Unraveling Real Estate Offers: A Comprehensive Guide to Commonly Used Forms

Are you ready to embark on an exciting journey towards homeownership?

As a buyer, these are the most common forms you will see in a Purchase and Sale Agreement:

• Form 21 - Residential Purchase & Sale Agreement - This is the most commonly used agreement to purchase a house. (Condominiums and multi-family properties have their own forms.) Page 1 of this form outlines the main details of your offer including price, earnest money deposit, and the closing date. Pages 2-6 contain important information about the terms included in the agreement and it is a good idea to read through all paragraphs in this form to understand what the contract obligates you to do.
  
  
• Form 28 - Condominium Purchase & Sale Agreement - This form is very similar to the Form 21 above, but is used when you are purchasing a condominium. Page 1 of this form outlines the main details of your offer including price, earnest money deposit, and the closing date. Pages 2-6 contain important information about the terms included in the agreement and it is a good idea to read through all paragraphs in this form to understand what the contract obligates you to do.
  
  
• Form 20 - Multi-Family Purchase & Sale Agreement - This form is very similar to Form 21 and Form 28, but is used when you are purchasing a multi-family property (Duplex, triplex, fourplex, etc.) Page 1 of this form outlines the main details of your offer including price, earnest money deposit, and the closing date. Pages 2-6 contain important information about the terms included in the agreement and it is a good idea to read through all paragraphs in this form to understand what the contract obligates you to do.
  
  
• Form 22J - Lead Based Paint Disclosure - This form will be used in a contract for any property built before 1978. This form requires the seller to disclose if they have any knowledge of lead based paint that has been used in the house, and allows the opportunity for a buyer to do an inspection for the presence of lead-based paint. Typically, the opportunity to conduct an inspection is waived if you are including an inspection contingency (more on this below) as the test is very simple and easy and can be done at the time of your inspection.
  
  
• Form 22K - Identification of Utilities - This form is completed by the seller and will list all of the utility providers currently servicing the home. Escrow will use this form to ensure that any existing balance with those utility companies is paid in full at closing. You can use the information on this form to call and set up your utility accounts for your new home.
  
  
• Form 22E - FIRPTA Certificate - The Foreign Investment in Real Property Tax Act (FIRPTA) requires that a buyer of a property in the US must withhold tax if the seller is a foreign person. The seller will complete this form and indicate if they are a foreign entity. For most transactions, the seller is not a foreign corporation. However, if they are, we will work with the escrow closer to ensure that the proper amount of tax is withheld from the sellers proceeds and sent to the IRS. The buyer's signature is only needed on this form when the seller IS a foreign entity.
  
  
• Form 22A - Financing Addendum - This form is used when a buyer would like to make the offer contingent on being able to secure a loan. You must disclose what type of loan you intend to use to purchase the property. With this contingency included, if you are unable to secure the loan, you can withdraw from the transaction and still receive a refund of your earnest money. This form also requires that the seller give the appraiser access to the property when an appraisal is ordered by your lender. This form also includes the option to ask for the seller to contribute some funds at closing (also called a seller credit or concession). Additionally, this form contains information about how the situation will be handled if the lenders appraisal comes in at a value that is less than the sale price.
  
  
• Form 22AD - Increased Down Payment Addendum - In a competitive market where property values are increasing, sometimes the home does not appraise at the agreed upon purchase price. Typically, when this happens, the buyer and seller renegotiate according to the information outlined in the Form 22A. Form 22AD allows you to increase your down payment in the event that the appraisal comes in lower than purchase price. Here is an example of how this form would help if your appraisal came in low:
  • Purchase price - $750,000
  • Appraised Value - $725,000
  • Additional Down Payment in Form 22AD - $25,000

In this situation, you would not need to renegotiate with the seller since the additional funds you offered for the low appraisal cover the difference between the purchase price and the appraised value. If a seller that knows there is a chance of the home appraising low (and then having to renegotiate the purchase price), they may be more likely to accept an offer with an increased down payment, even if the purchase price of that offer is lower than other offers that do not offer additional down payment funds.

• Form 35 - Inspection Addendum - This form allows the buyer to conduct an inspection of the property and to terminate the agreement by sending notice of disapproval to the seller. It is extremely important to be aware of the timelines outlined in this form and ensure that notices and responses are sent in a timely fashion. This form allows the buyer to withdraw from the agreement during the inspection contingency period and receive a refund of the earnest money deposit.
  
  
• Form 35R - Inspection Response - This form will be used to provide responses to the seller during the inspection contingency. As outlined in the Form 35, the buyer will have an amount of time (typically 10 days) to inspect the property and alert the seller of the results of the inspection. The options a buyer has after completing their inspection are:
  • Approval - The inspection contingency is waived and the buyer is requesting no modifications.
  • Disapproval - The agreement will automatically terminate and the buyer will receive a refund of their earnest money deposit. (Note: The buyer has the right to terminate the agreement based on the inspection findings without providing the seller an opportunity to address them. You can withdraw from the agreement at anytime for (virtually) any reason within the inspection contingency timeframe.)
  • Request for additional inspections - If something came up in the inspection and the buyer would like to have an additional professional perform an inspection this option is used. Please note that the seller may request the inspector's recommendation for additional inspection, so make sure you have that recommendation.
  • Request for modifications - If the buyer would like to request a reduction in purchase price or for the seller to complete repairs this option is selected, and the buyers requests are filled in and sent to the seller.

Should the buyer want to renegotiate based on the findings of the inspection, the buyer would use the latter option. After requesting these modifications the seller will have an amount of time (typically 3 days) to respond to the buyer's requests, the options the seller has when responding to a request for modification are:

• • Agreement - Seller agrees to the modifications the buyer has selected and the inspection contingency is waived.
  • Partial Agreement - The seller agrees to some, but not all of the buyers requests.
  • Rejection - Seller rejects all proposals by the buyer.
  • Partial Rejection - Seller rejects all proposals from the buyer, but will suggest an alternate solution.

• • Acceptance - Buyer accepts the sellers proposal and the inspection contingency is satisfied.
  • Rejection - The buyer rejects all proposals from the seller and the agreement is terminated. The buyer will be entitled to a refund of their earnest money deposit.
  • Partial Rejection - The buyer rejects the sellers response, but proposes an alternate solution. (Note: This does not extend the inspection contingency period. If the seller has not accepted the buyer's final response before the inspection contingency period expires, the buyer must serve notice terminating the agreement before the period expires in order to receive a refund of their earnest money deposit.)
    
    
• Form 22AA - Appraisal Addendum - This form allows a buyer to make their offer contingent on an appraisal, but not contingent on financing. This form also provides that if the appraisal comes in low the buyer may give notice of this to the seller to renegotiate the terms of the contract. This form also addresses potential work orders that may come up in the appraisal and outlines the process of negotiating if work orders are required. (Sometimes an appraisal will be subject to repairs or modifications being completed.) If the appraisal comes in low, or there are work orders the seller is not willing to complete, the buyer would be entitled to a refund of their earnest money deposit.
  
  
• Form 22S - Septic Addendum - This form will be used if the sale is contingent on an inspection of the on-site sewage system (or septic system). This form only covers inspections of the septic system, so if a buyer wants to conduct an inspection of the entire home, a Form 35 (see above) should be used. If a buyer reviews the inspection report and would like to withdraw from the transaction based on those findings, written notice must be provided to the seller in order to receive a refund of the earnest money deposit.
  
  
• Form 22EF - Evidence of Funds Addendum - This form allows for the buyer to disclose how they intend to pay for the purchase. The options include funds the buyer currently possesses (or non-contingent funds) or funds from any other source (contingent funds).
  
  
• Form 35E - Escalation Addendum - If a buyer wants to submit an offer on a property and it is expected that the property will receive multiple competing offers, the buyer may want to include an escalation addendum. This addendum sets a maximum offer price, as well as an interval at which the purchase price will increase above the competing offer net purchase price. Here is an example:
  • Purchase Price (on page 1 of the P&S Agreement): $725,000
  • Maximum Purchase Price: $815,000
  • Escalation Interval: $5,000
  • Competing Net Purchase Price: $800,000
  • Final Purchase Price: $805,000

• Form 22D - Optional Clauses Addendum - This is an optional form but includes many clauses commonly included as part of a purchase and sale agreement such as the seller cleaning the property and not leaving personal property behind. This also allows the buyer to review the Homeowners Association documents and allows the buyer to withdraw and receive a refund of their earnest money should they discover something in the Association documents.