This webpage coverers the most frequent questions I receive concerning the purchase contract and the purchase process.
Q: Real estate purchase contract structure
A: Conceptually, I divide the 44 page contract into two sections:
Q: What agreement is used to purchase real estate in Las Vegas?
A: The purchase agreement is published by The Greater Las Vegas Association of Realtors. The complete package with all the disclosures and such is over 40 pages long. However, the key part of the contract is only 11 pages. Here are the key 11 pages and below are the most frequently asked questions and references to the corresponding agreement sections. Here is the full document with all the disclosures and addendums.
Q: How much are closing costs?
A: It depends on whether the purchase is financed or cash. Closing costs on a cash purchase is typically less than $2,000. If the property is financed, the closing costs will typically range between 4% and 5% of the purchase price. This includes the cost of the loan.
Q: When I am committed to buying the property or losing my earnest money?
A: The way I write the contract, there is a 10 day due diligence period that usually starts once the contract is fully executed by both parties. During this time period, you can cancel the contract for any reason and your earnest money will be refunded. See 12.A Due Diligence Period for specifics.
Q: What does "As Is" actually mean?
A: When you purchase a property "As Is" you are waiving any right or recourse against the seller. In simple terms, if the home collapses into a hole one second after the property closes, it is your problem; the seller will not do anything. This is not hidden; you will have to sign multiple documents that state that you are buying the property "As Is". Further, you will have to sign a notarized document attesting to the fact that you are waiving all your rights to property disclosures or to make any claims against the seller. Here is more information on As Is properties.
Q: What happens if I'm not able to obtain financing after the agreement is signed?
A: Section 1.B of the purchase contract states that the agreement is contingent upon the buyer qualifying for a new loan... under terms and conditions we specify (maximum interest rate, loan type, etc.).
Q: What happens if the appraisal is less than the offer amount?
"If an appraisal is required as part of this agreement, or requested by Buyer, and if the appraisal is less than the Purchase Price, the transaction will go forward if (1) Buyer, at Buyer's option, elects to pay the difference and purchase the Property for the Purchase Price, or (2) Seller, at Seller's option, elects to adjust the Purchase Price accordingly, such that the Purchase Price is equal to the appraisal. If neither option (1) or (2) is elected, then Parties may renegotiate; if renegotiation is unsuccessful, then either Party may cancel this Agreement upon written notice, in which event the EMD shall be returned to Buyer."
In summary, if the appraisal is less than the offer amount and the seller does not agree to reducing the purchase price to the appraisal we terminate the contract. Your loss will be the cost of the appraisal ($400) and possibly the inspection ($275).
Q: When do I actually commit funds; when does the earnest money check actually get deposited?
A: The earnest money is usually deposited (wired to) with the title company once both the buyer and seller have signed the purchase contract. See: 5.A Opening of escrow and 5.B Earnest money.
Q: Who is the earnest money check made payable to?
A: The title company. I specify a title company in the contract but the banks generally require that you use their preferred title company. We will not know which title company until after the contract is formed.
A: Below is the text from Section 8 of the purchase contract:
TRANSFER OF TITLE: Upon COE, Buyer shall tender to Seller the agreed upon Purchase Price, and Seller shall tender to Buyer marketable title to the Property free of all encumbrances other than (1) current real property taxes, (2) covenants, conditions and restrictions (CC&R's) and related restrictions, (3) zoning or master plan restrictions and public utility easements; and (4) obligations assumed and encumbrances accepted by Buyer prior to COE. Buyer is advised the Property may be reassessed after COE which may result in a real property tax increase or decrease.
Q: What are my options if the inspection uncovers a significant problem and I want to terminate the contract?
A: There is typically a ten day due diligence period during which inspections are completed. During these ten days, you can terminate the contract for any reason. Here is the text from section 12.A:
Due Diligence Period: Buyer shall have calendar days from Acceptance to complete Buyer's Due Diligence. Buyer shall ensure that all inspections and certifications are initiated in a timely manner as to complete the Due Diligence in the time outlined herein. (If utilities are not supplied by the deadline referenced herein or if the disclosures are not delivered to Buyer by the deadline referenced herein, then Buyer's Due Diligence Period will be extended by the same number of calendar days that Seller delayed supplying the utilities or delivering the disclosures, whichever is longer.) During this period Buyer shall have the exclusive right at Buyer's discretion to cancel this Agreement. In the event of such cancellation, unless otherwise agreed herein, the EMD will be refunded to Buyer. If Buyer provides Seller with notice of objections, the Due Diligence Period will be extended by the same number of calendar days that it takes Seller to respond in writing to Buyer's objections. If Buyer fails to cancel this Agreement within the Due Diligence Period (as it may be extended), Buyer will be deemed to have waived the right to cancel under this section.
Note: since you need not specify the reason for terminating the contract, you can use this provision to terminate for reasons other than the inspection.
Q: If I choose to cancel the contract due to the inspection, are my costs for the inspection reimbursed?
A: No. If you choose to cancel the contact, any expenses you have incurred (inspections, appraisals, etc.) are your loss; you will not be reimbursed.
Q: What if I choose to cancel the contract after the due diligence period?
A: You will lose your earnest money deposit. See 17.B If Buyer Defaults.
Fixtures And Personal Property: The following items will be transferred, free of liens, with the sale of the Property with no real value unless stated otherwise herein. Unless an item is covered under Section 7(E) of this Agreement, all items are transferred in an "AS IS" condition. All EXISTING fixtures and fittings including, but not limited to: electrical, mechanical, lighting, plumbing and heating fixtures, ceiling fan(s), fireplace insert(s), gas logs and grates, solar power system(s), built-in appliance(s), window and door screens, awnings, shutters, window coverings, attached floor covering(s), television antenna(s), satellite dishe(s), private integrated telephone systems, air coolers/conditioner(s), pool/spa equipment, garage door opener(s)/remote control(s), mailbox, in-ground landscaping, trees/shrub(s), water softener(s), water purifiers, security systems/alarm(s);
I also add the text below to each contract because I am concerned that the seller could swap out one appliance for another. For example, there is a nice stove in the property until just before closing and then they replace the nice stove with a cheap stove. Here is the text I add to each contract:
All window treatments, appliances and pool equipment(if applicable) present on the date of this offer to remain.
Q: How do I know the property will be in the same condition when I close as when I decided to buy the property?
A: Section 13 of the purchase contract states:
"Walk-Through Inspection Of Property: Buyer is entitled under this Agreement to a walk-through of the Property within [5] calendar days prior to COE to ensure the Property and all major systems, appliances, heating/cooling, plumbing and electrical systems and mechanical fixtures are as stated in Seller's Real Property Disclosure Statement, and that the Property and improvements are in the same general condition as when this Agreement was signed by Seller and Buyer. To facilitate Buyer's walk-through, Seller is responsible for keeping all necessary utilities on. If any systems cannot be checked by Buyer on walk-through due to non-access or no power/gas/water, then Buyer reserves the right to hold Seller responsible for defects which could not be detected on walk-through because of lack of such access or power/gas/water. The purpose of the walk-through is to confirm (a) the Property is being maintained (b) repairs, if any, have been completed as agreed, and (c) Seller has complied with Seller's other obligations. If Buyer elects not to conduct a walkthrough inspection prior to COE, then all systems, items and aspects of the Property are deemed satisfactory, and Buyer releases Seller's liability for costs of any repair that would have reasonably been identified by a walk-through inspection, except as otherwise provided by law. "
Q: What happens after the seller accepts my offer?
Q: How do I know if restrictions imposed by the home owner's association will limit my ability to rent the property?
A: Knowing the association rules (Common-Interest Communities) is critical. Here is the text from section 9 of the purchase contract.
Common-Interest Communities: If the Property is subject to a Common Interest Community ("CIC"), Seller or his authorized agent shall request the CIC documents and certificate listed in NRS 116.4109 (collectively, the "resale package") within two (2) business days of Acceptance and provide the same to Buyer within one (1) business day of Seller's receipt thereof. Buyer may cancel this Agreement without penalty until midnight of the fifth (5th) calendar day following the date of receipt of the resale package. If Buyer does not receive the resale package within fifteen (15) calendar days of Acceptance, this Agreement may be cancelled in full by Buyer without penalty. If Buyer elects to cancel this Agreement pursuant to this section, he must deliver, via hand delivery or prepaid U.S. mail, a written notice of cancellation to Seller or his authorized agent identified in the Confirmation of Representation at the end of this Agreement. Upon such written cancellation, Buyer shall promptly receive a refund of the EMD. The parties agree to execute any documents requested by ESCROW HOLDER to facilitate the refund. If written cancellation is not received within the specified time period, the resale package will be deemed approved. Seller shall pay all outstanding CIC fines or penalties at COE.
The seller must provide a specific set of documents that are intended to provide you with a reasonable understanding of the restrictions as well as the condition of the association. Here is what you must receive:
You will also have to sign a document stating that you have received the above documents and that you agree to be bound by the CC&Rs. Here is the document.
Q: How do I determine the condition of the property?
A: Every property, whether purchased "As Is" or not, should be inspected by a licensed property inspector. Here is a sample inspection report. Note that:
Q: How can I minimize maintenance costs?
A: I recommend that you purchase a one year home warranty for each property. The home warranty does not cover everything but will cover the major items. Basically, most home warranties have a $55 per call-out charge. Beyond that the home warranty covers the repairs. The typical cost for a one year home warranty is about $330. Here is a sample home warranty policy description.
Q: Do I have to come to Las Vegas to buy a property?
A: No. If you are paying cash for the property, the title company (an independent third party who facilitates the purchase) will send you documents via email to sign. Just sign them and return them. You may be required to provide notarized identification. Typically this is a photo-copy of two forms of photo ID which is notarized by a local notary. If you are financing the property, the title company will send a mobile notary to you to handle signing all the documents.
A: Title insurance guarantees that you receive and maintain a legal and "marketable" title to the property. Think of title insurance as a single payment "life insurance" for the title of the property. Title Companies search public land records for matters that may affect the title but even the most exhaustive search may not uncover all of the title defects. Owner's Title Insurance protects you against hidden title defects. Potential defects
include:
One difference between a title policy and a life insurance policy is that title policies list what they do not cover; if something is not listed on the title policy then it is covered.
Q: Do I need to retain a lawyer to buy a property in Las Vegas?
A: No. You are welcome to have an attorney review the documents but I have never had anyone do this on residential property. The process in Las Vegas is standardized and (typically) no lawyer are involved in any aspect of the purchase. Virtually everyone uses the same purchase contract which is issued by the Greater Las Vegas Association of Realtors. The title company (an independent third party) facilitates the purchase of the property. Title insurance guarantees that you receive and maintain a legal and "marketable" title to the property. See What is title insurance? for a description of title insurance.
Q: Do I need to have a US bank account to buy property?
A: No. I work with international buyers all the time. When it comes time to transfer funds to purchase the property, have the bank wire the funds to the title company in a currency amount equivalent to the US dollar price.
Q: Are there any limitations to foreign nationals buying real estate in Las Vegas?
A: To the best of my knowledge, there are no limitations to foreign nationals buying any real estate in the US with the exception of "strategic" properties such as airports, dock facilities, etc.
Q: Does the earnest money check need to be in US dollars?
A: No. Any major currency denomination is fine. I attach a currency exchange sheet to the offer so the seller can see that the funds are the equivalent to the US dollar amount. Note that this check is not deposited, I only need a copy of the check for submission with the offer.
Contact me if you are considering buying or selling Las Vegas real estate. You will be glad you did.
...Eric
Eric Fernwood
RE/MAX CENTRAL
8400 W. Sahara Ave
Las Vegas NV 89117
Email: EricFernwood@gmail.com
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