Page 25
Under Code of Ethics – reads “…obligations of REALTOR® 363, a REALTOR® that may be …” should read “…obligations of a REALTOR® that may be…”
Page 26 through 34
Updateto 2008 Code of Ethics – Can be downloaded from
Page 35
Change question #1 to:
1. Which of the following is most likely required to have a real estate brokerage business?
A.A licensed practicing attorney
B.An attorney-in-fact
C.A licensed real estate salesperson
D.A licensed real estate broker
Page 42
Change Investment Permeance to Investment Permanence
Page 74
Top of page, 5th line reads “…must be filed in the county where the property is located and within 90 after labor or material have first been furnished.” Change to “…must be filed within 90 days of the last date labor or material was furnished in the county where the property is located.”
Page 83
Question #19; change distracter B to:
B.holdover tenant.
Page 109
Under Easement by Prescription; change “personal property” to “private property”
Page 154 to 166
Updatepurchase contract to 2008 version
Update explanation to match 2008 version
Page 225
In 1st paragraph under Current FHA Coverage, change percentages to 98.75 and 97.75
Change next to last sentence in 1st paragraph to “As of 2008, the maximum loan amount in Georgia for single family residential is $346,250.”
Page 226
Under Mortgage Insurance; 2nd paragraph; next to last sentence; change “…once their homeowner equity reaches…” to “…once their loan-to-value ratio reaches…”
Page 326
2nd matrix; last example; days should be 58 and amount $198.63
Page 332
Under Mortgage insurance; 2nd sentence; capitalize Private
Page 333
Top of page; should be $116,400X .5% = $582.00
Page 335
Under Transfer Tax; 2nd sentence to read “There is always a transfer tax and while historically it has been paid by the seller, it may be paid by either party.”
Page 352 – 359
Updateto 2008 lease contract
Page 386
In Figure 18.2; in Garage, Driveway, Patio and Dwelling figures change sign to X (i.e. 20’ X 20’ = 400 sf)
Page 426-427
Update explanation of Figure 20.1, Exclusive Seller Listing Agreement
Page 427a – 427d
Update to 2008 version of Exclusive Seller Listing Agreement.
Page 431 – 434
Update to 2008 version of Exclusive Buyer Brokerage Agreement.
Page 480
Question #20; change “years” in all distracters to “days”.
Page 606
Chapter 2, Change answer to #2 to A
Chapter 4, Change answer to #14 to B
Page 607
Chapter 14, Change answer to #3 to A
Purchase Contracts
Explanation to replace pages 154 and 162-166
Variously known as a purchase contract, deposit receipt, offer and acceptance, purchase offer, or purchase and sales agreement, these prepared forms contain specific language that has been written or approved by attorneys and have often been court tested. Extreme caution should be used when altering the forms from their original context. Illustration 9.1 shows the 2008 version of the GAR F20 Purchase And Sale Agreement. It is believed that this is the agreement that a licensee candidate/student should be exposed to as soon as possible since this is the form which will be commonly used in residential real estate transactions in Georgia.
1. Purchase and Sale.
This section sets forth the parties to the agreement (buyer and seller) and states their mutual intent to buy and sell the property. It also provides for the common address of the property. Also included in this section is a reference to all appurtenances remaining with the property, with the exclusion to those items mentioned in the Seller’s Property Disclosure Statement.
2. Legal Description.
A legal description is “A method of describing a property geographically exclusive of any other property on the face of the earth.” This section allows for the description of the property in one of two ways; by attaching the description (A), or by filling it out in the blanks provide on the form (B). NEVER use both! Option A is the preferred method and the agent would simply attach an exhibit and cut and paste a description from a warranty or security deed. If that is not feasible, option B is the method commonly used in the past. When using option B, another decision must be made as to use a plat book or deed book reference. Again, never use both. Remember throughout this form, any unused spaces which are part of the agreement should be nullified by placing an “N/A” (not applicable) in the space.
3. Purchase Price and Method of Payment.
Simply put, this section states the purchase price, written like a check with letter and then numbers, and requires that the price be paid in cash or certified funds. As this is a “due diligence” contract, there is no financing contingency. If needed, an exhibit is available to make the agreement contingent on financing.
4. Amount and Deposit of Earnest Money.
The holder of the earnest money is designated here and states whether the deposit is cash or check. This paragraph also allows the broker to hold the earnest money in an interest bearing account, requires that the holder deposit the earnest money within 5 banking days after binding agreement date and makes the contract voidable by the seller if the earnest money funds are dishonored.
5. Closing Costs.
This agreement requires the buyer to pay for all closing costs, including Georgia property transfer tax. This tax has historically and commonly been paid by the seller but that is not required by law. This section then provides for the seller to make a contribution to be used by the buyer in any way they deem appropriate to offset the costs. Since most costs are generated because of the loan and the buyer controls which loan they apply for and with which lender, it is believed this is a fair and definitive way to negotiate the payment of costs associated with the purchase and sale. This section also states the parties will prorate such items as real estate taxes, community association assessments and utility bills, as appropriate.
6. Date of Closing and Transfer of Possession.
Here, the obligations to close as of a certain date is stipulated, but also allows for “…or on such other date as may be agreed upon in writing by the parties.” It also allows for a unilateral extension of the closing date for up to 7 days under very specific circumstances (title problems or the closing attorney or lender cannot perform their obligations). This section also stipulates when the buyer will receive possession of the property; at closing, hours after closing or days after closing.
7. Closing Attorney.
This states which law firm will be appointed to close the transaction and discloses that they will be representing the interests of the lender. In event there is no lender, this paragraph prompts an agreement and disclosure of who’s interest the law firm will represent.
8. Title.
In this section, the seller warrants the property to have a marketable title and allows the buyer to examine such. Notice that in section “B”, good and marketable title is defined as “…title which a title insurance company licensed to do business in Georgia will insure at its regular rates, subject only to standard exceptions.” It also states whether there is a survey of the property attached and what the rights of the parties will be in the event there is a subsequent survey which is “materially different” from the one supplied.
9. Risk of Damage to Property.
This section requires that the property will be delivered to the buyer at closing in substantially the same condition as at the time of contract, free of trash and debris. It also states the requirements of the parties in the event there is a destruction or substantial damage to the property. Simply, either party can cancel the agreement within 14 days of notification of damage. If neither party terminates, the seller shall have the responsibility to repair and restore the property and contract will extend for up to one year, as necessary.
10. Inspection.
This section provides the buyer with the right to inspect the property and creates the duty to inspect the neighborhood for any conditions for which they would find objectionable. Specifically, the website for the Georgia Violent Sex Offender Registry is provided and buyer is recommended to view this website if they have concerns.
11. Property Sold Subject to Due Diligence Period or “As-Is”
This very important section offers the buyer 2 options. Historically, the buyer has had the right to inspect the property and notify the seller of defect. The parties would then negotiate any repair or replacement. The problem has been defining exactly what is a defect and who should have the right to conduct the inspection and declare the property defective. What one person may consider defect, another may consider normal wear and tear. If there are 3 pieces of siding on one side of the house which are defective, does the buyer have the right to claim all siding on that side of the home to be defective and demand they be replaced? If the siding on one side of the house that has been exposed to the harshest sun is defective, does the buyer have the right to demand all siding be replaced on the house as it is obviously defective siding, even if it does not currently show excessive deterioration? The Home Builder’s Association has a pretty good definition of defect but it is over 60 pages long! Obviously, this is not a viable option. Another challenge is the inspector. Currently in Georgia, persons who inspect properties prior to the closing of the sale do not have to be licensed or certified. If the inspector was your Uncle Bubba who worked on a job site carrying lumber for a framing crew while in college, does that qualify as an inspector? For this reason, this contract is used primarily as a due diligence contract as indicated in option “A”. This essentially creates an option and gives the buyer the unilateral right to terminate their obligations to the contract if, within the due diligence period agreed upon, the buyer exercises their right to terminate and properly notifies the seller. This option is thought by most to be the most desirable and functional method. While it does give the buyer control for a period of time, it takes out of the negotiation the time and emotional capital historically spent debating what a defect or inspector is or what they are not. Also take note, in A.2. of this section, the buyer has the right but not the obligation to conduct at their expense whatever “…evaluations, inspections, appraisals, examinations, surveys, and testing…” which includes “…testing for lead-based paint and/or lead-based paint hazards, inspecting for active infestation of and /or damage from termites…”. At any time during the negotiated due diligence period, the buyer can terminate the agreement for any reason or, if there are objections, the buyer may initiate a negotiation with the seller to address their concerns. Option “B” is the “As-Is” option. If chosen, the buyer has obligation to buy the property without regard to what may be found in an inspection and the seller has no obligation to make any repairs. As is simply means “without warranty” and does nothing to the obligation a seller or agent has to disclose known latent defect.
12. Appraisal.
Since this is a due diligence contract and there is not an imbedded financing contingency, this section allows for the option of including the Appraisal Contingency Exhibit. This would make the obligations of the buyer contingent on the property appraising for the amount of the sales price. If the appraisal could be completed during the due diligence period, this Exhibit should not be needed but is still an option for those who feel it is appropriate under the circumstances.
13. Entitlement to and Disbursement of Earnest Money.
This section entitles the buyer to the earnest money in the event the seller defaults, there is no agreement entered into, a contingency cannot be met or upon closing. The seller would be entitled to the earnest money in the event the buyer defaults. If the seller accepts the earnest money upon default by buyer, the earnest money is treated as liquidated damages and the seller relinquishes any legal right to make additional claims against the buyer. This section also stipulates under what circumstances the holder of the earnest money may disburse. These situations are consistent with Georgia License Laws and Rules: a. withdrawal of an offer; b. rejection of an offer; c. closing of the contract; d. separate written agreement of all parties with an interest; e. court order; f. filing of an interpleader; or g. reasonable interpretation of the holder of the money. This section also provides for protection of the holder (usually the broker) in that they are indemnified from any and all suits, claims or causes of action related to their performance of duties.
14. Agency and Brokerage.
Agency has become a very important topic to the real estate licensee. While there will be a very in-depth and comprehensive discussion of agency and disclosure requirements in later chapters, a brief explanation of this section will be provided now. This section defines the broker working with the buyer as the “selling broker” and the agent working with the seller as the “listing broker”. The wording goes on to state whether the broker is or is not representing the interests of the party. Working “with” a person is not the same as working “for” a person. Working “for” is agency and brings with it very specific and important responsibilities. This section also allows for the possibility of dual agency and designated agency choices. These choices, while legal, are controversial and should only be chosen when within company policy and fully understood and explained. Furthermore, this section provides for compensation of the brokers but does not stipulate what exactly that compensation will be. This is because the purchase and sale agreement is between the buyer and seller and the compensation provisions are between the party responsible to pay and the brokers. This is typically negotiated in the brokerage engagement agreement. There is also a section for the brokers to disclose any relationship they may have that could be perceived to be a conflict.
15. Disclaimer.
This is a general catch-all statement to distance the broker from liability caused by their actions, statements or claims. It essentially says that brokers and their affiliated licensees are robbing various small villages of having their own idiot, and nobody should rely upon anything the broker says or does. While it obviously does not go quite that far, it is a pretty inclusive statement which attempts to shift the responsibility onto the buyer and seller to check items of importance out for themselves and reminds the parties that the brokers are not an expert in many topics.
16. Seller’s Property Disclosure.
This simple paragraph states that the seller’s property disclosure form is attached and made a part of the agreement. While a seller is required to disclose latent defect in property, it is not legally required to use this, or any other, form. When negotiating with banks, corporate owners of employee properties and third party relocation companies, it is not uncommon that they will refuse to complete this form as they have never lived in the property or have specific knowledge and do not want to create a liability by implying that they do have knowledge. When a disclosure form is not attached, this section should be crossed out with all parties initialing, dating and timing the change.
17. Lead-Based Paint.
On properties built before 1978, buyers have under federal law the right to inspect for lead based paints. Here, this right is waived by the buyer and the reason is, it is covered under their right to inspect in the contract.
18. Notices.
A very important section! A contract is not a contract unless it has been properly and effectively communicated between the parties. Section 18 requires that all notices be in writing and stipulates the 5 delivery methods; 1) in person; 2) overnight delivery; 3) FAX; 4) registered or certified U.S. mail, return receipt; or 5) e-mail. Furthermore, notice is not effective until actual receipt with the exception of FAX. If the sending FAX provides a written confirmation of transmission, the notice is effective upon transmission, regardless of receipt. Also provided here is imputed notice, which is the right of an agent to receive legal notice on behalf of a client. So if the required notice is properly delivered to the agent, it is the same as delivery to the client. This section also provides for a FAX number and e-mail address for unrepresented parties.
19. Other Provisions.
Found here are such things as (A) the seller agrees to transfer any warranties, bonds or contracts to the buyer at the buyers expense; (B) any repairs will be made in a workmanlike manner; (C) this agreement is the entire agreement between the parties. This makes it incumbent upon the buyer and seller to make sure that anything they deem important make it to the writing of the contract. (D) is the survival clause. This stipulates that obligations, such as title warranties and commission payments, shall continue after closing if not completed at closing. (E) states that interpretation of agreement shall be based on Georgia law and all times included are Georgia times; (F) states that time is of the essence in this agreement. Simply put, times are obligations, not suggestions. If one party does not comply within the times stated in the contract, they will be in breach. (G) is legal terminology commonly found that states plural means singular, singular means plural, he means she, she means he and they mean you, me and our Aunt Martha, if applicable. (H) clarifies that binding agreement date (which is very important in this contract), is the date the acceptance is received by the offeror; (I) requires all parties to cooperate in doing all things reasonably necessary to fulfill the agreement; and (J) is the disclaimer for GAR to limit the use of the forms and the liability that GAR may have if there is any ensuing litigation.