Purchase contracts are the most common form of written agreement between a seller of property and a potential purchaser. In fact, the vast majority of real estate transactions that take place in the United States—the purchase and sale of single-family homes—utilize purchase contracts. Special mention is made of provisions that may be of particular interest to the purchaser organizations. As with any legal document, the terms of the purchase contract should be as clear and unambiguous as possible. You should consult with an experienced Spanish Fork Utah real estate lawyer prior to entering into any written agreement.
The purchase agreement must clearly state the identities of the purchaser and the seller and include an address where the parties must deliver any written notices required under the agreement. The address provisions may be included in a separate paragraph.
The purchase contract must contain a paragraph that describes in detail the real property to be transferred and addresses how the personal property owned by the seller and located on the property will be disposed of.
The description of the real property (land and whatever else is built on the land) provided in the purchase agreement may be the single most important section of the document. The sponsor will be able to “specifically enforce” or force the sale of the specific parcel of land described in the purchase agreement only if the terms of the written agreement clearly describe the property in question. The sponsor should be certain that the description included in the purchase agreement is the legal description of the property that can be found in the land records of the jurisdiction where the property is situated. Additional means of identifying the property, for example, the lot and square numbers used to identify the property for property tax purposes and the property mailing address, should be used only to supplement the legal property description.
The contract must state how the parties are going to treat any personal property (everything not permanently affixed to the land) that is located on the property on the date of transfer. This personal property usually includes such items as appliances, light fixtures, heating and air-conditioning units, lawn mowers, and so on. As a general rule, these items are transferred to the purchaser. However, the contract should state the transfer (if that is the case) or the limitations on the personal property to be conveyed.
The purchase contract must contain a paragraph that states a definite purchase price for the property. This paragraph also may contain details on how the purchase will be financed.
There are different ways of purchasing a property. You can either purchase it outright or exercise an option. Speak to an experienced Spanish Fork Utah real estate lawyer to know more about an option contract.
There are not many differences between a purchase and an option contract. In fact, an option agreement must contain many if not all of the provisions included in a purchase contract because the option essentially converts into a purchase contract if the optionee exercises its option to purchase the property. Therefore, option contracts often include many of the provisions in the context of what the parties must do or provide if the option is exercised. The purchase and the option contracts do differ in the following ways:
• Unlike the purchaser of a purchase contract, who is legally committed to purchasing the property by the settlement date, the purchaser of an option is committed only to deciding whether it wants to exercise its option to purchase the property within the option period.
• Purchase contracts require a significant earnest money deposit, ranging from 5 percent to 25 percent, to “guarantee” the purchaser’s performance. Option contracts, on the other hand, generally require the purchaser to pay only a relatively small amount of money—1 percent to 5 percent of the purchase price—for the right to defer its decision on the purchase. This option fee may or may not be applied to the purchase price. The option contract should state how the option fee is to be treated.
• An option is often viewed as a purchaser’s, not a seller’s tool, because it allows the purchaser to risk very little and requires the seller to provide the purchaser with an exclusive right to purchase the property during the option period. A seller is not likely to enter into an option contract if there is significant demand for the property in the marketplace. Sellers obviously prefer to execute a purchase contract, which carries the expectation of settlement, instead of an option contract, which carries limited expectations that the property will be transferred.
• Optionees generally are required to act within the option period or lose their option on the property; purchasers in a purchase contract are often provided, for good cause, a reasonable period of time to complete the transaction even after the settlement date has expired
Ordinarily a home buyer cannot obtain a loan which represents the full amount of the purchase price in any kind of transaction; the purchase of a home is no exception. A down payment is required as a manifestation of the good faith and serious intentions of the borrower and to provide a margin of safety, that is, of value of collateral over debt, for the lender.
The importance of this arrangement to an understanding of the market for homes in fee lies in the fact that, in general terms, credit multiplies the purchasing power of the down payment by a factor which is the reciprocal of the ratio of down payment to the total purchase price. If credit were extended in the full amount of the purchase price, purchasing power would be limited only by the amount which the prospective homeowner could borrow; where no credit is available, purchasing power is limited by the prospective owner’s own resources. If the down payment represents one-half of the purchase price and the other half can be borrowed, the purchasing power of the down payment is multiplied by two; if one-third, by three, etc.
When you are applying for a mortgage, the lender will require you to sign many documents. Do not sign them unless and until you have shown them to an experienced Spanish Fork Utah real estate lawyer. The lawyer will advise you on what you need to do to protect your rights.
The settlement process, in a nutshell, involves payment by the purchaser of the acquisition price, signing of the deed of conveyance of the property by the seller, and recording of that deed among the land records of the jurisdiction in which the property is located.
The first step is to understand the role of the settlement agent. The settlement agent acts as the neutral “referee” of the settlement. The settlement agent does not represent any of the parties at the settlement, but instead carries out the instructions of all the parties—the purchaser, the seller, the lender (if any), and the local government.
The main reason that a settlement agent is needed is because it is virtually impossible to carry out the fundamental aspect of a sale directly between purchaser and seller without a level of trust that is not justified by normal market considerations. The seller has to sign the deed conveying the property to the purchaser; the seller does so in exchange for payment of the purchase price. The purchaser has to pay the purchase price, but only when the purchaser can be assured that the seller does indeed have good and marketable title to convey to the purchaser. Without the involvement of the neutral settlement agent, the seller could not be assured that the purchaser was providing all of the required acquisition price (including all funds being provided by third-party lenders or investors). Similarly, the purchaser and the purchaser’s lenders and investors could not be assured that their acquisition funds were being used to acquire a deed to a property that the seller has the authority to convey. The settlement agent holds in escrow the deed and the acquisition funds from all relevant sources until the settlement agent can successfully record the deed and ensure that no unidentified claims have been recorded against the property. An experienced Spanish Fork Utah lawyer can act as settlement agent.
The Fifth Amendment states that private property can only be taken for a “public use.” If the government or other condemnors may take private property only for valid public uses, how do we determine if the taking is for a public or private use? The “public use” doctrine can be described as an “essentially contested concept.” This suggests that its meaning has been subject to debate over time. Various courts and legislatures have defined “public use” either from a narrow or a broad perspective. A narrow reading of “public use” indicates “used by the public.” Under this definition, uses such as for bridges, highways, and schools qualify as valid public uses because the public, or at least some segment of it, can actually physically use the property. Critical here is that more than one person benefits and uses the property. A second, broader definition of “public use” equates the meaning to include the “public advantage,” “promoting the public welfare,” the “public good,” and “public necessity.” Here it is not essential that the public actually use the property so long as they benefit from the taking in some way. Again, more than one person must benefit from use of eminent domain. This meaning suggests that almost any project can be construed as a public use, as long as it is shown that it furthers economic development, public welfare, or a better use of local resources. If your property is being taken away by the state or city for public use, contact an experienced Spanish Fork Utah real estate lawyer.
If you are entering into a construction contract with a contractor, consult an experienced Spanish Fork Utah real estate lawyer. The lawyer can prepare the construction contract.
The construction contract must spell out the various documents that make up the contract documents and incorporates them into the agreement. This is necessary because the agreement alone is not a complete contract and requires the other documents to be binding and inclusive. The contract must name the documents by their generic titles and list separately all of the items that are being incorporated into the agreement- the Conditions (General, Supplementary, and other), the drawings and specifications, any addenda issued prior to the formal agreement, and any other documents necessary to the particular project. The documents and the construction contract together constitute the entire contract and supersedes any other agreements or negotiations that may have occurred.
The owner must be sure that any issues discussed and resolved during negotiations are reduced to writing and included in one of the documents on this list, in order to have any legal effect. The owner also must be careful not to list conflicting or redundant documents.
The standard Changes clause permits the property owner to make changes only within the ‘general scope’ of the contract. Because of this phrase in particular, and the structure of the article in general, the courts have consistently ruled that such a change provision does not authorize a drastic modification beyond the scope of the contract. Rather, a fundamental alteration of this nature is a contract breach, or cardinal change as it is sometimes referred to, entitling the contractor to breach damages. Under established case law, a change outside the scope of the contract is a breach. It occurs when the property owner affects an alteration in the work so drastic that it effectively requires the contractor to perform duties materially different from those originally bargained for.
The issuance of change orders will, of course, have varying effects in different situations depending on the scope and location of the work required by the orders and the timing and manner of the issuance of such orders. The issuance of a large volume of change orders could adversely affect the contractor’s ability to efficiently perform the basic contract. Since such dislocation is a normal and natural consequence of the circumstances, a contractor would be entitled to recover a fair and reasonable amount for the additional costs it sustained.
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When you need legal help with real estate in Spanish Fork Utah, please call Ascent Law for your free consultation (801) 676-5506. We want to help you with quiet title actions, evictions, mortgage issues, boundary lines, estate matters and more.
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West Jordan, Utah
84088 United States
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