Oklahoma
Contract Information Booklet
Oklahoma Real Estate Commission
1915 N. Stiles Avenue, Suite 200
Oklahoma City, Oklahoma 73105-4915
February 2018
FOREWORD
This booklet was developed by the Oklahoma Real Estate Contract Form Committee
which was created by the legislature in 2001, for the purpose of creating real estate
purchase and/or lease contracts and related addenda for use by real estate licensees.
The Committee consists of a total of 11 members: three (3) from the Oklahoma Real
Estate Commission; three (3) from the Oklahoma Bar Association; and ve (5) members
from the Oklahoma Association of REALTORS
®
.
The information in this booklet is dedicated to the residential sales contract and related
addenda; however, this information is also useful for portions of the New Home and
Vacant Lot contracts and related addenda. This publication does not constitute legal
advice. Legal advice should be sought from competent legal counsel.
First Printing - March 2006
Revised February 2018
This booklet is available online at www.orec.ok.gov (Click on the “Contract
Forms and Related Addenda” link).
This publication, produced by the University of Oklahoma Printing Services, is issued by the
Oklahoma Real Estate Commission as authorized by Executive Director Charla J. Slabotsky, at
no cost to the taxpayers of the State of Oklahoma. The entire cost of preparing this publication is
supported by the Real Estate Licensees through their Education and Recovery Fund fees. Copies
have been deposited with the Publication Clearinghouse of the Oklahoma Department of Libraries.
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Oklahoma Contract Information Booklet
Bolded italic words are dened at the end of this brochure.
The Offer Negotiations to purchase a home begin when the Buyer makes a
written Offer to purchase the Seller’s home. The Seller may accept, reject or
make a Counteroffer to the Buyer’s offer. The offer may go back and forth until
both Parties have agreed to all terms in writing, and the document has been
delivered to both Buyer and Seller (or their Broker, as authorized). At this point,
the offer becomes a Contract.
During the Offer and Counteroffer process, the Listing Broker (if applicable) is
required by law to continue presenting all offers to the Seller up until the time the
Seller accepts an offer in writing. Further, during the offer/counteroffer process, the
Seller may withdraw the Seller’s counteroffer and accept another contract if the
Seller’s counteroffer has not been accepted and signed by the Buyer and delivered
back to Seller, or if authorized, Listing Broker. Likewise, Buyer may withdraw
Buyer’s offer and purchase a different property if the Buyer’s offer has not been
accepted and signed by the Seller and delivered back to Buyer, or if authorized,
Selling Broker. All items of a contract are negotiable between the Buyer and Seller.
Prior to the Buyer submitting an Offer, the Buyer should try to obtain a Conditional
Loan Approval from a valid lending institution. This will assist the Buyer to
determine the Buyer’s housing price range. It is not a guarantee that a loan
will be given; however, it does check the Buyer’s credit worthiness and known
history. A Buyer or Seller should not confuse this with a Final Loan Commitment
that can not be obtained until just prior to closing to ensure all of the Buyer’s
nancials are considered.
The Contract
consists of the contract form and any related addenda and/or
attachments. Once signed by both Buyer and Seller, the contract is valid and
binding upon each Party — if the contract is not understood by either Party, the
Party should seek advice from an attorney. Each Party, both Buyer and Seller,
should read the entire contract and related addenda and attachments. The contract
must be executed by original signatures of the Parties or by signatures as reected
on separate identical contract counterparts (carbon, photo, fax or other electronic
copy).
Legal Description
[1] area should contain the legal and physical property
address. The contract, unless altered, shall include all xtures and improvements,
and all appurtenances, subject to existing zoning ordinances, plat or deed
restrictions, utility easements serving the Property, including all mineral rights
owned by Seller unless expressly reserved by Seller in the contract and excluding
mineral rights previously reserved or conveyed of record (collectively referred to
as “the Property”.)
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Purchase Price, Earnest Money and Source of Funds
[2] This paragraph
explains the purchase price and the amount of earnest money. The earnest
money is to be deposited in the trust account (as noted in the contract)
immediately following a fully executed and delivered contract. The contract is
designed for a cash transaction unless a Financing Supplement is attached.
Early in the home search process, it is advantageous to seek out a lender to get
pre-qualied for a home loan. Although not required, this process allows you to
understand the loan process and how much home you can qualify for. A home
loan may be obtained from a mortgage company, credit union, or bank.
It is the responsibility of the lending institution to disclose State and Federal
Regulations concerning the terms and conditions of the real estate loan for
which the Buyer applies.
Should your contract be contingent on qualication of a FHA, VA, or Conventional
loan, then a Financing Supplement should be attached to your contract.
According to the OREC contracts, you will have 5 days from the Time Reference
Date to make application for a home loan deemed acceptable to you.
The provisions of the Financing Supplement require the following:
1) Review and approval of Buyer’s credit worthiness, income, and funds
necessary to Close.
2) Conrmation that Buyer has paid initial processing fees.
3) Property appraisal has been ordered.
4) Loan approval is not subject to sale or closing of Buyer’s current property
unless stated elsewhere in this Contract.
Buyers should be aware of “predatory lenders.” These lenders charge excessive
fees or charge higher interest than is required based on the Buyer’s
credit history.
To learn more about predatory lending, visit the Department of Consumer Credit
website: www.ok.gov/okdocc. The Buyer may also call the OKDOCC at 1-800-
448-4904 to determine if a mortgage Broker is licensed. It is recommended that
the Buyer investigate the reputation and stability of the lender. The Commission
has a publication regarding predatory lending on its web site entitled “Don’t Be a
Victim of Loan Fraud.” It can be found under the “Publications” link.
Closing, Funding and Possession
[3] The Buyer will be required to pay the
balance of the purchase price with cash, cashier’s check, wire transfer, or other
funds acceptable to the Seller. The Closing Company may not accept payment
of the balance with the following: personal check, corporate check, employer’s
check, investment account check or asset management check. Most closing
companies will not accept cash because they are not designed or equipped to
do so.
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It is recommended that the Buyer contact the Closing Company prior to the
Closing to determine the acceptable form of payment for the balance of the
purchase price. The Buyer will need to present Government-issued identication
(e.g. driver’s license) at Closing.
Proceeds to the Seller from the Closing are generally paid by the Closing
Company’s check. A Closing Company’s check may not be cashed by the bank
as readily as a cashier’s check. The bank may not release the funds to the
Seller until the Closing Company’s check clears. If Seller prefers a cashier’s
check, the Seller should contact the Closing Company at least 48 hours prior to
the closing and request that Seller’s proceeds be paid by cashier’s check.
Accessories, Equipment and Systems
[4] lists items that will remain with
the Property. If there are additional item(s) the Buyer wants included, the item
should be specically listed under “Additional Inclusions.” The Seller is bound
only by what is stated in the Contract, and Buyer should not rely on anything
other than what is written in the Contract. If the Seller is not including an item in
the purchase price, the item(s) should be specically listed under “Exclusions.”
Time Periods as Specied in the Contract
[5] shall commence on the Time
Reference Date. The day after the Time Reference Date shall be counted as
day one (1) of the Contract regardless of date the Contract is signed by the
Buyer and Seller.
Residential Property Condition Disclosure Act
[6] requires the Seller,
unless exempt, prior to the Seller accepting an offer to purchase, to complete
and make available to the Buyer a Residential Property Condition Disclosure
Statement Form or Disclaimer Form. The Disclosure Form requires the Seller
to disclose a vast amount of information regarding the Property.
The Disclaimer Form indicates that the Seller has no knowledge regarding the
condition of the property; has no actual knowledge of any defects; and has never
occupied the Property.
The real estate licensee has the duty to obtain the Disclosure or Disclaimer form
and any amendments from the Seller, and provide them to the Buyer prior to a
Seller accepting an offer to purchase. The licensee has the duty to disclose to
the Buyer any defects in the Property actually known to the licensee which are
not included in the disclosure statement or any amendment. A licensee does not
have a duty to conduct an independent inspection of the Property and has no
duty to verify the accuracy or completeness of the statements made by the Seller.
Both Parties should read the “Residential Property Condition Disclosure Act” for
other information. The publication can be found on the Commission’s website.
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Investigations, Inspections and Reviews
[7] The Buyer is encouraged to
have a professional with appropriate qualications conduct inspections of the
entire property during the time period stated in the Contract. The Buyer should
accompany the inspector during the inspection. The Buyer should not rely on a
friend or themselves to make these inspections. The Contract language makes
reference to a person the Buyer deems qualied—the Buyer should be aware
that no one can receive compensation for performing an inspection unless they
have obtained the appropriate license from the Construction Industries Board or
other applicable State licensing board, commission or department. Accordingly,
a person deemed qualied by the buyer to perform an inspection must perform
the inspection without compensation unless they are appropriately licensed or
regulated under Oklahoma law. The Oklahoma Home Inspection Licensing Act
provides that a Home Inspection of an existing home can only be performed
for compensation by a licensed home inspector or an architect as part of their
practice. Certain other specialized inspections, which are not considered “Home
Inspections” as dened in the Oklahoma Home Inspection Licensing Act, may be
performed by individuals holding certain occupational licenses, licensed termite
inspectors, individuals inspecting new homes, certain government employees,
engineers, professional craftsmen performing limited inspections within the
expertise of a specic area or persons qualied by education or training to
conduct limited inspections. (For more information see Title 59, Oklahoma
Statutes, Section 858-623.) To ensure you are hiring a licensed home inspector,
please contact the Construction Industries Board at 1-877-484-4424 or verify a
home inspector’s license yourself at www.ok.gov/cib.
A real estate licensee may provide the Buyer with a list of professionals from
which to choose; however, the Buyer is responsible for choosing a qualied
professional that accommodates the Buyer’s needs.
In addition to the items listed, the Buyer can write in additional item(s) that
are of concern to the buyer at the time of making the Offer and have these
items investigated, inspected or reviewed. Further, if the Buyer plans to
obtain a federally-insured loan (FHA), the Department of Housing and Urban
Development requires the Buyer to be given a form that encourages obtaining
a home inspection. The form can be obtained from the Commission’s website
under “Contract Forms and Related Addenda.”
If the Property is not connected to a public sewer system (property that is on a
septic tank, aerobic or lagoon system), Buyer should have the system inspected
by a qualied expert. The Oklahoma Department of Environmental Quality
performs inspections on existing septic systems for approximately $255.00. You
can order this online at www.deq.state.ok.us, under environmental complaints &
local service, online payments. If you need further information, please contact
a local DEQ representative or call 1-800-869-1400.
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Flood Notice. The City of Tulsa has an Ordinance that requires a Seller to
notify a Buyer if the Seller’s property is located in an area designated by the
City as a ood hazard area. Other cities or communities may have similar
ordinances. The seller needs to contact city officials or the designated oodplain
administrator where the property is located to determine whether there is a
similar ood notication ordinance.
It is the Buyer’s responsibility to investigate the property’s ood zone, storm
run off water, storm sewer backup or water history. To obtain a written Flood
Hazard Evaluation based on the Federal Emergency Management Agency’s
Flood Insurance Rate Maps (FIRM’s) contact the U.S. Army Corps of Engineers,
Flood Plain Management Services (FPMS), 1645 South 101st East Avenue,
Tulsa, Oklahoma 74128. The charge for this ood hazard evaluation is a
minimum of $55.00. The Buyer can also call 1-918-669-7197 and obtain an
appointment with the Tulsa District, U.S. Army Corps of Engineers office and
examine the maps and information. The FIRM’s are also available on line at
www.msc.fema.gov.
The U.S. Army Corps of Engineers handles all of the State of Oklahoma, and
there are Floodplain Administrators in every community that participates in
the National Flood Insurance Program to assist you also at no charge. The
U.S. Army Corps of Engineers can supply the Buyer with the name and phone
number of the oodplain administrator in the community where the property
is located. The Oklahoma Water Resources Board also maintains a list of all
oodplain administrators on their website at www.owrb.ok.gov/hazard.
For more information on the nature of the water condition as it relates to the
Property being purchased, the Buyer may contact neighbors to determine if they
have noticed any water problems or the tax assessor’s office in their community.
Flood Insurance. If there is a ood risk, the Lender may require the Buyer
to obtain federal ood insurance. Flood insurance may also be purchased on
personal property (carpets, drapes, furniture, etc), and the Buyer should seek
advice from an insurance agent.
The Oklahoma Insurance Department regulates all insurance agencies,
appraisers and title companies for fair pricing, discrimination practices, business
practices and public awareness. Their contact information is www.oid.ok.gov
and 1-800-522-0071.
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Treatments, Repairs, Replacements and Reviews. The Treatments for
Termites and/or other Wood Destroying Insects paragraph [7C1] specically
addresses the treatment of Termites and/or other Wood Destroying Insects.
The Buyer, during the time period stated in the Contract, is advised to have
the Property inspected for Termites and/or other wood destroying insects. Any
repairs caused by termites or other wood destroying insects are addressed in
the Treatments, Repairs, Replacements, and Reviews paragraph of the Contract.
The Treatments, Repairs, Replacements and Reviews paragraph [7C2] addresses
what the Buyer should do if the Buyer [based on inspections] determines that
items need to be treated, repaired and/or replaced due to their not being in normal
working order. If the Buyer and Seller fail to negotiate the Treatment, Repair, and
Replacement items and if a written agreement for the seller to complete all agreed
Treatments, Repairs, or Replacements prior to the closing date is not reached
between the Parties within the time as stated in the Contract, the Contract shall
terminate and the Earnest Deposit is to be returned to the Buyer.
Expiration of Buyer’s Right to Cancel Contract [7D] paragraph contains
several important notices to the Buyer:
• If the Buyer fails to perform Investigations, Inspections and Reviews,
or fails to deliver a written list of items to be treated, repaired and
replaced or cancel the Contract within the time period as specied in the
Contract, the Buyer forfeits the right to cancel the Contract and accepts
the Property in its condition regardless of its condition.
• Failure of the Buyer to obtain hazard insurance coverage on the Property
within the time period as specied in the Contract shall not relieve the
Buyer of the obligation to close the transaction. The Buyer is required to
check into the availability and costs of coverage during the time period
specied in the Contract (7A). In the event hazard insurance coverage
is unavailable, or too costly to the Buyer, the Buyer may cancel the
Contract under paragraph (7C2) within the appropriate time period.
• The Buyer cannot cancel the Contract after the time periods have
expired as stated in the Contract if Buyer determines that the square
footage calculation is different than previously stated. The Buyer is
required to check into the square footage of the Property during the time
period as specied in the Contract (7A). If the Buyer has issues with
square footage, the Buyer may cancel the Contract under paragraph
(7C2) within the appropriate time period.
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Inspection of Treatments, Repairs and Replacements and Final Walk-
Through [7E]. The Contract allows the Buyer to inspect the Treatments,
Repairs, and Replacements made to the Property, and the Buyer may perform
a nal walk-through regarding the overall condition of the Property prior to
Closing. The Buyer shall pay for any cost incurred for any re-inspection, unless
prohibited by the mortgage lender.
Risk of Loss
[8] paragraph states that prior to transfer of Title or transfer of
Possession, the risk of loss to the Property, shall be on the Seller; after transfer of
Title or transfer of Possession, the risk of loss shall be on the Buyer.
Acceptance of Property
[9] paragraph states, unless otherwise agreed to in
writing, once the Buyer accepts title or takes possession of the Property, the
Buyer shall have accepted the Property in its present condition.
No warranties, expressed or implied, by Sellers, Brokers and/or their associated
licensees, with reference to the condition of the Property, shall be deemed to survive
the Closing. An exception to this would be those warranties that may be available from
a builder on new construction, manufacturer of a new product or a Residential Service
Agreement [12] purchased by the Buyer or Seller for a limited time after the Closing.
Title Evidence
[10] this paragraph outlines the Buyer’s and the Seller’s Expenses
and time requirements for the Parties. To accomplish this, the Seller must make
the Abstract of Title available to the Title Closing Company so the abstract can
be brought up to date. Buyer, at Buyer’s expense, may obtain a Commitment for
issuance of a Title Insurance Policy, or an Attorney’s Title Opinion.
There are two types of Title Insurance policies – a Lender’s Policy and a Buyer’s
(Owner’s) Policy. In most nanced transactions, Title Insurance is required by the
Lender (Lender’s Policy) to cover the lender’s loan. The Lender’s Title Insurance
does not protect the Buyer, even though the Buyer pays the title insurance premium.
It is recommended that the Buyer, while purchasing the portion to protect the Lender
also purchase the portion that protects the Buyer. An Owner’s Title Policy for the
Buyer costs little more.
Land of Boundary (Pin Stake) Survey. Buyer can pay for a Pin Stake Survey or
a Mortgage Inspection Report. It is recommended that the Buyer consult with
their Title Closing Company regarding the appropriate choice for their transaction.
Buyer to Examine Title Evidence. Buyer may have the Title Evidence examined
by an attorney who will render an Attorney’s Title Opinion, or Buyer may obtain a
Title Insurance Policy, or both.
Seller to Correct Issues with Title, Possible Closing Delay. The Seller is to
make reasonable efforts to cure title defects that have been identied. This may
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cause the Closing Date to be extended as referenced in the Contract. Items
such as utility easements serving the property, building and use restrictions of
record, set back and building lines (unless the structure extends beyond the
lines), zoning regulations, and reserved and severed mineral rights, are not
considered objections to the Title.
Upon Closing, any existing Abstract(s) of Title, owned by Seller, shall become
the property of Buyer.
Taxes, Assessments and Pro-rations
[11] In calculating the taxes,
assessments and pro-rations, the day of Closing shall be the responsibility of
the Seller.
Residential Service Agreement
[12] The Parties decide whether or not a
Residential Service Agreement (a limited home warranty) will be included in
the purchase of the Property. If included, the Seller and/or Buyer can pay an
amount toward the purchase of the agreement; however, Buyer is responsible for
all costs in excess of agreed amounts as outlined in the service agreement. The
real estate licensee may receive a fee for services performed in connection with a
Residential Service Agreement. The real estate licensee must disclose in writing,
to all Parties, any compensation received for compensable services (as dened
by RESPA) as part of the Residential Service Agreement. The Buyer and Seller
are not required to purchase a home warranty and they may purchase a home
warranty from any vendor of their choice. The Buyer is advised that the limited
home warranty does not replace or substitute the property inspection rights the
Buyer has and the Buyer is encouraged to perform all inspections.
Additional Provisions
[13] The Additional Provisions paragraph allows the Buyer
to address items of particular interest that are not already addressed in the Contract
.
Mediation
[14] If a Dispute arises regarding the Contract the Dispute shall be
submitted to an Alternative Dispute Resolution System
available in the county
wherein the Property is located. Any Settlement Agreement shall be binding. In
the event an agreement is not reached between the Parties, the Parties may
pursue legal remedies as provided by the Contract. If the Parties are unable to
locate a system in the area, the Parties can call the Early Settlement Program
under the jurisdiction of the Oklahoma Supreme Court at 1 (405) 556-9802 or
www.oscn.net and click on Alternative Dispute Resolution in the left margin.
Breach and Failure to Close
[15] Parties must understand that failure to act
within a time period set forth in the contract shall constitute a breach of the
contract.
Time is of the Essence
[16] If a Breach of Contract occurs by either Party, the
prevailing Party shall have remedies as stated in the Contract.
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Incurred Expenses and Release of Earnest Money
[17] This paragraph
states that the Seller and Buyer, respectively, are responsible for any expenses
incurred on their behalf and it shall be paid by the Party incurring the expense
and shall not be paid from the Earnest Money Deposit. The Earnest Money shall
be disbursed in accordance with the Contract.
Delivery of Acceptance of Offer or Counteroffer
[18] The Parties authorize
their respective Brokers to accept delivery of acceptance of the offer or counteroffer.
Non-Foreign Seller
[18] FIRPTA Explained. FIRPTA is the Foreign Investment
in Real Property Tax Act of 1980 (26 USC § 1445 et. Sec.) (“FIRPTA”). Under
FIRPTA, nonresident Sellers are taxed similarly to U.S. real estate owners when
selling their properties by placing the tax-remittance onus on the resident Buyer.
BUYER’S OBLIGATIONS UNDER FIRPTA. In transactions with foreign persons,
the Buyer MUST submit fteen percent (15%) of the amount realized from the sale
of the property to the Internal Revenue Service (“IRS”) within 20 days of closing,
unless an exemption or reduced rate applies. For real estate that will be used
by the Buyer as a residence, the withholding amount will be 0%, 10%, or 15%,
depending on the sales price. Generally speaking, the “amount realized” is the
sales/purchase price of the Real Estate. The Buyer must determine the Seller’s
status as a foreign or non-foreign person. If the Seller is foreign, but an exemption
applies, then the Buyer must obtain proof of qualication to avoid IRS sanctions.
If a Seller asserts that he/she is a non-foreign person, the Buyer should obtain an
Affidavit of Non-Foreign Seller or a Qualied Substitute Statement.
A “Foreign Person” Under FIRPTA. A foreign person includes: a nonresident alien
individual; a foreign corporation, partnership, trust, or estate; and any other person
that is not a U.S. person. A nonresident alien is dened as an individual who is neither
a U.S. citizen nor a resident of the U.S. within the meaning of section 770 1 (b) of
the Internal Revenue Code. Two tests apply. Under the “green-card” test, an alien
individual is a resident of the U.S. if he/she has been admitted for U.S. permanent
residence (i.e., has a green card) at any time during the calendar year. Under the
substantial-presence test, an alien individual is a resident for U.S. federal tax purposes
if the alien is physically present in the U.S. for 183 days or more during the current
calendar year. Alternatively, if the alien is physically present for at least 31 days during
the current year, the alien may be treated as a U.S. tax resident in the current year
under a three-year look-back test which requires an analysis of the alien’s presence
over the preceding three years. If the alien is from a country that has an income tax
treaty with the United States, the treaty may act to change these results.
Exceptions To Withholding Under FIRPTA. The following are the most
common:
1) the property is purchased for less than $300,000 AND the Buyer is using
the property as a primary residence;
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2) the Seller has an IRS statement that species the Seller is exempt from
withholding, is entitled to a reduced withholding amount, has provided
adequate security for payment or has made arrangements with the IRS
for payment;
3) the Seller provides the Buyer with a Non-Foreign Seller Affidavit;
4) a Qualied Substitute provides the Buyer with a Qualied Substitute
Statement; or
5) the Seller is participating in a SIMULTANEOUS Section 1031 Exchange.
In order for the home to be considered the Buyer’s “primary residence”
for purposes of the exception, the Buyer or a member of the Buyer’s
family must have denite plans to reside at the property for at least 50%
of the number of days the property is used by any person during each
of the rst two 12-month periods following the date of transfer. When
counting the number of days the property is used, do not count the days
the property will be vacant.
Affidavit of Non-Foreign Seller (Form 2303) and Qualied Substitute
Statement. The Affidavit of Non-Foreign Seller (Seller’s Affidavit) is a sworn
statement completed and signed by the Seller which includes the Seller’s tax
identication number (most often a Social Security number) and in which the Seller
states under Penalty of Perjury that the Seller is not a foreign person as dened
under FIRPTA, and thus, is not subject to tax withholding under FIRPTA. The Seller
can provide a completed and signed Seller’s Affidavit directly to the Buyer or to a
Qualied Substitute. A Qualied Substitute is a person or entity as dened under
FIRPTA that accepts a Seller’s completed and signed Seller’s Affidavit in the Buyer’s
stead. The Qualied Substitute retains the Seller’s Affidavit and must provide the
Buyer with a Qualied Substitute Statement. The Qualied Substitute Statement is
a sworn statement made under Penalty of Perjury in which the Qualied Substitute
states that the Qualied Substitute has a completed and signed Seller’s Affidavit
from the Seller. The Buyer must retain the Qualied Substitute Statement in his/her
records. If the Buyer receives a Qualied Substitute Statement, the Buyer never
receives the Seller’s Affidavit, nor the Seller’s tax identication number.
Execution By Parties
[19] This paragraph relates to the date when the
Parties execute and sign the Contract.
Termination of Offer
This paragraph indicates the date and time when the
Buyer’s Offer will terminate.
Earnest Money Receipt and Broker Acceptance
This paragraph references
the amount of money the Buyer pays as an Earnest Money Deposit when making
an Offer. Further, the paragraph states that the Earnest Money Deposit will be held
by the Listing Broker unless otherwise stated in the Contract [under Paragraph 2].
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Additional Information Pertaining to the Contract
A real estate Broker may work with one or both Parties to a real estate
transaction. The Oklahoma Broker Relationships Law (Title 59, Oklahoma Statutes,
§858-351 – 858-363) allows a real estate rm to provide Brokerage services to both
Parties to the transaction. This could occur when a rm has contracted with a seller
to sell their property and a prospective buyer contacts that same rm to see the
property. If the prospective buyer wants to make an offer on the property, the rm
must now provide a written notice to both the buyer and seller that the rm is now
providing Brokerage services to both Parties to the transaction.
Oklahoma real estate Brokers have mandatory duties and responsibilities to
all Parties in a real estate transaction. These duties and responsibilities shall be
described and disclosed in writing prior to signing a contract to sell, purchase, lease,
option or exchange real estate. These duties and responsibilities are to:
• Treat all Parties with honesty and exercise reasonable skill and care.
• Receive all written offers and counteroffers, reduce offers or counteroffers to a
written form upon request of any Party to a transaction and present timely all
written offers and counteroffers (unless specically waived in writing by a Party.)
• Timely account for all money and property received by the Broker.
• Disclose information pertaining to the property as required by the Residential
Property Condition Disclosure Act.
• Comply with all requirements of The Oklahoma Real Estate License Code and
all applicable statutes and rules.
• Keep condential information received from a Party or prospective Party
condential unless written consent is granted by the Party, the disclosure is
required by law, or the information is public or becomes public as the results of
actions from a source other than the Broker. Condential information includes:
• That a Party is willing to pay more or accept less than what is being offered
• That a Party or prospective Party is willing to agree to nancing terms different
from those offered
• The motivating factors of the Party or prospective Party purchasing, selling,
leasing, optioning or exchanging the property
• Any information specically designated as condential by the Party unless such
information is public.
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A Broker has additional duties and responsibilities only to a Party for whom
the Broker is providing Brokerage services These duties and responsibilities
shall also be described and disclosed in writing prior to signing a contract to sell,
purchase, lease, option and exchange real estate. These duties are to:
• Inform the Party in writing when an offers is made that the Party will be expected
to pay certain costs, Brokerage services costs and approximate amount of the
costs.
• Keep the Party informed regarding the transaction.
If a Broker intends to provide fewer Brokerage services than those required
to complete a transaction, the Broker shall provide written disclosure to the
Party for whom the Broker is providing services. The disclosure shall include a
description of those steps in the transaction that the Broker will not provide and state
that the Broker assisting the other Party in the transaction is not required to provide
assistance with these steps in any manner.
Disclosure of these duties and responsibilities is required in writing. The
duties and responsibilities disclosed by the Broker shall be conrmed in writing by
each Party in a separate provision, incorporated in or attached to the contract to
purchase, option or exchange real estate.
Services provided to a tenant do not automatically create a Broker relationship.
When a Broker provides Brokerage services to a landlord under a property
management agreement, the services provided to the tenant by the Broker shall not
be construed as creating a Broker relationship between the Broker and the tenant
unless otherwise agreed to in writing; however, the Broker owes to the tenant the
duties of honesty and exercising reasonable skill and care.
Broker’s Compensation. The Broker’s compensation is a matter of negotiation
between the Broker and Buyer or Seller, and is not xed, controlled, recommended
or maintained by the Oklahoma Real Estate Commission.
Environmental Risks. It is the Buyer’s responsibility to determine whether there
are environmental hazards such as hydrocarbon, chemical, carbon, asbestos,
mold, Methamphetamine, radon gas, lead-based paint, or any other toxic materials
that are of concern. A good resource for this information is the Department of
Environmental Quality (DEQ) website: www.deq.state.ok.us
The Buyer may want to check with local authorities, police departments, etc.
as these authorities have the location of properties where they have found a
Methamphetamine (“Meth”) lab on the premises. An information pamphlet on
Methamphetamines is also available on the Oklahoma Real Estate Commission’s
Web site: www.orec.ok.gov
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Lead-Based Paint Disclosure. With regard to properties built BEFORE 1978,
HUD/regulations require that the Buyer receive the Seller’s “Disclosure of Infor -
mation on Lead-Based Paint and Lead-Based Hazards,” the EPA booklet entitled
“Protect Your Family From Lead in Your Home,” and the following written warning:
“Every purchaser of any interest in residential real property on which a
residential dwelling was built prior to 1978 is notied that such property
may present exposure to lead from lead-based paint that may place
young children at risk of developing lead poisoning. Lead poisoning in
young children may produce permanent neurological damage, including
learning disabilities, reduced intelligence quotient, behavioral problems,
and impaired memory. Lead poisoning also poses a particular risk to
pregnant women.”
The Seller is required to provide the Buyer with any information on lead-based
paint hazards from risk assessments or inspections in the Seller’s possession
and notify the Buyer of any known lead-based paint hazards.
If the Buyer elects to have a risk assessment for the presence of lead-based paint
and/or lead-based paint hazards, the assessment is to be completed within the
10-day period for investigations, inspections, or review as stated in Paragraph
7 of the Contract. Any repairs to the property following the assessment are
covered under Paragraph 7C2b of the Contract. For additional information
please refer to the Commission’s website, under the “Publications” link.
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EPA Rules on Pre-1978 Homes that are Renovated, Repaired and Painted
Beginning April 2010, contractors who perform renovation, repair and painting
projects that disturb lead-based paint in homes, child care facilities, and schools
built before 1978 must be certied and must follow specic work practices to
prevent lead contamination.
If a homeowner performs renovation, repair, or painting work on their own
residence, EPA’s RRP rule does not apply to them; however, the rule would
apply if the home they are repairing will be rented out to a tenant.
The rule was promulgated by the EPA because common renovation activities
like sanding, cutting, and demolition can create hazardous lead dust and chips
by disturbing lead-based paint, which can be harmful to adults and children.
Megan’s Law. Oklahoma has enacted a law that requires sex offenders convicted
of certain sex crimes to register with law enforcement. Record keeping and
notication cover only those crimes committed since 1989. Potential homebuyers
can check with law enforcement to obtain a list of those registered and living in
a particular area by contacting their respective local police department or the
Oklahoma Department of Corrections’ website at www.doc.state.ok.us. (Click on
Offenders, then on Sex Offender Lookup.)
Psychologically Impacted Property. Psychologically-impacted property is any
property where certain circumstances, suspicions or facts may create emotional
or psychological disturbances or concerns to a Buyer as outlined in Title 59,
O.S., Section 858-513. If the items as listed in Section 858-513 are of concern
to the Buyer, the law requires that the real estate licensee adhere to the following
procedure:
1. The Buyer must be in the process of making a bona de (written) offer.
2. The real estate licensee must receive a request in writing from the
Buyer.
3. The Buyer’s written request must state that this factor is important to the
decision of the Buyer.
4. The real estate licensee shall make inquiry of the owner by submitting
the written request to the owner.
5. With the consent of the Seller, the real estate licensee will furnish the
Seller’s response to the Buyer or Buyer’s Broker.
6. If the Seller refuses to furnish the information requested, Seller’s Broker
shall so advise the Buyer or Buyer’s Broker.
7. If the Buyer is requesting information concerning Acquired Immune
Deciency Syndrome (AIDS) disease which falls under the privacy
laws, the information can only be obtained in accordance with the Public
Health and Safety Statute, Title 63, Oklahoma Statutes, 1992, Section
I-502.2A.
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Real Estate Settlement Procedures Act (RESPA) is a consumer protection
statute, rst passed in 1974. The purposes of RESPA are to help: 1) consumers
become better shoppers for settlement services; and 2) to eliminate kickbacks
and referral fees that unnecessarily increase the costs of certain settlement
services.
Details about RESPA - Corresponding with the above purposes:
1. RESPA requires that borrowers receive disclosures at various times. Some
disclosures spell out the costs associated with the settlement, outline lender servicing
and escrow account practices and describe business relationships between
settlement service providers.
2. RESPA also prohibits certain practices that increase the cost of settlement
services. Section 8 of RESPA prohibits a person from giving or accepting any
thing of value for referrals of settlement service business related to a federally
related mortgage loan. It also prohibits a person from giving or accepting any
part of a charge for services that are not performed. Section 9 of RESPA
prohibits home Sellers from requiring home Buyers to purchase title insurance
from a particular company.
RESPA in General - RESPA covers loans secured with a mortgage placed on
a one-to-four family residential property. These include most purchase loans,
assumptions, renances, property improvement loans, and equity lines of credit.
HUD’s Office of RESPA and Interstate Land Sales is responsible for enforcing
RESPA.
RESPA required disclosures — At the time of loan application - When borrowers
apply for a mortgage loan, mortgage Brokers and/or lenders must give the
borrowers:
• a Special Information Booklet, which contains consumer information
regarding various real estate settlement services. (Required for purchase
transactions only) and
• a Good Faith Estimate (GFE) of settlement costs, which lists the
charges the Buyer is likely to pay at settlement. This is only an estimate
and the actual charges may differ. If a lender requires the borrower to
use a particular settlement provider, then the lender must disclose this
requirement on the GFE.
• a Mortgage Servicing Disclosure Statement, which discloses to the
borrower whether the lender intends to service the loan or transfer it to
another lender. It also provides information about complaint resolution.
For more information regarding RESPA requirements, please go to www.hud.gov.
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Termites and other Wood Destroying Insects. Oklahoma is an area where
damage from termites and other wood destroying insects can be a major
concern for homeowners. It is strongly recommended that the Buyer have the
property inspected by a licensed termite company. FHA/VA Financing requires
a termite inspection report on all existing construction. If there is evidence of
active infestation or evidence of prior termite damage, the property must be
treated and/or the damage repaired prior to loan closing. If the termite report
indicates possible structural damage or if appraiser makes a requirement, a
structural inspection should be required.
Termite inspection companies are licensed by the Oklahoma Department of
Agriculture; their Consumer Service Division can be contacted at 405-522-5981.
Some termite companies do offer a warranty for their reports but there is no
requirement for them to do so.
Square Footage Disclosure (Title 59, Oklahoma Statutes, Section 858-
515.1). On August 26, 2011 a new law went into effect relating to the disclosure
of information pertaining to square footage. The law states that a real estate
licensee shall not be required to provide square footage information or otherwise
and if it is provided by the licensee, the information provided shall not be
considered any warranty or guarantee of the information.
The law states that if a licensee provides a Party to a real estate transaction
with “third-Party information” concerning the size or area in square footage or
otherwise, the licensee shall identify the source of the information. Third-Party
information means: 1) an appraisal or any measurement information prepared
by a licensed appraiser, 2) a survey or developer’s plan prepared by a licensed
surveyor, 3) a tax assessor’s public record, or 4) a builder’s plan used to construct
or market the property.
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GLOSSARY OF TERMS
Abstract of Title—A recorded history of a piece of land (accumulation of
recorded documents) usually prepared for a mortgagee or purchaser of real
property, summarizing the history of a piece of land, including all recorded
conveyances, interests, liens, and encumbrances that affect title to the property.
Ad Valorem Taxes—Property taxes are ad valorem taxes; taxes that are levied
annually according to the value of property.
Alternative Dispute Resolution System—The Alternative Dispute Resolution
System in Oklahoma is currently made up of twelve community-based mediation
centers and eleven programs developed by state agencies. This system, which
was authorized (1983) and funded (1985) by the state legislature through the
Oklahoma Dispute Resolution Act, Title 12, Oklahoma Statutes, Supp. 1997,
Section 1801 et seq., is administered and supervised by the Administrative
Director of the Courts (ADC). The purpose of the system, as stated in the Act
is “to provide to all citizens of this state convenient access to dispute resolution
proceedings which are fair, effective, inexpensive, and expeditious.” The Act also
anticipates that “such proceedings can also help alleviate the backlog of cases
which burden the judicial system in this state.” To locate a system in your area
go to www.oscn.net.
Appurtenances—A right, privilege, or improvement belonging to and passing
with a principal property, i.e., easement, a right-of-way, etc.
Assessments and Dues—Money assessed to property owners within
a homeowner’s association to improve and maintain common areas. An
assessment can be different than a Special Assessment as dened herein.
Attorney Title Opinion—A legal opinion on the state of title for a given piece
of real property, usually describing whether the title is clear and marketable or
whether it is encumbered.
Breach of Contract—Violation of a contractual obligation, either by failing to
perform one’s own promise or by interfering with another Party’s performance.
Built in Appliances—Are appliances wherein normally a structure surrounds
multiple sides of it and includes slide-in ranges.
Certied—Authenticated or veried in writing; attested as being true or as
meeting certain criteria.
Closing—In real estate, the nal transaction between the Buyer and Seller,
whereby the conveying documents are concluded and the money and property
are transferred, unless otherwise agreed to by the Parties.
Closing Date—A date agreed upon by the Parties to the Contract to close the
transaction.
Comparable Market Analysis (CMA)—Prior to selling or purchasing real estate
the Seller or Buyer may engage the services of a real estate licensee who will
render a CMA giving the Seller or Buyer an idea of the value of the property
they desire to sell or purchase. The CMA is based on sales that have occurred
recently in proximity to the subject property. The CMA should not be confused
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with a real estate Appraisal that must only be prepared by a person licensed with
the Oklahoma Insurance Department.
Conditional Loan Approval—A letter whereby a nancial institution advises
that the applicant has made application for pre-approval of a loan amount and
based on information, i.e., pay stubs, bank statements, credit report, etc., the
institution indicates that the applicant is pre-approved for a particular loan
amount.
Contract—An agreement between two or more Parties creating obligations that
are enforceable or otherwise recognizable at law.
Counteroffer—A Party’s new offer that varies in terms from the original offer
and therefore modies the original offer.
Counterparts—One of two or more copies or duplicates of a legal instrument
that may be executed by a Party, each of which may be considered an original.
Deed—A written instrument by which title to land is conveyed. At common law,
any written instrument that is signed, sealed, and delivered and that conveys
some interest in real property. There are various types of Deeds, i.e., General
Warranty Deed, Special Warranty Deed, Quitclaim Deed and others. Each is
unique and has different provisions.
Delivery of Deed—Delivery and acceptance is required; a Deed should be
recorded at the county clerk’s office.
Earnest Money—A deposit paid (usually in escrow) by a prospective Buyer
(especially of real estate) to show a good-faith intention to complete the
transaction, and ordinarily forfeited if the Buyer defaults. Although earnest
money has traditionally been a nominal sum (such as a nickel or a dollar) used
in the sale of goods, it is not a mere token in the real estate context; it may
amount to many thousands of dollars. As used in this Contract, Earnest Money
shall also mean an item of value.
Equity—The money value of a property in excess of claims or liens against the
property.
Escrow Holder—The holder of a document, property, or deposit; a third Party
depositary of an escrow.
Estimated Expenses of Transaction (Net to Seller/Cost to Buyer)—
Oklahoma Real Estate Commission Rule requires that a real estate licensee
inform the Buyer and/or Seller, at the time an offer is presented, that the Buyer
and/or Seller will be expected to pay certain closing costs, Brokerage service
costs, and approximate amount of said costs.
Executed—A document that has been signed.
Expiration of Offer—The date on which an offer or the like ceases to exist.
Fences—Include chain link, stockade, metal, electrical, includes sub-surface
electric and components, etc.
Final Walk Through—The right given to a Buyer to re-inspect the property just
prior to Closing.
Fixtures—Personal property that is attached to land or a building and that is
regarded as an immoveable part of the real property, such as a replace built
into a home.
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Foundation—A fund established for charitable, educational, religious, research,
or other benevolent purposes; an endowment.
Good Faith Estimate (GFE)—The GFE is a three page form designed to
encourage you to shop for a mortgage loan and settlement services so you
can determine which mortgage is best for you. It shows the loan terms and
the settlement charges you will pay if you decide to go forward with the loan
process and are approved for the loan. It explains which charges can change
before your settlement and which charges must remain the same. It contains
a shopping chart allowing you to easily compare multiple mortgage loans and
settlement costs, making it easier for you to shop for the best loan. The GFE may
be provided by a mortgage Broker or the lender. Until you let a loan originator
know that you wish to proceed with a loan, the loan originator may only charge
you for the cost of a credit report.
Homeowner’s Association—An Association of people who own homes in a
given area and have united to improve or maintain the area’s quality due to
the area not being maintained by a local city or county office. The Association
normally has restrictions and covenants that all property owners abide with and
which should be recorded in the County where the property resides. Further,
each property owner is assessed an amount of money determined by the
Association in its bylaws.
HUD-1 Settlement Statement—The HUD-1 Settlement Statement is a
standard form that clearly shows all charges imposed on borrowers and Sellers
in connection with the settlement. RESPA allows the borrower to request to see
the HUD-1 Settlement Statement one day before the actual settlement. The
settlement agent [of the Closing Company] must then provide the borrowers
with a completed HUD-1 Settlement Statement based on information known to
the agent at that time.
Improvements—An addition to real property that increases its value or utility or
that enhances its appearance.
Lease—A contract by which a rightful possessor of real property conveys the
right to use and occupy that property in exchange for consideration, usually rent.
Legal Description—A formal description of real property, including a description
of any part subject to an easement or reservation, complete enough that a
particular piece of land can be located and identied. The description can be
made by reference to a government survey, metes and bounds, or lot number
of a recorded plat.
Lender Required Documents—Documents the lender may require prior to
processing the loan.
Liquidated Damages—This law can be found in Title 15, Oklahoma Statutes,
Section 215. State law indicates that a provision in a real estate sales contract,
providing for the payment for damages in the event damages are sustained by a
breach of the contract, shall be limited to ve percent (5%) of the purchase price.
Listing Broker—A Broker licensed by the Oklahoma Real Estate Commission
and who has entered into a Brokerage agreement with the Seller to list their
property for sale.
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Mechanic Liens—A statutory lien that secures payment for labor or materials
supplied for improvements to real property such as a building. It is also termed
as laborer’s lien (for labor) and materialman’s lien (for materials.)
Mediation—The act or process of bringing about a resolution; wherein an
unbiased third-Party assists the Parties [which are in conict] and promotes or
encourages a solution to the conict that both Parties can agree to. For more
information see “Alternative Dispute Resolution System” dened herein.
Mineral Rights—Is a term encompassing all the ways a person can have
a possessory interest in minerals in the ground. It includes the right to enter
the land and occupy it in order to remove the minerals. Mineral rights can be
retained when land is sold or conveyed, thus making it possible for someone
to own the right to mine the minerals without owning the land. A right of entry
onto the land can be held by the grantor who retains the mineral rights, or other
arrangements can be made to gain access to the minerals. Mineral rights can
be leased or sold. A landowner who leases mineral rights often receives a
royalty, or a percentage of the value of the minerals which are mined by the
leaseholder. “Mineral Rights” is a much broader term and is more inclusive
than the term “oil and gas.”
Mortgagee—A person to whom property is mortgaged.
Mortgage Inspection Report—Means a representation of the boundaries
of a parcel of real property and the improvements thereon and shall not be
designated as or construed as being a land or boundary survey.
Mortgagee’s (Lender) Title Policy—A title policy designed to protect the
interest of the lender against unknown defects.
Mortgagor—A person who mortgages property.
Normal Working Order—Normal working order is dened as a system or
component function, without defect, for the primary purpose and manner for
which it was installed. (Defect means a condition, malfunction or problem,
which is not decorative, that would have a materially adverse effect on the value
of a system or component, or would impair the health or safety or the occupants
or Buyer.)
Offer—Expressed written intent of Buyer, to enter into a contract on specied
terms, made in a way that would lead a reasonable person, the Seller, to
understand that acceptance of the offer will result in a binding contract.
Offeree—One who recieves an offer.
Offeror—One that makes an offer.
Oklahoma Housing Foundation—In general, it is a non-prot Foundation that
donates funds to charities for education, research and housing assistance for
the homeless. The Foundation is eligible to receive the interest accrued from
Broker’s funds that are placed in an interest bearing account.
Owner’s Title Policy (Title Insurance)—A policy protecting the equity of the
Buyer against monetary loss resulting from unknown defects.
Party—The Buyer(s) or Seller(s).
Pin Stake Survey—There are different types of surveys and the Buyer’s
cost will depend on the type of survey selected by the Buyer. For example:
A boundary (staked survey) is the physical location of boundary corners, and
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some details such as fence lines, platted easements and other easements given
to the surveyor.
Possession—The right under which one may exercise control over something
to the exclusion of all others on the date as stated in the Contract.
RESPA—The Real Estate Settlement Procedures Act (RESPA) is a consumer
protection statute, rst passed in 1974. The purposes of RESPA are:
1. to help consumers become better shoppers for settlement services in
connection with their real estate loan, and
2. to eliminate kickbacks and referral fees that unnecessarily increase the
costs of certain settlement services.
Residential Property Condition Disclaimer Statement Form—Seller’s
statement that: 1) they are unaware of any defect on the property; 2) they have
no knowledge about the condition of the property; and 3) they have never lived
in the property.
Residential Property Condition Disclosure Statement Form—Seller is
required to disclose knowledge and information regarding the condition of the
property. This form is to be given to the Buyer prior to the Seller accepting the
Buyer’s offer to purchase.
Residential Service Agreement—A service agreement that covers a home for
a period of time against items listed in the policy.
Selling Broker—A Broker who is licensed by the Oklahoma Real Estate
Commission and has entered into a Broker relationship with the Buyer.
Security Deposits—Funds paid in advance by a person who is leasing real
property to guarantee the performance of an obligation.
Special Assessment—A tax levied for a unique special purpose.
Specic Performance—A court-ordered remedy that require precise fulllment
of a legal or contractual obligation when monetary damages are inappropriate or
inadequate, as when the sale of real estate or a rare article is involved. Specic
performance is an equitable remedy that lies within the court’s discretion
to award whenever the common-law remedy is insufficient, either because
damages would be inadequate or because the damages could not possibly be
established.
Square Footage—Square footage measurements of a dwelling can vary from
a few feet to several hundred feet regardless of source (County Assessor’s
records, appraisal or appraisal measurement report, etc.). Buyer shall satisfy
that the size and/or square footage of the dwelling is acceptable to the Buyer. If
a real estate licensee discloses square footage information as allowed in Title
59, Oklahoma Statutes, Section 858-515.1, the licensee is required to disclose
the source of the information.
Termites—Any of numerous pale-colored soft-bodied insects that live in
colonies consisting of winged or wingless forms that feed on wood, and are very
destructive to wooden structures and trees.
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Time is of the Essence—Parties must understand that failure to act within a
time period set in the Contract will create an incurable breach of the contract.
Time Reference Date—The date on which a contract or other instrument
becomes enforceable or otherwise takes effect, which sometimes differs from
the date on which it was signed.
Title Examination Standards of the Oklahoma Bar Association—Criteria by
which a real estate title can be evaluated to determine whether it is defective or
marketable. Many states, through associations or conveyancers and real estate
attorneys, have adopted title standards.
Title Insurance Commitment and Policy—A comprehensive indemnity
contract under which a title insurance company warrants to make good a loss
arising through defects in title to real estate or any liens or encumbrances
thereon .
Trust Account—An account held by a real estate Broker to deposit items (monies
or other valuables of others) held in regard to the real estate transaction.
Utility Districts—Private utility companies that provide service to local residents
wherein no public service is available.
Warranty Deed—A deed containing one or more covenants of title; especially, a
deed that expressly guarantees the grantor’s good, clear title and that contains
covenants concerning the quality of title, including warranties of seisin, quiet
enjoyment, right to convey, freedom from encumbrances, and defense of title
against all claims.
Wood Destroying Insects—Insects, other than termites, which damage or
destroy wood or other cellulose materials, including but not limited to carpenter
ants, carpenter bees, powder post beetles. This term shall not include other
fungi which inhabit but do not damage or destroy wood or other cellulose
materials, health hazard molds, or stain fungi.
Wood Infestation Report—A document issued which contains statements or
certications as to the presence or absence of termites and other wood destroying
insects, and the presence or absence of damage. The Wood Infestation Report
does not include a bid or proposal for treatment.
A person completing a Wood Infestation Report must be certied or licensed and
is under the jurisdiction of the Oklahoma Agricultural Department (www.oda.
state.ok.us). Each report prepared must be in compliance with the standards
set by the Department. A person performing an inspection must be a certied
applicator or a certied service technician; any person issuing a report must
be certied in structural pest control. The business responsible for the Wood
Inspection Report must have a current license in structural pest control.
