Sewer/Septic.
• 6. Heating/Cooling.
• 7. Equipment. Air purifier, audio systems, central vacuum, etc.
• 8. Appliances.
• 9. Fireplaces/Stoves.
• 10. Interior Features. Ceiling fans, elevators, dumb waiters, skylights, etc.
• 11. Exterior Features. Lawn sprinklers, heated driveway, gas BBQ, etc.
• 12. Termites/Dry Rot/Pests.
• 13. Additions/Remodels.
• 14. Structural Items & Soils.
• 15. Boundaries and Easements.
• 16. Use of Property. Is the current use a legal use (renting two units but it’s zoned for a single family)?
• 17. Electrical.
• 18. Mold (not shower mold).
• 19. Other Moisture Conditions. Crawl spaces, poor lot drainage, etc.
• 20. Hazardous Conditions. Asbestos, lead, methamphetamine, etc. Any attempts to mitigate such?
• 21. Homeowners Association. If yes, what are the fees?
• 22. Unpaid Assessments. HOAs can assess a fee for upcoming or completed maintenance items.
• 23. Insurance. Have there been damages which prompted an insurance claim?

Here is a pdf of the Uniform Residential Loan Application, a.k.a. the 1003 (the ten O three).

Below are instructions from eFannieMae. The basic idea of a 1003 is to determine how much money you can pay back.

You will list all your income, all your debts, etc. We all know that the loan process is boring, but if you want the American Dream you have two choices: cash or loan.

 Instructions

The lender may accept applications taken during a face-to-face interview, over the telephone, through the mail, or via the Internet. The lender should complete all blanks and attach any separate exhibits, details, or statements that are relevant to underwriting the mortgage. The borrower(s) must sign the original application at the time it is completed. If the application is taken over the telephone or via the Internet, the borrower(s) must sign the completed application as soon as possible thereafter. However, an electronic signature or facsimile of the borrower’s signature is acceptable as indicated in the “Acknowledgment and Agreement” section of the application. The lender should retain the original application with the supporting information provided by the borrower(s). Before or at the loan closing, the borrower(s) must sign the final application that the lender prepares based on its verification of the information that the borrower(s) provided in the original application.

The instructions at the top of Form 1003 are consistent with the permissible inquiries that creditors are allowed to make under the Equal Credit Opportunity Act (ECOA). Although ECOA permits the lender in a community property state to obtain information regarding the liabilities of a borrower’s spouse even though he or she is not applying for the mortgage and his or her income will not be considered for loan qualification purposes, we do not require the lender to obtain the information. This also means that in states where another person shares community property rights with the applicant, the lender does not need to include information on that person’s liabilities if he or she is not an applicant.

Note: The following instructions highlight certain sections of the form.

Introductory Statement

We recognize that the introductory paragraph of Form 1003 differs slightly from the introductory paragraph in the Uniform Residential Loan Application found on Freddie Mac’s website, Freddie Mac Form 65. However, because we have determined that these differences are not material, Fannie Mae will deem either version to comply with our requirements for use of the Uniform Residential Loan Application.

V. Monthly Income and Combined Housing Expense Information

Gross Monthly Income: If the net cash flow for an investment property (or the monthly operating income for a two- to four-family property for which the applicant occupies one of the units as a principal residence) is a positive number on the Operating Income Statement (Form 216), it should be listed as “net rental income.” If it is a negative number, it must be included in the applicant’s monthly obligations.

Combined Monthly Housing Expense: The present monthly housing expenses for the borrower and the co-borrower should be listed on a combined basis. The proposed monthly housing expense for a two- to four-family property in which the applicant will occupy a unit as a principal residence should reflect the monthly payment (PITI) for the subject property. For all one-unit investment properties and all two- to four-family properties in which the applicant will not occupy one of the units, the present monthly housing expense should reflect the applicant’s principal residence.

VI. Assets and Liabilities

When the borrower’s and co-borrower’s assets and liabilities are not sufficiently joined to make a combined statement meaningful, a separate Statement of Assets and Liabilities (Form 1003A) should be completed for the co-borrower.

VII. Details of Transaction

The purchase price shown on Line “a” under the “Details of Transaction” should not include any discounts or rebates or other allowances paid or allowed to the purchaser. For refinancing, the amount being refinanced should be shown on Line “d” — Refinance. The figure should include the total amount of all existing liens plus the costs of improvements that have been — or will be — made. Lines “a”, “b”, and “c” should not be used to describe a refinance transaction.

VIII. Declarations

Noncitizen Applicants: If an applicant indicates in his response to Question J that he is not a U.S. citizen, and also indicates in his response to Question K that he is not a permanent resident alien, the lender may wish to ask whether he is a nonpermanent resident alien or otherwise is lawfully present in the United States. Fannie Mae will purchase loans where the borrower is not a U.S. citizen provided that the borrower is lawfully present in the United States. We do not designate specific documentation that is required to establish lawful presence. Lenders should consult their counsel or other sources for information on standard documents that can be used to establish lawful presence. An Individual Tax Identification Number (ITIN) alone does not establish either that the holder is lawfully present or that he is not lawfully present. Fannie Mae does not require that the borrower have a Social Security Number.

Determining First-Time Homebuyers: The loan can be considered a loan to a first-time homebuyer if any of the applicants is an individual who (1) is purchasing the security property, (2) will reside in the security property, and (3) had no ownership interest (sole or joint) in a residential property during the three-year period preceding the date of the purchase of the security property, unless he or she is a displaced homemaker or single parent whose only ownership interest in a principal residence during the preceding three-year time period was a joint ownership with a spouse. (A displaced homemaker or single parent who during the three-year period owned a principal residence alone or with anyone other than a spouse, or who owned a second home or investment property, cannot be considered a first-time homebuyer.)

A displaced homemaker is an adult who:

• has not worked full time in the labor force for several years
• has worked in the home to care for the home and family during that time, and
• is currently unemployed or underemployed and is having difficulty finding or upgrading employment.

A single parent is a person who is unmarried or legally separated from his or her spouse and is pregnant or has custody (including joint custody) of one or more minor children.

The responses to questions in the Declarations section described below will enable lenders to determine whether an applicant qualifies as a first-time homebuyer. Note that if there is more than one applicant, only one of the applicants has to qualify for first-time homebuyer status in order for the mortgage to be considered a mortgage to a first-time homebuyer.

Instructions for translating these responses into a single “first-time homebuyer indicator” that can be reported to us when the mortgage is submitted for purchase or securitization follow.

The following may be added to Section IX: Acknowledgment and Agreement at the end of the paragraph.

Right to Receive Copy of Appraisal.
I/We have the right to a copy of the appraisal report used in connection with this application for credit. To obtain a copy, I/we must send Lender a written request at the mailing address Lender has provided. Lender must hear from me/us no later than 90 days after Lender notifies me/us about the action taken on this application, or I/we withdraw this application.

X. Information for Government Monitoring Purposes

This section is included to aid the federal government in monitoring compliance with equal credit opportunity, fair housing and home mortgage disclosure laws. Supplying this information is strictly voluntary on the part of the applicant, but lenders should ask all applicants to provide it, including those who apply by telephone and through the Internet, and should describe the reason for collecting this data. Race and ethnicity are separate categories, and although the lender should ask applicants to furnish information for both, applicants may furnish one but not the other. Note that there is no longer a place for applicants to indicate race as “Other” but applicants may check as many races as apply.

The Home Mortgage Disclosure Act and its implementing Regulation C generally require Lenders to collect sex, race and ethnicity data on all applications.

When an application is taken in person and an applicant elects not to provide some or all of this information, federal law requires the lender to note the applicant’s sex, ethnicity, and race on the form, based on the lender’s visual observation or the applicant’s surname. To aid in identifying applicants who may be of Hispanic ethnicity and who elect not to self-identify, the lender may wish to consult the list of Spanish surnames developed by the U.S. Bureau of the Census. Furthermore, the lender may wish to advise the applicant that he may complete or change the information in this section after the application is approved, at any time up until closing.

To Be Completed By Interviewer

The interviewer must complete this portion of the form to indicate the method used to take the application and to provide the name and telephone number of the interviewer, as well as his or her employer’s name and address.

Continuation Sheet/Residential Loan Application

Lenders may amend this section by including space to evidence intent to apply for joint credit. Other approaches, such as including this information on a separate document, are also acceptable to Fannie Mae, provided they meet the requirements of applicable law. Lenders should consult counsel to determine their alternatives.

Special Notice for Balloon Mortgages

For each balloon mortgage, the lender must insert a special notice regarding the nature of the balloon features on Form 1003 or in a separate attachment to the form. If an attachment is used, the borrower(s) must sign the attachment. The following language must be inserted, using capital letters:

“THIS LOAN MUST EITHER BE PAID IN FULL AT MATURITY OR REFINANCED TO A MARKET LEVEL FIXED-RATE MORTGAGE. YOU MUST REPAY THE ENTIRE PRINCIPAL BALANCE OF THE LOAN AND UNPAID INTEREST THEN DUE IF YOU DO NOT QUALIFY FOR THE CONDITIONAL RIGHT TO REFINANCE AS SPECIFIED IN THE NOTE ADDENDUM AND MORTGAGE RIDER. THE LENDER IS UNDER NO OBLIGATION TO REFINANCE THE LOAN IF QUALIFICATION CONDITIONS ARE NOT MET. YOU WILL, THEREFORE, BE REQUIRED TO MAKE PAYMENT OUT OF OTHER ASSETS THAT YOU MAY OWN, OR YOU WILL HAVE TO FIND A LENDER, WHICH MAY BE THE LENDER YOU HAVE THIS LOAN WITH, WILLING TO LEND YOU THE MONEY. IF YOU REFINANCE THIS LOAN AT MATURITY, YOU MAY HAVE TO PAY SOME OR ALL OF THE CLOSING COSTS NORMALLY ASSOCIATED WITH A NEW LOAN EVEN IF YOU OBTAIN REFINANCING FROM THE SAME LENDER.”