CH 11 CONTINGENCIES, AMENDMENTS, and ADDENDA.pdf.docx

Paragraph e authorization to release information the

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condition are acceptable. Paragraph E. Authorization to Release Information The buyer gives the lender the right to provide the seller or the seller’s representative with information relating to the status of the approval for financing. Loan Assumption Addendum Financing through assumption refers to the buyer seeking to assume the seller’s existing loan. When the buyer assumes the seller’s loan, the buyer becomes responsible for repayment of the loan as well as any other obligations to the lender. The Loan Assumption Addendum provides the ___________________________________________________________ _ Unit 11: Contingencies, Amendments, and Addenda 414
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details regarding this type of transaction. If the box in Paragraph 4, FINANCING, B in the purchase contract is checked, then the use of this addendum is mandatory. The loan assumption addendum is used in a situation in which the existing loan is assumable without the lender’s approval. As a result, use of this addendum is very rare. Paragraph A. Credit Documentation In Paragraph A, the seller requires various forms of documentation to establish the buyers’ creditworthiness. Typically, 3 to 7 days is a reasonable time for the buyer to comply with the seller’s credit documentation requirements. In addition, the seller will not require this entire list. The blank leaves room for other forms of documentation that may be necessary. Paragraph B. Credit Approval Paragraph B establishes time lines and consequences for not meeting the credit documentation timelines. If the buyer does not deliver the required documentation within the specified time, the seller can terminate the contract and retain the earnest money as liquidated damages. If the buyers deliver the documentation in a timely manner and the sellers find the credit unacceptable, the sellers have 7 days from delivery to notify the buyers of their rejection and the buyers will retain their earnest money. If the sellers fail to notify the buyers within the 7 days, then the buyers’ credit is deemed acceptable and the transaction moves forward. Paragraph C. Assumption Paragraph C cites the parties to whom the first and/or second lien notes are payable, the estimated balance being assumed and the monthly payment. Since the assumed balance will usually vary from the effective date of the contract to the closing date, this addendum allows the equity or the sale price to be adjusted to accommodate the changed assumptive balance. If that difference is greater than $500.00, either party may terminate the contract or the parties may renegotiate. Paragraph D. Loan Assumption Terms Paragraph D places a limit on the assumption fees and any change in the interest rate the lender might impose upon assumption. After the transaction completes and the buyer assumes the loan, release of the seller’s liability would be achieved by using the Release of Liability Addendum.
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  • Fall '19
  • Mortgage loan, FHA

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