In the following paragraphs, I will outline some of the reasons why you should think about having a lawyer look over your purchase and sale agreement before you sign it. Everyone has noticed that the real estate market in North Idaho is picking up steam recently. The majority of people today are engaging in the practise of signing purchase and sale agreements. When doing so, they frequently collaborate with real estate agents and make use of form contracts. While these methods are successful for the vast majority of transactions, they are not necessarily successful for all that a person hopes to achieve through a purchase and sale.
persons who are either selling property themselves and require a purchase and sale agreement to be created, or persons who are looking to buy real estate and have a purchase and sale agreement that was proposed to them that they want us to take a look at, send us questions rather frequently. And despite the fact that the volume of these documents is high and the relative frequency of legal disputes is, thankfully, low, there are still enough potential problems that someone would be well advised to have an attorney take a look at their purchase and sale contract and make sure that it is hitting all of the points that they want it to hit in order to allow them to safely close the transaction and minimise the possibility for legal or title issues in the future.
So, one thing that people really can stand to benefit from having an attorney look at is the contingency wording in a buy and sell agreement. This is because people really can stand to benefit from having an attorney look at this. As a result of the current state of the market, a great number of people are abandoning their backup plans left, right, and centre. They buy homes without a physical inspection, without a title review, and without even a financing contingency if they are paying cash for the property. Sometimes they buy properties without even seeing them beforehand. Because of this, people are willing to take the risk in order to purchase the home. And they are quite within their rights to do so. People want to have certain contingency periods in place in other circumstances, especially when making more expensive purchases, so that they can get a better sense of what it is that they’re buying before they close the deal, before their earnest money becomes non-refundable and before they don’t have any way necessarily to back out legally. This is especially true in situations where the purchase price is higher.
They are going to want language that protects them and gives them very clearly the right to have a physical inspection of the property done, a title review done, and a review of, for example, zoning or other land-use-related issues that could affect the property after closing. In this scenario, they are going to want language that protects them and gives them the right to have a physical inspection of the property done.
They want it to be very apparent that these are the contingencies, and these are the time periods that we have to assess these issues before closing, and they want it to be stated that this very clearly. When it comes to ensuring that something is properly documented in the agreement and that it is agreed to between the parties in the explicit language of the contract, having an attorney on your side can be of great assistance. Therefore, another illustration of this would be title problems. People frequently desire to have the title examined before the deal closes, but they aren’t always aware of the window of opportunity during which this can be done.
The issuing of what is known as a preliminary commitment for title insurance by the title company, which will be the escrow business that will be completing the deal, is typically what sets off the timer for the title review period. And that title insurance commitment will include not only a list of the things that the buyer’s title insurance policy would cover but also a list of the things that it wouldn’t cover, as well as a variety of exceptions to the coverage that the title insurance provides. And the list of documents that constitute those exceptions will often take the form of a document that has been recorded with the county and is relevant to the title of the property in question. Documents pertaining to easements, covenants imposed by homeowners associations, agreements concerning septic systems or wells, or any other of a great many other items could fall under this category.
And if someone doesn’t have a well-documented contingency period setting forth, number one, that they have the right to review those things and to make title objections to the seller before they close, and number two, what that time period is, then they could find themselves not having the right to review those matters and then taking the property potentially as-is from the title stand point, and then having to deal later on with whatever is in those public record documents.
And so, one of the things that I always like to make sure that my clients have if they’re buying property is number one, that they do have a title contingency; number two, that it’s a sufficient time period, seven to ten days for most situations will be sufficient; and then number three, that if during that seven to ten day period they find something in the title history of the property that they don’t want to have to deal with or that’s objectionable to them.
As an illustration, perhaps there is a provision in the HOA bylaws that prohibits them from constructing a mother-in-law house, and one of the reasons they want to acquire the property is because of this provision. Or, if it turns out that the neighbour has an easement running right through the middle of the lot, right where they would potentially want to build, then I always want to make sure that there is language in the agreement that gives the buyer the right to send the seller a title objection saying that we object to the following conditions of title, such as this easement, this covenant, or this other document that could affect the use of the property. This is something that I want to make sure is included. After that, the seller will normally have until the closing date to either solve that problem, or if they decide that they cannot or will not fix the problem, then the buyer has the right to back out of the transaction and receive their earnest money back. If the seller fails to fix the problem before the closing date, then the buyer has the right to cancel the transaction and get their earnest money back. One very good reason, and one that comes up relatively frequently, why people might want to have an attorney look over their purchase and sale contract is to make sure that there are adequate contingency protections in an agreement and that it clearly states what the contingencies are. This is one of the reasons why people might want to have an attorney look over their purchase and sale contract.
The use of boilerplate provisions is yet another problem that arises. An agreement that regulates the process of conflict resolution could include many different provisions, depending on the preferences of the parties involved. For instance, if a disagreement arises later in relation to the buy and sale agreement, people may want to have mandatory arbitration, which can sometimes lessen the amount of time that it takes to resolve disagreements as well as the costs that are associated with doing so. On the other hand, there are instances when people demand the right to go to court. But they also want to be sure that if they go to court and win, they will be able to get their attorney’s fees reimbursed by the court. This is something they want to make sure of before going to court. And so, having contract language in there governing dispute resolutions and governing who gets attorney’s fees in the case of a court process or other type of issue, from the agreement that may be very essential as well. This can be very important as well.
Another concern that arises in the context of buy and sale agreements is, of course, the time and manner in which the closing will take place. But recently I’ve noticed an increase in the number of conversations or negotiations that take place between buyers and sellers about the kind of deed that will be transferred when the transaction is finalised. And this is something that you will want to include in the agreement for the acquisition and selling of the property. Now, the vast majority of purchase and sale agreements will stipulate that the seller must sign what is known as a warranty deed over to the buyer at the time of closing in order to transfer ownership of the property. In accordance with the laws of Idaho, the warranty deed serves the purpose of laying forth a number of warranties concerning the property’s title.
For instance, the legal meaning of a warranty deed is that the seller is guaranteeing to the buyer that they have the right to sell the property, that there are no encumbrances on the property, such as liens or other types of negative impacts on the title, and that there are no other warranties relating to what the seller has in terms of title and what the seller is conveying to the buyer. Another example is that the seller is guaranteeing to the buyer that they have the right to sell the property. And buyers obviously want warranty deeds because those warranty deeds provide them with protection in the event that it turns out later that there is an issue with the title, there is an encumbrance, or if the seller didn’t actually own the property that they were conveying to the buyer, then the buyer has recourse against the seller under the warranty deed to make the seller fix those issues and to pay the buyer’s legal fees and other expenses that were incurred as a result of those issues.
On the other hand, there are transactions that can take place in which the buyer and the seller (and even both of them) can come to an agreement to merely deliver a quitclaim deed. A quitclaim deed, in contrast to a warranty deed, is a transfer of title that takes place “as is.” The seller does not provide any guarantees or warranties to the buyer that they even own the property, let alone that there are no encumbrances or other conditions that are unfavourable to the title. As a result, a quitclaim deed is frequently utilised in the process of property transfer between spouses or among other family members, as well as the process of property transfer out of an estate. Transactions, to put it another way, in which the parties are familiar with one another and have greater incentive to trust one another. However, the buy and sale agreement can make it perfectly clear what kind of conveyance would be necessary in order to close the deal. And you want that to have a solid foundation in the language’s documentation.
Another problem that may arise is something that is known as the survival of the provisions of the purchase and sale agreement. According to the laws of Idaho, once a sale has been finalised, the majority of the restrictions and prerequisites listed in the purchase and sale agreement are null and void. The theory in question is sometimes referred to as the “merger doctrine.” That, in addition to concerns regarding the title that are contained within the deed, if there is a portion of the contract that says, for example, that the seller is supposed to leave curtains or furniture or other personal property on the on the property after closing, you want to make sure that those provisions are all going to survive the closing and not be subsumed into the deed, so that it can be enforced later on by the buyer, or by the seller for that matter if there’s a dispute regarding
Therefore, for these and a whole host of other reasons, Timely Contract is in an excellent position to enable both buyers and sellers to review their purchase and sale agreements, and to get competent legal advice about the terms and provisions of the language in those agreements, as well as how those terms and provisions relate to their particular goals.
If you have any questions about this, you can ask in the comments section.
