| Have you ever wondered if your agent and
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| | proceeds from the sale. So, they have
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| loan officer are doing something that
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| | you sign a side agreement. The seller
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| could get you into trouble?
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| | supposedly will give you a check after
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| You should!
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| | close for the furnace or have someone
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| Buying a house is a complicated process
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| | replace it after the close.
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| and many times your lack of insider
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| | This happens all the time. The agents
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| knowledge can get you in hot water.
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| | and loan officer involved in the
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| Shouldn't the agent and loan officer be
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| | transaction would sooner cut off their
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| putting your best interest first?
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| | right arm then lose a commission because
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| Of Course!.....but unfortunately, it does
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| | of a faulty furnace. Here is what could
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| not work out that way. The deal
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| | happen to you ,the buyer, when a side
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| transaction gets put first.....the part
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| | agreement goes wrong.
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| where the agent and loan officer both get
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| | 1. The seller never gives you any money
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| paid. Once the agent and loan officer
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| | for the furnace or they give you a check
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| have started working on a transaction,
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| | that bounces.
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| they don't want anything to get in the
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| | 2. The furnace is installed after the
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| way of the commission when it closes. It
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| | close by the seller's choice of
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| may be in your best interest to get out
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| | contractors. Of course they will want to
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| of the contract and not buy that home but
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| | get the cheapest contractor they can find
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| the agents and loan officers are lazy and
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| | because it isn't their house anymore.
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| don't want to do the right thing. They
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| | The furnace get installed incorrectly or
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| want to do the easy thing. In this case,
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| | during installation something else in
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| the easy thing is fraudulent and
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| | your new home gets destroyed and you have
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| unethical.
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| | to pay for that since it is your house
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| I know while you are out looking at
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| | now.
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| houses you have a million things to think
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| | 3. The lender finds out about the side
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| about. In my experience, the inspection
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| | agreement and now calls the note due and
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| is something that can really be confusing
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| | payable.
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| if you don't know how to handle it. More
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| | If running the risk of depending on the
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| importantly, you will be committing loan
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| | seller and the agents for money isn't bad
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| fraud without the proper counsel.
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| | enough, think of it from the lender's
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| Usually, after you write a contract on a
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| | side. They are the ones lending the
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| home and it has been accepted, you as the
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| | money for your new home. They have a
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| buyer have a home inspection done. The
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| | right to know that the collateral is not
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| inspection is different than the
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| | what is represented in the contract.
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| appraisal. The appraisal is done to
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| | Even though the inspection is not a part
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| establish the value of the home.
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| | of the mortgage process, the lender
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| Appraisers will inspect the home also.
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| | doesn't contract to lend on a house that
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| The appraiser will measure rooms to
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| | needs expensive repairs. Not only did
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| verify square footage and note the
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| | you overpay but the lender get cheated
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| condition of the home while they are in
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| | too...it is called loan fraud.
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| there. If they find any major problems
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| | Just because I mention the agents most of
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| that affect the soundness of the home,
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| | the time does not mean the loan officer
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| they will report that in the appraisal.
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| | is off the hook. They are supposed to
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| The appraisal is submitted with the other
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| | protect the lender from any fraud and in
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| loan documents to the lender.
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| | the case of side agreements. What they
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| Even though the inspection is not a
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| | are basically saying to the agents is, "I
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| requirement for the loan, every buyer
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| | don't want to know about what you are
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| should get an inspection. You as the
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| | doing just get it done so we all can get
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| buyer need to know if the property is in
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| | paid". The loan officers are just as
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| satisfactory condition and therefore
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| | guilty as the agents.
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| worth what you are going to pay for it.
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| | The Maine Creditor Update which is the
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| You also want to make sure the seller
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| | newsletter for the Office of Consumer
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| isn't hiding anything from you. Buying a
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| | Credit Regulation has an article in it
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| house and then having to spend hundreds
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| | from its September 2004 issue.
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| or thousands of dollars fixing things the
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| | It states, "Buyers and sellers of
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| seller didn't want you to know about is
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| | residential real estate will sometimes
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| not the dream of home ownership most
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| | agree to "side deals" in which money
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| people think of.
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| | changes hands to cover the cost of needed
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| So, if the inspection report is not a
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| | repairs or defects discovered on the
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| part of the loan process....how could you
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| | property. However, if these adjustments
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| commit loan fraud?
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| | are substantial enough to affect the
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| If there are problems identified from the
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| | value of the residences being used as
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| inspection the buyers can either decide
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| | security for loans to the buyers, and if
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| they do not want the property in that
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| | the side deals are not reflected in the
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| condition or request the sellers fix the
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| | HUD-1 closing statement, then all parties
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| problems before closing. The agents must
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| | to the transactions (including the
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| have the buyer and seller agree in
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| | settlement agents and the real estate
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| writing on any repairs inside the
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| | agents) should carefully review their
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| contract. Unfortunately, the agents like
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| | participation to determine whether legal
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| to have what is called "side agreements".
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| | or ethical principles are being violated.
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| A side agreement is an agreement that is
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| | In any FHA-insured loan, the buyer,
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| not part of the real estate contract.
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| | seller and settlement agent each sign
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| The contract should be agreed upon by all
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| | statements attesting to the accuracy of
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| parties and should have all information
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| | the figures being used. Knowledge of a
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| true and correct. With a side agreement,
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| | substantial side agreement not reflected
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| there is information that is withheld
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| | in the HUD-1 would almost certainly
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| from some of the people involved in the
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| | violate these representations. Maine law
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| transaction. The lender who is loaning
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| | does not contain specific provisions
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| you the money to buy the home and the
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| | prohibiting undocumented side agreements,
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| title company who is supposed to be the
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| | such as the one enacted in Alabama which
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| gatekeeper for all the documents to
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| | states that a real estate agent may lose
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| transfer title correctly are the one left
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| | his or her license for "misrepresenting
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| out.
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| | or failing to disclose...the true terms
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| Let's say there was a problem with the
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| | of a sale of real estate" (Ala. Code,
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| furnace on the home you were under
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| | sec. 34-27-36(a)(21). However, parties
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| contract to buy. You tell your agent you
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| | to Maine transactions should not assume
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| want the furnace to be replaced because
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| | that the absence of a state law here
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| the inspection report says it is unsafe.
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| | means that such deals are permitted on
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| Your agent already knows the seller does
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| | mortgages headed for the secondary
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| not have the money to fix the furnace
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| | market, especially when the loans will be
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| until after they get the proceeds from
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| | held or guaranteed by government or
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| selling the house. How does your agent
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| | quasi-government entities."
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| know that? Agents talk to each other all
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| | If you are going to agree to anything you
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| the time without you knowing it. Most
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| | always do it in writing in the contract.
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| agents technically work for the seller.
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| | That is what contract amendments are for.
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| That means they share information with
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| | Real estate is all about the contract.
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| the seller's agent all the time. They
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| | You can't un-ring a bell. Even though
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| work together to get the deal done and if
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| | the only thing the lender saw was the
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| it is not in your best interest, then so
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| | appraisal and it didn't uncover a faulty
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| be it.
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| | furnace, the problem is now out in the
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| The seller does not have the money to
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| | open and you have to deal with it. You
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| make the repairs before the close. The
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| | are ultimately going to pay for the home
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| agents will have the you and the seller
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| | and keeping a level head about right and
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| sign a side agreement stating either:
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| | wrong is important.
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| 1. the seller will write you a check
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| | Do not let anyone talk you into signing a
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| after the close for the repairs or
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| | side agreement. You now know that it is
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| 2. the seller will hire a contractor for
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| | not in your best interest and it is
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| the repairs after the close
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| | unethical and fraudulent.
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| The problem with these side agreements is
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| | Tips
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| they always favor the seller and more
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| | 1. Always get your inspection done early.
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| importantly, they are loan fraud.
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| | Make it one of the first things you do
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| For example, the inspection states the
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| | after your contract has been accepted.
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| furnace needs replacing. Your agent is
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| | The agents usually try to push this one
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| supposed to present the seller's agent
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| | until the end because they are already
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| with a contract amendment stating the
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| | afraid something will be wrong and they
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| seller will have a licensed contractor
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| | figure the farther you are down the road,
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| install a new furnace before closing.
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| | the more you will agree to things that
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| The seller will either agree to that and
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| | are not in your best interest. Get it
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| sign the contract amendment so it becomes
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| | done as fast as you can.
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| part of the contract or not agree to that
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| | 2. Don't use the agent's inspection
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| and you now have a decision to make. Do
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| | company or anyone they suggest. Find one
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| you want to buy a house that it supposed
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| | on your own. If you now know that agents
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| to be in good working order at that price
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| | will use side agreements not in your best
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| when you know now from the inspection it
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| | interest, then you also should know that
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| isn't?
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| | they will use inspection companies that
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| But like we discussed earlier, the agents
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| | won't deliver a true picture of the
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| both know the seller does not have the
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| | problems with the home just get the deal
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| money to pay for the furnace. The agents
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| | done.
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| are looking at losing their commissions
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| | Good Luck in your House Hunting!
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| and the seller is looking at losing the
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