Ronny Carmon | Buyer's Resource Guide by Coldwell Banker Bain

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Buyer’s Resource Guide Table of Contents

Coldwell Banker Bain Buyer’s Client Advisory............................................ 4 The Law of Real Estate Agency & Agency Disclosure................................. 6 Coldwell Banker Bain Guarantee................................................................ 13 Your Property Wish List.............................................................................. 16 Tips to Buyers............................................................................................. 18 What is an Escrow?.................................................................................... 20 The Purpose of an Escrow....................................................................... 21 A Typical Escrow Transaction.................................................................... 21 What A Typical Escrow Holder Does......................................................... 22 The Escrow Holder Does Not................................................................... 22 Escrow Instructions.................................................................................. 23 Your Appointment.................................................................................... 23 Helpful Reminders.................................................................................... 23

Common Questions & Sources for Assistance ......................................... 24 After the Sign-Off..................................................................................... 24

Title Company............................................................................................. 24 What a Title Company Does..................................................................... 24 Title Insurance – What’s the Coverage?.................................................... 25 Understanding Preliminary Reports........................................................... 27 Explanation of Preliminary Reports............................................................ 29

Ronny Carmon | 425.979.1416 | RonnyCarmon@CBBain.com Rules, Regulations and Fees are subject to change. Please verify with appropriate services

Buyer’s Resource Guide Table of Contents

Closing Costs............................................................................................. 31 Inspections................................................................................................. 32 Full Disclosure (Form 17)............................................................................ 33 Who Pays What.......................................................................................... 34 Seller – What the Seller is generally expected to pay................................. 34 Buyer – What the Buyer is generally expected to pay................................ 35

Top 5 Questions Asked by Buyers ........................................................... 35 Moving Expenses....................................................................................... 36 Moving Checklist........................................................................................ 37

Ronny Carmon | 425.979.1416 | RonnyCarmon@CBBain.com Rules, Regulations and Fees are subject to change. Please verify with appropriate services

Real Estate Dictionary................................................................................ 38

CBB FORM NO. CA-BUYER/SM COLDWELL BANKER BAIN CLIENT ADVISORY – BUYER IN SELLER’S MARKET REV. 04/17/2019 Page 1 of 2

CLIENT ADVISORY BUYER ADVISORY IN A SELLER’S MARKET: Some Risks Associated With Certain Offer Terms Many prospective buyers are hearing about the “seller’s market” and tactics for competing in multiple offer scenarios. While some tactics may persuade a seller to accept a buyer’s offer, it is important to understand there are advantages you as buyer may be forfeiting or risks you may be taking on with each tactic. As your trusted real estate advisor, your Coldwell Banker Bain broker wants you to be an informed buyer in the marketplace and aware that there are potential risks of not including contract terms that benefit you as a buyer. CONDITIONS AND CONTINGENCIES What is a Condition/Contingency? A condition/contingency allows you to get out of a contract and obtain a refund of your earnest money deposit under certain conditions. If you have NO Condition/Contingency or WAIVE your Condition/Contingency, some risks include: 

You can still terminate the contract prior to closing, but you may forfeit your earnest money or seller may have other remedies against you. Confirm purchase agreement term marked for seller’s remedy upon a buyer’s default – is it earnest money only or seller’s election of remedies?



You may proceed with purchasing the property but without discovering before closing any material defects in the home or other systems on the property that you could have with an inspection.



You may proceed with purchasing the property but without discovering before closing that the property can’t be used as intended because of title, land use or other restrictions.

EXAMPLES OF CONDITIONS/CONTINGENCIES AND SOME CONSIDERATIONS FOR BUYERS

A Financing Condition conditions the sale on buyer obtaining a loan and if the buyer is unable to obtain a loan, the contract terminates and if buyer has complied with the contingency terms, buyer is entitled to a return of the earnest money. Without this condition, if the buyer cannot close because a loan is not approved, the buyer forfeits the earnest money.

An Appraisal Condition allows a buyer to terminate the contract if lender’s appraisal is less than the purchase price and seller does not either reduce the purchase price or provide an appraisal at purchase price that lender accepts. Without this condition, a buyer may be unable to close and seller keeps the earnest money, or loan type, amount, interest rate, or buyer contribution may change in order to cover the purchase price.

An Inspection Condition allows a buyer to have the property inspected and to terminate the contract or ask for seller concessions (repairs or credits) if dissatisfied with the condition of the property based on the inspection. Without this condition, a buyer may fail to identify material defects in the home before closing.

Septic and/or Well Inspection Conditions allow buyer to review seller’s septic inspection reports and to have the well inspected. Without these conditions, a buyer may fail to identify problems with the functioning, capacity or environmental quality of the systems.

A Title Condition allows a buyer to review title for easements, covenants or restrictions that affect buyer’s intended use of the property. If seller does not cure buyer’s disapproved title issues, then buyer can terminate the contract with earnest money returned to buyer. Without this condition, a buyer may fail to identify title restrictions that prevent buyer from using the property as buyer had intended.

A Sale of Property Contingency or Pending Sale of Property Condition allows a buyer to disclose a contingent source of funds and to condition its offer on the sale of buyer’s other property or on the closing of a sale of buyer’s other property. Without these conditions/contingency, if buyer’s property does not sell or close, buyer will either need to find the funds to close or will need to terminate the contract and forfeit the earnest money.

CBB FORM NO. CA-BUYER/SM COLDWELL BANKER BAIN CLIENT ADVISORY – BUYER IN SELLER’S MARKET REV. 04/17/2019 Page 2 of 2

EXAMPLES OF CONDITIONS/CONTINGENCIES AND SOME CONSIDERATIONS FOR BUYERS All Cash Offer or No Contingent Funds. Some buyers offer to pay all cash or need financing but do not disclose that to the seller. Consider: 

Buyer needs to have the funds and be able to deliver the full amount to escrow at closing.



Seller may require buyer to provide evidence of funds as a condition to accepting the offer.



If a buyer offers to pay all cash but will rely on contingent funds (e.g., loan, a gift, withdrawal of amounts from a 401(k)), a buyer must disclose these in the offer and deliver on time.



Offer Price greater than List Price, or Escalation Addendum. Some buyers offer a purchase price greater than the list price, or submit an offer with an escalation addendum. Consider: 

The offer price may exceed appraised price, and buyer will need sufficient funds to pay a larger down payment.



Lender may not fund the amount above the list price or appraised price.



With an escalation addendum, buyer’s highest amount will tip seller as to the greatest amount buyer is willing to pay.

If a buyer cannot close, then buyer may forfeit earnest money or seller may pursue other remedies against the buyer.

High Earnest Money Amount. Some buyers include a high earnest money amount to show that they are serious about purchasing the property. Consider: 

If there are no conditions/contingencies and buyer terminates the contract or cannot close, buyer may forfeit the earnest money.



Even if the buyer terminates the contract under a condition/contingency, the seller may attempt to keep the earnest money by disputing buyer’s right to terminate.

Pre-Inspection. Some buyers arrange a pre-inspection before submitting an offer without an inspection condition. This provides the buyer with information about material defects without including the inspection condition in the purchase agreement. Consider: 

Sellers may not allow pre-inspections.



Seller may allow a pre-inspection but still not accept the offer.



An inspector may recommend additional inspections by specialists, but buyer will not have the right to those additional inspections if waiving the inspection condition.

Non-Refundable “Earnest Money”. Some buyers make earnest money non-refundable. In doing so, the deposit is no longer earnest money and is not refundable to the buyer. Consider: 

Even if seller defaults and deal does not close, seller may be able to retain the funds.



Even if the transaction does not close through no fault of buyer, seller may be able to retain the funds.

Lease Back to Seller. Some buyers offer to lease the property back to seller after closing. This allows the seller time to purchase another property without finding interim housing. Consider: 

This may involve loan and insurance issues.



There may be disputes about repairs and whether they arose before or after closing.



Seller may refuse to vacate or may delay.



If seller won’t pay, this is a cost to buyer.



If a buyer delays closing in lieu of a lease back, buyer needs to discuss the delay with lender and availability and cost of an extended interest rate lock.

While removal of conditions/contingency or including seller-favorable terms may be attractive to a seller and aid in the buyer’s offer being accepted in a multiple offer situation, buyers are advised to consider that there are risks they take by not including conditions/contingencies or by including seller-favorable terms in the offer. For a more complete understanding of how contract terms operate and to draft any changes to the terms in the statewide residential purchase forms, you are advised to seek the counsel of a real estate attorney. To confirm you are aware that there may be monetary, due diligence and other risks to you as a buyer in excluding conditions/contingencies or including seller-favorable terms in a purchase offer, please initial below: _____ _____ Buyer acknowledges there are risks Initial Initial in excluding conditions/contingencies

_____ _____ Buyer acknowledges there are risks in Initial Initial including seller-favorable terms

THE LAW OF REAL ESTATE AGENCY This pamphlet describes your legal rights in dealing with a real estate firm or broker. Please read it carefully before signing any documents.

The following is only a brief summary of the attached law. SEC. 1. Definitions. Defines the specific terms used in the law. SEC. 2. Relationships between Brokers and the Public. Prescribes that a broker who works with a buyer or tenant represents that buyer or tenant — unless the broker is the listing agent, a seller’s subagent, a dual agent, the seller personally or the parties agree otherwise. Also prescribes that in a transaction involving two different brokers licensed to the same real estate firm, the firm’s designated broker and any managing broker responsible for the supervision of both brokers, are dual agents and each broker solely represents his or her client — unless the parties agree in writing that both brokers are dual agents. SEC. 3. Duties of a Broker Generally. Prescribes the duties that are owed by all brokers, regardless of who the broker represents. Requires disclosure of the broker’s agency relationship in a specific transaction. SEC. 4. Duties of a Seller’s Agent. Prescribes the additional duties of a broker representing the seller or landlord only. SEC. 5. Duties of a Buyer’s Agent. Prescribes the additional duties of a broker representing the buyer or tenant only. SEC. 6. Duties of a Dual Agent. Prescribes the additional duties of a broker representing both parties in the same transaction, and requires the written consent of both parties to the broker acting as a dual agent. SEC. 7. Duration of Agency Relationship. Describes when an agency relationship begins and ends. Provides that the duties of accounting and confidentiality continue after the termination of an agency relationship. SEC. 8. Compensation. Allows real estate firms to share compensation with cooperating real estate firms. States that payment of compensation does not necessarily establish an agency relationship. Allows brokers to receive compensation from more than one party in a transaction with the parties’ consent. SEC. 9. Vicarious Liability. Eliminates the liability of a party for the conduct of the party’s agent or subagent, unless the principal participated in or benefited from the conduct or the agent or subagent is insolvent. Also limits the liability of a broker for the conduct of a subagent. SEC. 10. Imputed Knowledge and Notice. Eliminates the common law rule that notice to or knowledge of an agent constitutes notice to or knowledge of the principal. SEC. 11. Interpretation. This law establishes statutory duties which replace common law fiduciary duties owed by an agent to a principal. SEC. 12. Short Sale. Prescribes an additional duty of a firm representing the seller of owner-occupied real property in a short sale. 6

SECTION 1: DEFINITIONS. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) “Agency relationship” means the agency relationship created under this chapter or by written agreement between a real estate firm and a buyer and/or seller relating to the performance of real estate brokerage services. (2) “Agent” means a broker who has entered into an agency relationship with a buyer or seller. (3) “Broker” means broker, managing broker, and designated broker, collectively, as defined in chapter 18.85 RCW, unless the context requires the terms to be considered separately. (4) “Business opportunity” means and includes a business, business opportunity, and goodwill of an existing business, or any one or combination thereof when the transaction or business includes an interest in real property. (5) “Buyer” means an actual or prospective purchaser in a real estate transaction, or an actual or prospective tenant in a real estate rental or lease transaction, as applicable. (6) “Buyer’s agent” means a broker who has entered into an agency relationship with only the buyer in a real estate transaction, and includes sub-agents engaged by a buyer’s agent. (7) “Confidential information” means information from or concerning a principal of a broker that: (a) Was acquired by the broker during the course of an agency relationship with the principal; (b) The principal reasonably expects to be kept confidential; (c) The principal has not disclosed or authorized to be disclosed to third parties; (d) Would, if disclosed, operate to the detriment of the principal; and

(e) The principal personally would not be obligated to disclose to the other party. (8) “Dual agent” means a broker who has entered into an agency relationship with both the buyer and seller in the same transaction. (9) “Material fact” means information that substantially adversely affects the value of the property or a party’s ability to perform its obligations in a real estate transaction, or operates to materially impair or defeat the purpose of the transaction. The fact or suspicion that the property, or any neighboring property, is or was the site of a murder, suicide or other death, rape or other sex crime, assault or other violent crime, robbery or burglary, illegal drug activity, gang-related activity, political or religious activity, or other act, occurrence, or use not adversely affecting the physical condition of or title to the property is not a material fact. (10) “Owner-occupied real property” means real property consisting solely of a single-family residence, a residential condominium unit, or a residential cooperative unit that is the principal residence of the borrower. (11) “Principal” means a buyer or a seller who has entered into an agency relationship with a broker. (12) “Real estate brokerage services” means the rendering of services for which a real estate license is required under chapter 18.85 RCW. (13) “Real estate firm” or “firm” have the same meaning as defined in chapter 18.85 RCW. (14) “Real estate transaction” or “transaction” means an actual or prospective transaction involving a purchase, sale, option, or exchange of any interest in real property or a business opportunity, or a lease or rental of real property. For purposes of this chapter, a prospective transaction does not exist until a written offer has been signed by at least one of the parties. (15) “Seller” means an actual or prospective seller in a real estate transaction, or an actual or prospective landlord in a real estate rental or lease transaction, as applicable. (16) “Seller’s agent” means a broker who has entered

into an agency relationship with only the seller in a real estate transaction, and includes subagents engaged by a seller’s agent.

shall solely represent the party with whom the broker has an agency relationship, unless all parties agree in writing that the broker is a dual agent.

(17) “Subagent” means a broker who is engaged to act on behalf of a principal by the principal’s agent where the principal has authorized the broker in writing to appoint subagents.

(3) A broker may work with a party in separate transactions pursuant to different relationships, including, but not limited to, representing a party in one transaction and at the same time not representing that party in a different transaction involving that party, if the broker complies with this chapter in establishing the relationships for each transaction.

SECTION 2: RELATIONSHIPS BETWEEN BROKERS AND THE PUBLIC. (1) A broker who performs real estate brokerage services for a buyer is a buyer’s agent unless the: (a) Broker’s firm has appointed the broker to represent the seller pursuant to a written agency agreement between the firm and the seller, in which case the broker is a seller’s agent; (b) Broker has entered into a subagency agreement with the seller’s agent’s firm, in which case the broker is a seller’s agent; (c) Broker’s firm has appointed the broker to represent the seller pursuant to a written agency agreement between the firm and the seller, and the broker’s firm has appointed the broker to represent the buyer pursuant to a written agency agreement between the firm and the buyer, in which case the broker is a dual agent; (d) Broker is the seller or one of the sellers; or (e) Parties agree otherwise in writing after the broker has complied with RCW 18.86.030(1)(f). (2) In a transaction in which different brokers affiliated with the same firm represent different parties, the firm’s designated broker and any managing broker responsible for the supervision of both brokers, is a dual agent, and must obtain the written consent of both parties as required under RCW 18.86.060. In such case, each of the brokers

SECTION 3: DUTIES OF A BROKER GENERALLY. (1) Regardless of whether a broker is an agent, the broker owes to all parties to whom the broker renders real estate brokerage services the following duties, which may not be waived: (a) To exercise reasonable skill and care; (b) To deal honestly and in good faith; (c) To present all written offers, written notices and other written communications to and from either party in a timely manner, regardless of whether the property is subject to an existing contract for sale or the buyer is already a party to an existing contract to purchase; (d) To disclose all existing material facts known by the broker and not apparent or readily ascertainable to a party; provided that this subsection shall not be construed to imply any duty to investigate matters that the broker has not agreed to investigate; (e) To account in a timely manner for all money and property received from or on behalf of either party; (f) To provide a pamphlet on the law of real estate agency in the form prescribed in

RCW 18.86.120 to all parties to whom the broker renders real estate brokerage services, before the party signs an agency agreement with the broker, signs an offer in a real estate transaction handled by the broker, consents to dual agency, or waives any rights, under RCW 18.86.020(1)(e), 18.86.040(1)(e), 18.86.050(1)(e), or 18.86.060(2)(e) or (f), whichever occurs earliest; and

(c) To advise the seller to seek expert advice on matters relating to the transaction that are beyond the agent’s expertise;

(g) To disclose in writing to all parties to whom the broker renders real estate brokerage services, before the party signs an offer in a real estate transaction handled by the broker, whether the broker represents the buyer, the seller, both parties, or neither party. The disclosure shall be set forth in a separate paragraph entitled “Agency Disclosure” in the agreement between the buyer and seller or in a separate writing entitled “Agency Disclosure.”

(e) Unless otherwise agreed to in writing after the seller’s agent has complied with RCW 18.86.030(1)(f), to make a good faith and continuous effort to find a buyer for the property; except that a seller’s agent is not obligated to seek additional offers to purchase the property while the property is subject to an existing contract for sale.

(2) Unless otherwise agreed, a broker owes no duty to conduct an independent inspection of the property or to conduct an independent investigation of either party’s financial condition, and owes no duty to independently verify the accuracy or completeness of any statement made by either party or by any source reasonably believed by the broker to be reliable.

(d) Not to disclose any confidential information from or about the seller, except under subpoena or court order, even after termination of the agency relationship; and

(2) (a) The showing of properties not owned by the seller to prospective buyers or the listing of competing properties for sale by a seller’s agent does not in and of itself breach the duty of loyalty to the seller or create a conflict of interest. (b) The representation of more than one seller by different brokers affiliated with the same firm in competing transactions involving the same buyer does not in and of itself breach the duty of loyalty to the sellers or create a conflict of interest.

SECTION 4: DUTIES OF A SELLER’S AGENT. (1) Unless additional duties are agreed to in writing signed by a seller’s agent, the duties of a seller’s agent are limited to those set forth in RCW 18.86.030 and the following, which may not be waived except as expressly set forth in (e) of this subsection: (a) To be loyal to the seller by taking no action that is adverse or detrimental to the seller’s interest in a transaction; (b) To timely disclose to the seller any conflicts of interest;

SECTION 5: DUTIES OF A BUYER’S AGENT. (1) Unless additional duties are agreed to in writing signed by a buyer’s agent, the duties of a buyer’s agent are limited to those set forth in RCW 18.86.030 and the following, which may not be waived except as expressly set forth in (e) of this subsection: (a) To be loyal to the buyer by taking no action that is adverse or detrimental to the buyer’s interest in a transaction;

(b) To timely disclose to the buyer any conflicts of interest;

RCW 18.86.030(1)(f), which consent must include a statement of the terms of compensation.

(c) To advise the buyer to seek expert advice on matters relating to the transaction that are beyond the agent’s expertise;

(2) Unless additional duties are agreed to in writing signed by a dual agent, the duties of a dual agent are limited to those set forth in RCW 18.86.030 and the following, which may not be waived except as expressly set forth in (e) and (f) of this subsection:

(d) Not to disclose any confidential information from or about the buyer, except under subpoena or court order, even after termination of the agency relationship; and (e) Unless otherwise agreed to in writing after the buyer’s agent has complied with RCW 18.86.030(1)(f), to make a good faith and continuous effort to find a property for the buyer; except that a buyer’s agent is not obligated to: (i) seek additional properties to purchase while the buyer is a party to an existing contract to purchase; or (ii) show properties as to which there is no written agreement to pay compensation to the buyer’s agent. (2) ( a ) The showing of property in which a buyer is interested to other prospective buyers by a buyer’s agent does not in and of itself breach the duty of loyalty to the buyer or create a conflict of interest. (b) The representation of more than one buyer by different brokers affiliated with the same firm in competing transactions involving the same property does not in and of itself breach the duty of loyalty to the buyer or create a conflict of interest.

SECTION 6: DUTIES OF A DUAL AGENT. (1) Notwithstanding any other provision of this chapter, a broker may act as a dual agent only with the written consent of both parties to the transaction after the dual agent has complied with

( a) To t ake n o act i o n t h at i s ad ver se o r d et r i m en t al to either party’s interest in a transaction; (b) To timely disclose to both parties any conflicts of interest; (c) To advise both parties to seek expert advice on matters relating to the transaction that are beyond the dual agent’s expertise; (d) Not to disclose any confidential information from or about either party, except under subpoena or court order, even after termination of the agency relationship; (e) Unless otherwise agreed to in writing after the dual agent has complied with RCW 18.86.030(1)(f), to make a good faith and continuous effort to find a buyer for the property; except that a dual agent is not obligated to seek additional offers to purchase the property while the property is subject to an existing contract for sale; and (f) Unless otherwise agreed to in writing after the dual agent has complied with RCW 18.86.030(1)(f), to make a good faith and continuous effort to find a property for the buyer; except that a dual agent is not obligated to: (i) seek additional properties to purchase while the buyer is a party to an existing contract to purchase; or (ii) show properties as to which there is no written agreement to pay compensation to the dual agent. (3) (a) The showing of proper ties not owned by the seller to prospective buyers or the listing of competing properties for sale by a dual agent does not in and of itself constitute action that is

adverse or detrimental to the seller or create a conflict of interest. (b) The representation of more than one seller by different brokers licensed to the same firm in competing transactions involving the same buyer does not in and of itself constitute action that is adverse or detrimental to the sellers or create a conflict of interest.

a termination does not affect the contractual rights of either party. (2) Except as otherwise agreed to in writing, a broker owes no further duty after termination of the agency relationship, other than the duties of: (a) Accounting for all moneys and property received during the relationship; and (b) Not disclosing confidential information.

(4) (a) The showing of property in which a buyer is interested to other prospective buyers or the presentation of additional offers to purchase property while the property is subject to a transaction by a dual agent does not in and of itself constitute action that is adverse or detrimental to the buyer or create a conflict of interest. (b) The representation of more than one buyer by different brokers licensed to the same firm in competing transactions involving the same property does not in and of itself constitute action that is adverse or detrimental to the buyer or create a conflict of interest.

SECTION 7: DURATION OF AGENCY RELATIONSHIP. (1) The agency relationships set forth in this chapter commence at the time that the broker undertakes to provide real estate brokerage services to a principal and continue until the earliest of the following: (a) Completion of performance by the broker; (b) Expiration of the term agreed upon by the parties; (c) Termination of the relationship by mutual agreement of the parties; or (d) Termination of the relationship by notice from either party to the other. However, such

SECTION 8: COMPENSATION. (1) In any real estate transaction, a firm’s compensation may be paid by the seller, the buyer, a third party, or by sharing the compensation between firms. (2) An agreement to pay or payment of compensation does not establish an agency relationship between the party who paid the compensation and the broker. (3) A seller may agree that a seller’s agent’s firm may share with another firm the compensation paid by the seller. (4) A buyer may agree that a buyer’s agent’s firm may share with another firm the compensation paid by the buyer. (5) A firm may be compensated by more than one party for real estate brokerage services in a real estate transaction, if those parties consent in writing at or before the time of signing an offer in the transaction. (6) A firm may receive compensation based on the purchase price without breaching any duty to the buyer or seller. (7) Nothing contained in this chapter negates the requirement that an agreement authorizing or employing a broker to sell or purchase real estate for compensation or a commission be in writing and signed by the seller or buyer.

SECTION 9:

SECTION 11:

VICARIOUS LIABILITY.

INTERPRETATION.

(1) A principal is not liable for an act, error, or omission by an agent or subagent of the principal arising out of an agency relationship:

The duties under this chapter are statutory duties and not fiduciary duties. This chapter supersedes the fiduciary duties of an agent to a principal under the common law. The common law continues to apply to the parties in all other respects. This chapter does not affect the duties of a broker while engaging in the authorized or unauthorized practice of law as determined by the courts of this state. This chapter shall be construed broadly.

(a) Unless the principal participated in or authorized the act, error, or omission; or (b) Except to the extent that: (i) the principal benefited from the act, error, or omission; and (ii) the court determines that it is highly probable that the claimant would be unable to enforce a judgment against the agent or subagent. (2) A broker is not liable for an act, error, or omission of a subagent under this chapter, unless that broker participated in or authorized the act, error or omission. This subsection does not limit the liability of a firm for an act, error, or omission by a broker licensed to the firm.

SECTION 10: IMPUTED KNOWLEDGE AND NOTICE. (1) Unless otherwise agreed to in writing, a principal does not hav e knowledge or notice of any facts known by an agent or subagent of the principal that are not actually known by the principal. (2) Unless otherwise agreed to in writing, a broker does not have knowledge or notice of any facts known by a subagent that are not actually known by the broker. This subsection does not limit the knowledge imputed to the designated broker or any managing broker responsible for the supervision of the broker of any facts known by the broker.

SECTION 12: SHORT SALE. When the seller of owner-occupied residential real property enters into a listing agreement with a real estate firm where the proceeds from the sale may be insufficient to cover the costs at closing, it is the responsibility of the real estate firm to disclose to the seller in writing that the decision by any beneficiary or mortgagee, or its assignees, to release its interest in the real property, for less than the amount the borrower owes, does not automatically relieve the seller of the obligation to pay any debt or costs remaining at closing, including fees such as the real estate firmâ&#x20AC;&#x2122;s commission.

BUYER SERVICES GUARANTEE Buyer(s): ________________________________________________________________________ Buyer(s) Address: _________________________________________________________________

Coldwell Banker Bain is committed to providing the following services to help you purchase a property: 1

BUYER COUNSELING SESSION We will offer you the opportunity to discuss your needs and goals, and to plan the search for your property.

PROPERTY EVALUATION We will discuss the positive and negative features of a property that may affect its value and future resale.

OFFER PREPARATION We will prepare a written offer on the property you choose to purchase, with terms approved by you.

BUYER AGENCY INFORMATION We will discuss agency alternatives for you and the sellers. We will also provide you with an agency pamphlet.

NEGOTIATION STRATEGY If requested, we will prepare a Competitive Market Analysis for you. This may assist you in structuring your offer to purchase.

BUYER REPRESENTATION AGREEMENT We will explain to you the representation agreement and the special services and benefits it offers.

PROPERTY DISCLOSURE We will review with you all inspection reports and other documents pertaining to the condition of the property and disclose all material defects of the property that are known to us.

BUILDING INSPECTIONS We recommend that you obtain professional building inspections.

OFFER PRESENTATION We will present your offer to the seller or their designated representative.

BUILDING INSPECTION REMEDIES If applicable, we will work with you to request the seller to remedy the items you specify after your review of the building inspection reports as your Offer to Purchase specifies.

WALK-THROUGH We will accompany you, if requested, on a walk-through of the property (if one is provided for in the sales contract) before closing, and we will assist you in dealing with any problems discovered during the walk-through.

CLOSING THE SALE We will monitor and inform you of the progress of the purchase agreement, including the satisfaction of all contingencies and conditions during the entire transaction.

HOMEBUYER GUIDEBOOK If requested, we will provide you with a copy of the HomeBuyer Guide and explain how you can use it as a road map through the home-buying process.

FINANCING/PRE-APPROVAL We will offer to arrange a pre-approval appointment with our mortgage partner to assure the seller of your ability to close. Pre-approval will strengthen your position in a competitive situation.

CBBAIN.COM Upon request, we will guide you in using our website and its helpful tools to enhance your home search. We can also register you for our My Home Planner tool, which streamlines your search process. PROPERTY SHOWING We will show you properties that meet the criteria you have selected.

11 REVIEW OF WRITTEN SELLER

DISCLOSURE We will review with you the sellerâ&#x20AC;&#x2122;s written disclosure statement to enable you to determine whether the property meets your requirements.

12 HOME WARRANTY

We will explain to you the option of a Coldwell Banker home warranty plan to reduce your risk of repair after purchasing a property.

13 AFTER-SALE SERVICE

We will contact you after the closing to follow up on remaining details or service needs.

OF FUNDS 14 ESTIMATE REQUIRED Our mortgage partner will provide you with a preliminary estimate of closing costs and down payment requirement anticipated in the transaction.

Our Guarantee: Should Coldwell Banker Bain not perform the services as stated above, you are entitled to terminate the Buyer Agency representation agreement. Written termination notice must state reason(s) for termination and must be presented by you, in person, to the Office Manager. You agree to provide Coldwell Banker Bain with an opportunity to correct the situation within a 24 hour period following the delivery of the termination notice. However, if during the course of or within six (6) months after the expiration or the termination of this Agreement, you decide to purchase a property that was brought to your attention by the efforts or actions of the Broker, it is agreed that Coldwell Banker Bain will act on your behalf in drafting and presenting an Earnest Money agreement on the property selected and following the transaction through to closing.

Broker:__________________________________________________________________________ Principal Managing Broker: _________________________________________________________

CBB FORM NO. 41BG COLDWELL BANKER BAIN BUYER SERVICES GUARANTEE REV. 05/01/20

Form 41A Buyer’s Agency Agreement Rev. 10/19 Page 1 of 2

BUYER’S AGENCY AGREEMENT

This Buyer’s Agency Agreement is made this _________________________________________________ between

______________________________________________________________________________________ (“Firm”)

and _________________________________________________________________________________ (“Buyer”).

1. AGENCY. Firm appoints ______________________________________________________ ("Selling Broker") to represent Buyer. This Agreement creates an agency relationship with Selling Broker and any of Firm’s brokers who supervise Selling Broker’s performance as Buyer’s agent (“Supervising Broker”). No other brokers affiliated with Firm are agents of Buyer, except to the extent that Firm, in its discretion, appoints other brokers to act on Buyer's behalf as and when needed. Buyer acknowledges receipt of the pamphlet entitled "The Law of Real Estate Agency."

4 5 6 7 8 9

Buyer

2. AREA. Selling Broker’s services will be limited to real property located in the following geographical areas:

_________________________________________________________________________________________

______________________________________________________________ (unlimited if not filled in) (“Area”).

3. TERM OF AGREEMENT. This Agreement will expire __________ (120 days from signing if not filled in) or on 13 written notice of either party. Buyer shall be under no obligation to Firm except for those obligations existing at the 14 15 time of termination. 4. COMPENSATION AND SCOPE OF AGENCY. This Agreement creates an  exclusive;  non-exclusive (non- 16 17 exclusive if not checked) agency relationship. Buyer shall pay Firm compensation as follows:  ___________ % of purchase price;  $________________;  other:

_________________________________________________________________________________________

19 20 21

______________________________________________________________ a. Compensation Offered by Seller. Firm will utilize a multiple listing service (“MLS”) to locate properties and sellers may offer Firm compensation for procuring a buyer. Firm will disclose any compensation offered by the seller to Firm prior to preparing any offer. In the event that the compensation offered by the seller is equal to or greater than the compensation provided for by this Agreement, no compensation is due to Firm from Buyer. In the event that the compensation offered by the seller to Firm is less than the compensation provided in this Agreement, Buyer will pay the difference to Firm at the time of closing. If any of Firm’s brokers act as a dual agent, Firm shall receive the compensation offered by the seller to the listing firm and selling firm and any additional compensation Firm may have negotiated with the seller.

22 23 24 25 26 27 28 29

b. Exclusive. If the parties agree to an exclusive relationship above and if Buyer shall, during the course of this Agreement, purchase a property located in the Area, then Buyer shall pay to Firm the compensation provided for herein. If Buyer shall, within six (6) months after the expiration or termination of this Agreement, purchase a property located in the Area that, during the term of this Agreement was (1) brought to the attention of Buyer by the efforts or actions of Firm, or through information secured directly or indirectly from or through Firm; or (2) a property that Buyer inquired about to Firm, then Buyer shall pay to Firm the compensation provided for herein.

30 31 32 33 34 35 36

c. Non-Exclusive. If the parties agree to a non-exclusive relationship above and if Buyer shall, during the course of or within six (6) months after the expiration or termination of this Agreement, purchase a property that, during the term of this Agreement, was (1) brought to the attention of Buyer by the efforts or actions of Firm, or through information secured directly or indirectly from or through Firm; or (2) a property that Buyer inquired about to Firm, then Buyer shall pay to Firm the compensation provided for herein.

37 38 39 40 41

5. FIRM’S LISTINGS/SELLING BROKER'S OWN LISTINGS/DUAL AGENCY. If Selling Broker locates a property listed by one of Firm’s brokers other than Selling Broker (“Listing Broker”), Buyer consents to any Supervising Broker, who also supervises Listing Broker, acting as a dual agent. Further, if Selling Broker locates a property listed by Selling Broker, Buyer consents to Selling Broker and Supervising Broker acting as dual agents.

42 43 44 45

BUYER: _______________________ BUYER: ________________________ 14

Form 41A Buyer’s Agency Agreement Rev. 10/19 Page 2 of 2

BUYER’S AGENCY AGREEMENT Continued

6. NO WARRANTIES OR REPRESENTATIONS. Firm makes no warranties or representations regarding the value 46 of or the suitability of any property for Buyer’s purposes. Buyer agrees to be responsible for making all inspections 47 48 and investigations necessary to satisfy Buyer as to the property’s suitability and value. 7. INSPECTION RECOMMENDED. Firm recommends that any offer to purchase a property be conditioned on 49 Buyer's inspection of the property and its improvements. Firm and Selling Broker have no expertise in these 50 51 matters and Buyer is solely responsible for interviewing and selecting all inspectors. 8. V.A. TRANSACTIONS. Due to VA regulations, VA financed transactions shall be conditioned upon the full 52 53 compensation being paid by the seller. 9. NO DISTRESSED HOME CONVEYANCE. Firm will not represent or assist Buyer in a transaction that is a “Distressed Home Conveyance” as defined by Chapter 61.34 RCW unless otherwise agreed in writing. A “Distressed Home Conveyance” is a transaction where a buyer purchases property from a “Distressed Homeowner” (defined by Chapter 61.34 RCW), allows the Distressed Homeowner to continue to occupy the property, and promises to convey the property back to the Distressed Homeowner or promises the Distressed Homeowner an interest in, or portion of the proceeds from a resale of the property.

54 55 56 57 58 59

10. ATTORNEYS' FEES. In the event of suit concerning this Agreement, including claims pursuant to the Washington 60 Consumer Protection Act, the prevailing party is entitled to court costs and reasonable attorneys’ fees. The venue 61 62 of any suit shall be the county in which the property is located. 11. OTHER AGREEMENTS (none if not filled in).

63 64

__________________________________________________________________________________________ 65 __________________________________________________________________________________________

__________________________________________________________________________________________ Buyer has read and approves this Agreement and hereby acknowledges receipt of a copy.

____________________________________________ Buyer Date

_________________________________________ 68 Firm (Company)

____________________________________________ Buyer Date

_________________________________________ 69 By: (Selling Broker)

____________________________________________ Address

____________________________________________ City, State, Zip

____________________________________________ Phone Fax

____________________________________________ E-mail Address

Your Property Wish List What does your future home look like? Where is it located? As you hunt down your dream home, consult this list to evaluate properties and keep your priorities top of mind and to help me keep your wishes top of mind also.

Neighborhoods What neighborhoods do you prefer?

Schools What school districts do you want to be near?

Transportation Public transportation ______________________ Airport ____________________________

How close must the home be to these amenities?:

Other____________________________________ Other______________________________

Home Style What architectural style(s) of homes do you prefer? Do you want to buy a home, condominium, or townhome?

•

Would you like a one-story or two-story home?

•

How many bedrooms must your new home have?

•

How many bathrooms must your new home have?

•

How big would you like your home to be? (square feet)

•

Home Condition Do you prefer a new home or an existing home?

•

If you’re looking for an existing home, how old of a home would you consider?

•

How much repair or renovation would you be willing to do?

•

Do you have special needs that your home must meet?

•

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Schools__________________________________ Other______________________________

Freeway__________________________________ Shopping__________________________

Pricing What price range would you consider? No less than _________________________ but no more than ___________________________

Home Features Please circle one of the choices: Home Features

Must Have

Would Like

Willing To Comprimise

Front Yard

Yes | No

Back Yard

Yes | No

Garage (#of cars?)

Yes | No

Patio/Deck

Yes | No

Pool

Yes | No

Family Room

Yes | No

Formal Living Room

Yes | No

Formal Dining Room

Yes | No

Eat-in Kitchen

Yes | No

Laundry Room

Yes | No

Finished Basement

Yes | No

Attic

Yes | No

Fireplace

Yes | No

Spa in Bath

Yes | No

Air Conditioning

Yes | No

Wall-to-wall Carpet

Yes | No

Wood Floors

Yes | No

Great View

Yes | No

Not Important

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Community Features: Do you want to live in an area with a Community Association? yes / no What else do you want in your community? Community Features

Must Have

Would Like

Willing To Comprimise

Community Pool

Yes | No

Golf Course

Yes | No

Basketball Court

Yes | No

Tennic Court

Yes | No

Gated Community

Yes | No

Doorman

Yes | No

Clubhouse/Activities

Yes | No

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Not Important

Tips to Buyers (getting started – not conclusive) Write down on paper all the things that you would like to have in a home. I provided a separate page for this. •

As you think about your housing needs, it’s important to think about how long you will live in your home. Factor in both your current housing needs and what you may anticipate needing a few years from now. •

Don’t fall for the furnishings and décor while touring a home. Don’t be captivated by the surroundings instead of the home itself. Rooms can look completely different with your possessions in place. •

Likewise, don’t dismiss a poorly decorated home. A few changes to wall treatments and furniture bring light to an interior that isn’t well lit. •

Beware of small closets. People tend to underestimate the amount of space needed for their belongings. Likewise, split-level homes or houses built on a slab with no basement are often short on storage space. •

Make sure to check the structure and systems. Most buyers can spot the more obvious trouble signs early and most agents and attorneys recommend a professional inspection before you complete the sale. •

Tour the attic and basement. Look for any cracks in the foundation or loose bricks around the perimeter. •

•

Ask when the last time the roof was replaced and if there were any leaks.

Keep in mind that no home is in perfect shape. It is reasonable to expect a few minor problems. Be sure to take a careful look at the home to avoid disputes and disappointment after you have everything finalized. •

Attending an Open House, both in-person and virtually, is fun and it’s a great way to see many properties in a few weeks. •

The seller’s agents usually conduct Open Houses and represent the seller. Keep in mind that some properties are shown by appointment only. •

Buyers sometimes get caught up in the excitement of looking for the right home. Be wary of burnout. Only look for houses within your price range. Looking for homes out of your price range, even one step above, can make the home you eventually select seem like you are settling. •

Consider getting pre-approved for a mortgage before you go looking. This way you know the potential of your buying power. Pre-approval is also an advantage in a competitive market. •

Attend open houses during the hours specified. Agents and homeowners don’t appreciate stragglers and early birds. •

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Don’t be offended if you’re asked to register or show some form of identification. Agents who conduct open houses alone are sometimes targets of crime. •

Get a copy of the Listing if you’re considering the home. Homes sometimes become a blur when you visit one after another. A recap of the specifics, with a photo, will help you remember the best ones. Sometime taking notes can also help you remember (I will provide you with a notebook and home info). •

Don’t bring a crowd. You’re looking for a home, not finding a cheap way to entertain the family on a Sunday afternoon. Leave the kids and pets at home. •

A few things to think about: •

Your home’s location.

•

The type of home you want.

•

Balancing your wish list.

•

The amount of space the home has.

•

What the landscape looks like, and do you like to work in the yard.

•

What the layout looks like.

•

Community features.

•

Appliances and furnishings.

•

The maintenance of the home.

•

Any remodeling costs.

•

What the taxes may be.

•

What the quality and charm of the home may be.

Information Needed at Your Application (from NWMLS Form 22AP) •

Recent paystubs (prior 30 days)

•

Form W-2 (Wage and Tax Statements) for prior two years.

•

Form 1040 (Individual Income Tax Return) for prior two years

•

Any applicable business tax return forms for prior two years

•

Checking and savings account statements from prior two months

Securities account statements for prior two months, including investments, retirement funds, etc. •

•

Proof of any debts, including car loans, student loans, credit card accounts, etc.

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Mortgage statements and any home equity lines of credit related to other real property owned by the you •

Lease agreements, real property tax payments, homeowner’s association payments, and homeowner’s insurance information related to other real property owned by you •

•

Confirmation of source of down payment (e.g. savings, gift, sale of stock, loan, etc.)

•

Copy of driver’s license(s)

•

Residence addresses – past two years.

•

Names and addresses of each employer – past two years.

What is an Escrow? Escrow is the depositing of funds and documents by the parties with an impartial third party for delivery upon completion of the terms of the escrow instructions. The escrow holder impartially carries out the written instructions given by the principals (seller, buyer, lender) per the Purchase & Sale Agreement and Addendums. This includes receiving funds and documents necessary to comply with those instructions, completing or obtaining required forms and handling final delivery of items to the proper parties upon the successful completion of escrow. The escrow must be provided with the necessary information to close the transaction. This may include loan documents, tax statements, fire and other insurance policies, terms of sale and any seller assisted financing requests for various services to be paid out of the escrow funds.

The Purpose of an Escrow The common use of an escrow is to enable the parties in a real estate transaction to deal with each other with less risk since the escrow holder acts as: •

Custodian for funds and documents

•

A clearing house for payments of demands

•

An agency to perform the clerical details for the settlement of the accounts between the parties

A Typical Escrow Transaction Typically, an escrow begins with the customer giving the necessary information regarding the transaction and requesting that we order a Preliminary Title Report. A Preliminary Title Report provides the customer with an analysis of the present status of the property as revealed by the public records filed or recorded in the county in which the property is located. Upon receipt of the Preliminary Title Report, an analysis is made to determine the necessary action and documents required to complete the transaction; demands for satisfaction of liens not acceptable to the buyer and/or lender; documents for recording; instructions and requirements of

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the new lender. In most areas, buyers and sellers, instructions are prepared for signature from the information gathered. When all the title and financial requirements are met and instruction from all parties can be fully complied with, the escrow is said to be “in perfection” and can close. Then the financial settlement takes place, the documents are recorded, and the title insurance policy issued. You may be asked to complete a Statement of Identity or Affidavit of Identity as part of the paperwork. Because many people have the same name, the Statement of Identity is used to identify the specific person in the transaction through such information as date of birth, social security number, etc. This information is considered confidential.

What a typical Escrow Holder does: •

Serves as the neutral “stakeholder” and the communications link to all parties in the transaction

•

Prepares escrow instruction

•

Requests a preliminary title search to determine the present condition of title to the property

Requests a beneficiary’s payoff demand or statement and estimated utility bills for those lienable if requested to do so on the Purchase & Sale Agreement •

•

Complies with lenders specified in the escrow agreement

•

Receives purchase funds from buyer

•

Prepares or secures the deed or other documents related to escrow

•

Prorates taxes, interest, insurance and rents according to instructions

•

Records deeds and any other documents as instructed

•

Requests issuance of the title insurance policy

Closes escrow when all of the instructions of the buyer and seller have been carried out as per the Purchase & Sale Agreement and Addendums thereto •

•

Disburses funds as authorized by instructions

•

Prepares final statements for the parties accounting for the disposition of all funds deposited

If applicable, escrow orders final lienable utility bills and pays these bills upon receipt the day of closing or shortly thereafter •

The Escrow Holder does not: •

Offer legal advice

•

Negotiate the transaction

•

Offer investment advice

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Escrow Instructions Escrow instructions define all of the conditions that must occur before the transaction can be finalized. The escrow instructions represent your written statement to the escrow holder protecting your interests and also specify, in a debit and credit format, the disposition of the sales proceeds and the conditions under which the Statutory Warranty Deed may be recorded in favor of the new buyer. A Statutory Warranty Deed (or equivalent deed offered by the seller) is the document which legally transfers title to the property to the new owner. The seller will sign the Warranty Deed as part of the escrow instructions and the deed will be notarized by a qualified notary public. Proper identification is needed for this procedure. The Warranty Deed is recorded at the time escrow closes. Your escrow officer or real estate agent will contact you for an appointment to sign your escrow instructions and closing documents. At this time the escrow officer will inform you of the amount of proceeds you will need to bring to closing. A cashiers check is normally required for closing. Usually you will sign your escrow instructions at the title company office. However, you may go to your real estate agent’s office or some location agreed upon by all parties.

Your Appointment An appointment is required for the sign-off. Your escrow officer will call to arrange a convenient time and expect the process to take approximately one hour. There are several acceptable forms of identification which may be used during the escrow process. These include: •

A current driver’s license

•

Passport

•

State of Washington Department of Licensing ID Card

•

Green Card

One, or all, of these forms of identification must be presented at the signing of escrow in order for the signature to be notarized.

Helpful Reminders 1. If you wish to wire-transfer funds into escrow, arrangements must be made in advance with the escrow officer. Please verify all wire transfer instructions with your escrow closer over the phone to avoid wire fraud potential.

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2. In the event that you wish to use a Power of Attorney, arrangements must be made one (1) to two (2) weeks in advance with the escrow officer and the Power of Attorney must be approved by the buyer’s lender and your title company. 3. Should the funds deposited in escrow be insufficient for closing, you will need to bring a cashier’s check or certified check to the title company for the remainder of the purchase price. Either type of check should be from a Washington state bank or savings & loan and should be issued in the exact amount of the balance due. The amount of the balance may be obtained by phoning the escrow officer prior to signing the papers. The check should be made payable to your escrow company.

Common Questions & Sources for Assistance •

Details or your sales agreement: Real Estate Agent

•

Possession and key to your new home: Real Estate Agent

Loan requirements and financial matters: Lender, Mortgage Company or Real Estate Agent

•

Escrow instructions: Title Company, Escrow Officer or Escrow Assistant

After the Sign-Off After you and the seller have signed all necessary instructions and documents, the escrow officer will return them to the new lender for a final review. Following the review, the lender is ready to fund the buyer’s loan and advises the escrow officer so that the necessary work can be completed to record the documents and “Close” the escrow. Escrow closing signifies legal transfer of title to the property from the seller to the buyer and is the culmination of the transaction. Usually the Statutory Warranty Deed and Deed of Trust are recorded the same working day as escrow’s receipt of loan funds. This completes the transaction and signifies the “close of escrow.” Once all the conditions of the escrow have been satisfied, the escrow officer advises you of the date the escrow will close and takes care of the technical and financial details including paying off the sellers loan.

What a Title Company Does A Preliminary Report shows the condition of title before a sale or loan transaction. After completion of the transaction a title insurance policy is issued.

•

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Title Policy is insurance against loss resulting from defects of title to a specifically described parcel of real property. Defects may run to the fee (chain of title) or to encumbrances on the property.

•

Drafts a Deed of Trust along with other necessary documents. This document is filed with the county showing a property is transferred to a trustee by the borrower (trustor) in favor of the lender (beneficiary) and reconveyed upon payment in full.

•

Pays off existing loans when so ordered.

Taxes and insurance are prorated upon instructions from the buyer and seller.

•

Computes interest on loans.

•

Acquires hazard insurance.

•

Signing of documents is assisted

Records the appropriate documents with the county recorder’s office, giving public notice.

•

Disburses the documents and money to each party involved.

What’s the coverage? (The best resource is the title office listed who prepared the Preliminary Report ~ call them)

Owner’s Insurance Alta Standard Coverage Policy (American Land Title Association) The ALTA Standard Coverage Policy is designed to insure the owner of any type of real property (commercial, industrial, vacant land, residential) against loss by reason of those matters covered under the policy of insurance.

What is covered? 1.

Some of the coverage’s provided under the ALTA Standard Coverage Policy are:

Title to the real property owned by a person other than the insured

Defects, liens and encumbrances upon title which are recorded

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Lack of a right of access to and from the real property

The insured has a marketable interest in the real property

There are no forgeries or failed conveyances in the chain of title

What is not covered? Some of the matters not covered by the ALTA Standard Coverage Policy are: 1.

Matters which a correct survey would show

Unrecorded matters

Matters which a physical inspection of the real property would disclose

Rights of parties in possession

Unpatented water and mineral rights

Matters known, created or assumed by the insured

ALTA Homeowners Title Insurance Policy (American Land Title Association) The ALTA Homeowners Title Insurance Policy is designed to insure the owner of residential property (one-to-four family residences), including condominiums, against loss by reason of those matters covered under the policy of insurance.

What is covered? The ALTA Homeowners Title Insurance policy provides all of the coverageâ&#x20AC;&#x2122;s afforded the ALTA Standard Coverage Policy, plus: 1. Mechanicâ&#x20AC;&#x2122;s lien protection arising out of work done on the real property for which the insured did not agree to pay 2.

Rights under unrecorded leases

Unrecorded easements

Forced removal of dwelling structure upon adjoining real property

ALTA Extended Owners Policy (American Land Title Association)

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The ALTA Owner’s Policy is designed to insure the owner of real property against loss by reason of those matters covered under the policy of insurance. Do not confuse this policy with the ALTA Residential Title Insurance Policy. The ALTA Owner’s Policy is the broadest form of insurance provided an owner of any type of real property (commercial, industrial, vacant land, residential)

What is covered? The ALTA Extended Owner’s Policy provides all of the coverage’s afforded under the ALTA Standard Coverage Policy, plus: 1.

Matters which a survey would disclose

Easements not disclosed by the public records

3. Encroachments, discrepancies or conflicts in boundary lines not shown by the public records 4.

Rights of parties in possession

What is not covered? Like all policies of title insurance, the ALTA Owner’s Policy does not provide coverage against matters known, created or assumed by the insured.

Additional requirements Since the ALTA Owner’s Policy provides such a broad coverage, additional requirements for the issuance of the policy may include: 1.

A correct survey

A field inspection

A check of all utilities to make sure that they have no unrecorded easements

Copies of all leases and/or tenant lists

Since these requirements take time to complete, plan accordingly. Furthermore, the policy may contain further exceptions. Therefore, so not necessarily expect a clean report.

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Understanding Preliminary Reports After months of searching, you have found it â&#x20AC;&#x201C; your perfect dream home. But is it perfect? Will you be purchasing more than just a beautiful home? Will you also be acquiring liens placed upon the property by prior owners? Have documents been recorded that will restrict your use of the property? The Preliminary Report will provide you with the opportunity, prior to purchase, to review matters affecting your property which will be excluded from coverage under your title insurance policy unless they are removed or eliminated before your purchase.

What is a Preliminary Report? A Preliminary Report is a report prepared prior to issuing a policy of title insurance that shows the ownership of a specific parcel of land, together with the liens and encumbrances thereon, which will not be covered under a subsequent title insurance policy.

What role does a Preliminary Report play in the real estate process? A Preliminary Report contains the conditions under which the title company issues a particular type of title insurance policy. The Preliminary Report lists, in advance of purchase, title defects, liens and encumbrances which would be excluded from coverage if the requested title insurance policy were to be issued as of the date of the Preliminary Report. The report may then be reviewed and discussed by the parties to a real estate transaction and their agents. Thus, Preliminary Report provides the opportunity to seek the removal of the items referenced in the report that are objectionable to the buyer prior to the purchase.

When and how is the Preliminary Report produced? Shortly after escrow is opened and order will be placed and the title company will begin the process involved in producing the report. This process calls for the assembly and review of certain recorded matters to both the property and the parties to the transaction. Examples of recorded matters include a deed of trust recorded against the property, or a lien recorded against the buyer or seller for an unpaid court award or unpaid taxes.

What should I look for when reading my Preliminary Report? You will be interested, primarily, in the extent of your ownership rights. This means that you will want to review the ownership interest in the property you will be buying as well as any claims,

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restrictions or interests of other people involving the property. The report will note a statement of vesting the degree, quantity, nature and extent of the owner’s interest in the real property. The most common form of interest is the “fee simple” or “fee”, which is the highest type of interest an owner can have in land. Liens, restrictions and interests of others which are being excluded from coverage will be listed numerically as “exceptions” in the Preliminary Report. Among other things, these might be claims by creditors who have liens or liens for payment of taxes or assessments. There may also be recorded restrictions that have been placed in a prior deed or contained in what are termed CC&Rs (Covenants, Conditions and Restrictions). Interests of third parties are not uncommon and may include easements given by a prior owner that limit your use of the property. When you buy property you may not wish to have these claims or restrictions on your property. Instead, you may want to clear the unwanted items prior to purchase. In addition to the limitations noted above, a printed list of standard exceptions and exclusions, listing items not covered by your title insurance policy may be attached as an exhibit item to your Preliminary Report. Unlike the numbered exclusions, which are specific to the property you are buying, these are standard exceptions and exclusions appearing in all title insurance policies of the type anticipated by the Preliminary Report. The review of this section is important as it sets forth matters which will not be covered under your title insurance policy, but which you may wish to investigate, such as governmental laws or regulations regarding building and zoning.

Can I be protected against title risks prior to the close of the real estate transaction? Yes, you can. Title companies can protect your interest through the issuance of “binders” and “commitments.” A binder is an agreement to issue insurance giving temporary coverage until such time as a formal policy is issued. A commitment is a title insurer’s contractual obligation to insure title to real property. Discuss with your title insurer the best means to protect your interest.

How do I go about clearing unwanted liens and encumbrances? You will wish to carefully review the Preliminary Report. Should the title to the property be “clouded”, you and your agents will work with the seller and the seller’s agents to clear the unwanted liens and encumbrances prior to your taking title.

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Explanation of Preliminary Reports A Preliminary Report will usually contain the following elements: 1.

The name of the person or firm that requested the Preliminary Report (PR).

The address of the subject property.

The Title Company’s file number.

The applicant’s file number or reference number.

5. A paragraph stating that no liability is ever intended under a PR and indicating what should be requested if the customer desires assumption of liability prior to policy issuance. 6.

The most recent date and time that the public records have been searched. In other words, a lien or Deed of Trust recorded after the dates shown would not be disclosed on the PR.

The name of the title officer who produced the PR and who may answer questions about the report (requests for information about the status of the escrow should be directed to the Escrow Officer).

The office address and telephone number of the title company issuing the PR.

A paragraph describing the interest in the land that is covered by the report. For example: A fee. A condominium. A leasehold.

10. A paragraph telling you that in addition to the standard printed exceptions there will appear in the title policy exceptions which pertain specifically to the estate in question. 11. A legal description of the property which should be used for preparing any documents that will be recorded. 12. A site or plat map of the property described in the report.

The exceptions to each parcel of land are different due to the unique nature of real property. Below is a discussion of some of the more common exceptions that you may see during your review of a Preliminary Report. 1.

Property Taxes. Each year on February 15 the lien of the following year’s property tax attaches to the land, pursuant to law. Property taxes are assessed on the calendar year. Taxes become delinquent May 1 for the first half and November 1, for the second half.

Easements. Easements are a right to use the land of another for specific purposes. Easements can be created in a number of ways, including dedication on a subdivision map or a Grant of Easements to another party.

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3. CC&R’s. Covenants, Conditions and Restrictions are limitations on the uses that may be made of a parcel of land. For example, many CC&R’s contain restrictions stating that a property may only be used as a single family dwelling and allowing neighbors to take action against persons running a hotel out of their suburban home. Some restrictions contain a reversionary clause which states the violation of the restrictions will cause the title to the property to revert to the person imposing the restrictions. Most contain a clause assuring a lender that a violation will not act to impair the lien of the lender. 4.

Deed of Trust. The Deed of Trust is a security device for a lender. Under Washington law the Deed of Trust allows a relatively quick and easy way for a lender to obtain real property with which to satisfy a delinquent loan. The PR shows the recorded information about the Deed of Trust.

Abstract of Judgment. This type of lien is issued pursuant to a court order for the payment of debt.

Closing Costs Listed below are some typical closing costs you may incur as part of your loan transaction. When you apply for a loan you will receive a Good Faith Estimate of closing costs and settlement charges, and a booklet that will explain these costs. Appraisal Fee

This is a one-time fee that pays for an appraisal. The appraisal is made by an independent fee appraiser.

Credit Report

A one-time fee that covers the cost of the credit report.

Document Preparation Fee

There may be a separate fee that covers the preparation of the final legal papers.

Loan Discount

A one-time fee used to adjust the yield on the loan to what market conditions demand. It is often called “points.”

Loan Origination Fee

The lender’s administrative costs in processing the loan are covered by this fee.

Misc. Title Charges

The title company may charge fees for a title search, title examination, recording fees and notary fees.

PMI Premium

You might be required to pay an up-front fee for mortgage insurance depending upon the amount of your down-payment. Lenders may also require monies be placed into a reserve account held by them.

Ronny Carmon | 425.979.1416 | RonnyCarmon@CBBain.com Rules, Regulations and Fees are subject to change. Please verify with appropriate services

Prepaid Interest

Depending upon the time of the month your loan closes, this per diem charge may vary from a full month’s interest to that of only a few days. If your loan closes at the end of the month you will have to pay interest only for a day or so.

Taxes & Hazard Insurance

You may be required to reimburse the seller for property taxes depending upon the month in which you close. You will also need to pay a year’s hazard insurance premium up front. Also, you might be required to put a certain amount for taxes in to a special reserve account held by the lender.

Inspections When making an offer on a home the purchase contract will likely contain provisions allowing the buyer various inspections of the property. The purpose of these inspections is to educate you as to the physical condition of the property being purchased. While these inspections do not provide guarantees of the condition of the property, they do provide valuable information to the buyer. It is important to remember that the purchase contract may provide for withdrawal from the contract if these reports are unsatisfactory, but inspections should not be considered an open door to negotiations of the purchase price.

Structural Pest Control Often referred to as a Termite Report, the structural Pest Control Inspection is conducted by a licensed inspector. In addition to actual termite damage, the report will indicate any type of wood destroying organisms that may be present, including fungi (sometimes called “dry rot”), which generally results from excessive moisture.

Section 1 Conditions Most pest reports classify conditions as Section 1 or Section 2 items. Section 1 conditions are those which are active or are currently causing damage to the property. Generally, Section 1 items need to be corrected before a lender will make home loan.

Section 2 Conditions Those items which are not currently causing damage, but are likely to if left unattended are Section 2 conditions. A typical Section 2 is a plumbing leak where the moisture has not yet caused fungus decay.

Who Pays? The purchase contract will specify who is responsible for the cost of the inspection and making these corrections. This is a negotiable item and should be considered carefully what is customary and prudent.

Ronny Carmon | 425.979.1416 | RonnyCarmon@CBBain.com 32

Rules, Regulations and Fees are subject to change. Please verify with appropriate services

Physical Inspection The Physical Inspection clause in the purchase contract, when initiated by both parties, allows the buyer the right to have the property thoroughly inspected. This is usually done through a general home inspection. Home inspectors are currently required to have a license and many are, or have been, general contractors. The inspection and the resulting report provide an overall assessment of the present condition of the property.

What is inspected? The home inspection covers items such as exterior siding, paint, flooring, appliances, water heater, furnace, electrical service, plumbing and other visible features of the property. This is a general inspection and will often call for additional inspections by specific trades, such as roof and furnace.

Further Inspections If conditions warrant, the home inspector may recommend a Structural Engineer’s Report. Such a report would identify structural failures and detail recommended corrections.

Who Pays? Typically, this inspection is paid for by the buyer.

Geological Inspection You may also elect to have a Geological Inspection to educate yourself as to the soil conditions at the home you are purchasing. The inspection is performed by a geological engineer and involves not only physically inspecting the property, but also researching past geological activity in the area. The primary purpose of a geological inspection is to determine the stability of the ground under and around the home.

Who Pays? Typically the buyer pays, but as with other inspections, this is negotiable according to the purchase contract.

Home Warranty Home protection plans are available for purchase by the seller or buyer. Such plans may provide additional protection of certain systems and appliances in your new home. I will provide you with information on a Home Warranty from The Warranty Group.

Full Disclosure Washington Law provides that the seller has a responsibility for revealing to you the true condition of the property. The concept of selling a property “as is”, with the buyer assuming all responsibility for determining the property’s condition, is not acceptable in the present marketplace. The sellers must disclose the known condition of the property to the buyer. This information should be made available to the buyer as soon as possible.

Ronny Carmon | 425.979.1416 | RonnyCarmon@CBBain.com Rules, Regulations and Fees are subject to change. Please verify with appropriate services

Charm or irritant? Having lived in this property, the seller has become accustomed to the peculiar conditions that may have developed. But for the buyer the peculiarity may be more than a mere inconvenience. It may be an irritant that the buyer cannot tolerate. It is important for the seller to review the condition of the property with the real estate agent and take special note of any problems on the Disclosure Statement (Form 17). Washington State Law requires that the seller provide the buyer with a completed “Real Estate Transfer Disclosure Statement.”

All Systems Go A basic assumption in every sale is that the home and systems in the home are functional. For example, the roof will hold out the rain and sun, the hot water will provide hot water and the heater will provide heat. If it is known that any of the systems do not function properly such facts should be disclosed and acknowledged by the buyer.

“As is” An “as is” purchase is perfectly acceptable as long as the buyer understands what the “as is” condition entails. Thus, it can be said in the purchase agreement that the buyer accepts the roof and the plumbing and the electrical system in their present condition and acknowledges that they have defects. This acknowledgement provides a defense for the seller if it is later claimed he did not disclose the problem.

Environmental hazards It is requested that the seller disclose any knowledge of environmental hazards in the home or area such as asbestos or pollutants. You will be provided with a Real Estate Transfer Disclosure Statement filled out by the seller as to his awareness or knowledge of this subject.

Who Pays What Seller – What the Seller is generally expected to pay: Real Estate Commission ~ Negotiable

•

Document preparation fee for deed

•

Excise Tax (variable by home price and local jurisdiction) 1.78% + of sales price

•

Any city transfer or conveyance tax (50/50)

•

Any loan fees required by buyer’s lender

•

Payoff all loans in seller’s name (or existing loan balance if assumed by buyer)

•

Interest accrued to lender being paid off, statement fees, reconveyance fees and prepayment penalties

•

Ronny Carmon | 425.979.1416 | RonnyCarmon@CBBain.com 34

Rules, Regulations and Fees are subject to change. Please verify with appropriate services

•

Termite Inspection (according to contract)

•

Termite work (according to contract)

•

Home Warranty (according to contract)

•

Any Judgments, Tax Liens, etc. against the seller

•

Tax proration (for any taxes unpaid at time of transfer of title)

•

Any unpaid homeowner’s dues

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Recording charges to clear all documents of record to the seller

•

Any bonds or assessments (according to contract)

•

Any and all delinquent taxes

•

Notary fees

Buyer – What the Buyer is generally expected to pay: •

Real Estate Commission ~ Negotiable

•

Title insurance premium for lender

•

Document preparation (if applicable)

•

Notary fees

•

Recording charges for all documents in buyer’s name

•

Termite inspection (according to contract)

•

Tax proration (from date of acquisition)

•

Homeowner’s transfer fee

•

All new loan charges (except those required by lender for seller to pay)

•

Interest on new loan from date of funding to 30 days prior to first payment date

•

Assumption or change of records fee for takeover of existing loan

•

Inspection fees (roofing, property, inspection, geological, etc.)

•

Home warranty (according to contract)

•

Fire insurance premium for first year

Ronny Carmon | Buyer's Resource Guide

Articles inside

Moving Checklist

Moving Expenses

Title Company

What is an Escrow?

Who Pays What

The Law of Real Estate Agency & Agency Disclosure

Closing Costs

Full Disclosure (Form 17

Inspections

Coldwell Banker Bain Buyer’s Client Advisory