Due Diligence Contingencies Addendum Quiz
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Questions and Answers

What must the Buyer do within a specified number of days after receiving the checked items?

  • Notify the Seller of all accepted terms
  • Confirm the purchase without conditions
  • Terminate the agreement based on reasonable disapproval (correct)
  • Immediately pay the full purchase price

What is the main purpose of the due diligence contingencies addendum?

  • To establish the seller's final price
  • To finalize the closing date of the transaction
  • To outline necessary inspections only
  • To allow the Buyer to review and approve conditions (correct)

What does 'reasonable disapproval' refer to in the context of this addendum?

  • Seeking a better purchase price
  • Changing the location of the property
  • Rejecting all terms without cause
  • Expressing dissatisfaction due to material issues (correct)

In what circumstance can the Buyer disclose information received from the Seller?

<p>Under no circumstances (A)</p> Signup and view all the answers

What initial step is required of the Buyer upon receiving documentation from the Seller?

<p>Evaluate the documents within a specific time frame (A)</p> Signup and view all the answers

What is included in the Seller's Neighborhood Security Disclosure?

<p>Criminal activity relevant to property security. (C)</p> Signup and view all the answers

Which document provides an itemized inventory of personal property related to the property?

<p>Itemized inventory document. (B)</p> Signup and view all the answers

What should a Rental Income Rent Roll statement include regarding the tenant?

<p>Delinquencies and the amount in arrears (C)</p> Signup and view all the answers

What type of reports are mentioned as necessary for evaluating property conditions?

<p>Soil and pest control reports. (C)</p> Signup and view all the answers

Which is NOT a type of report required to be disclosed by the Owner?

<p>Construction management reports. (B)</p> Signup and view all the answers

Which of the following is NOT typically included in tenant rental or lease agreements?

<p>Utilities paid by the landlord (A)</p> Signup and view all the answers

What is the purpose of the preliminary title report for the policy of title insurance?

<p>To hand over to the Buyer after acceptance. (C)</p> Signup and view all the answers

What type of financial records is expected in operating income and expense documentation?

<p>Current year-to-date and two preceding years' profit and loss statements (C)</p> Signup and view all the answers

Which document should include details about property management employees?

<p>Property management agreements (C)</p> Signup and view all the answers

Which of the following addresses utilities for a property?

<p>Invoices and bills for utilities like internet and phone (C)</p> Signup and view all the answers

What should be disclosed regarding insurance policies related to the property?

<p>Claims made under any insurance policy in the past few years. (B)</p> Signup and view all the answers

What type of reports should be included in records regarding tenant turnover?

<p>A tenant turnover report and an eviction report for current and two preceding years (C)</p> Signup and view all the answers

What type of financial documents should be included in capital expenditures records?

<p>Operating and capital budgets for the current and following years (A)</p> Signup and view all the answers

Which documents are needed to assess advertising for units or spaces?

<p>Invoices and copies of advertising and marketing from the past two years (C)</p> Signup and view all the answers

What does the due diligence contingency allow the Buyer to do?

<p>Terminate the agreement based on reasonable disapproval (D)</p> Signup and view all the answers

Flashcards

Due Diligence Period

A period of time within which a buyer can inspect a property and terminate the purchase agreement based on their findings.

Due Diligence Contingencies

Conditions or aspects of a property that a buyer may want to review during the due diligence period.

Due Diligence Items

Documentation or information related to the property that the seller provides to the buyer for review during due diligence.

Termination Right

A buyer's right to terminate a purchase agreement if they find unacceptable issues during due diligence.

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Confidentiality Agreement

An agreement that prohibits a buyer from disclosing confidential information obtained during due diligence to third parties.

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Return of Documents

The return of all documents and materials received from the seller in the event the buyer does not proceed with the purchase.

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Seller's Duty

The seller's obligation to provide due diligence items to the buyer as soon as reasonably possible after the agreement is made.

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Rental Income Rent Roll Statement

A document listing tenant details, rent amounts, due dates, delinquencies, and other relevant information for each unit or space in a rental property.

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Tenant Rental or Lease Agreements

Legal agreements outlining the terms and conditions of a tenant's occupancy, including rent, lease duration, and any special provisions.

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Operating Income and Expense Records

Financial records showcasing income and expenses for the property, including profit and loss statements, capital expenditures, and budgets.

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Property Management Agreements

Agreements with property management companies, outlining their services and compensation structure.

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Maintenance Agreements

Documentation outlining repairs, maintenance tasks, and service contracts related to the property's operation.

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Utility, Tax, and Assessment Bills

Bills and statements related to utilities, taxes, assessments, and other expenses associated with the property.

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Advertising and Marketing Materials

Advertising materials, marketing plans, and budgets used to attract tenants to the property.

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Interview of Property Personnel

Interviews with individuals involved in managing, operating, and handling the property's finances.

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Natural Hazard Disclosure Statement

Official reports from a geologist detailing potential natural hazards and geological characteristics of the property.

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Property Disclosures

A document prepared by the property owner that discloses conditions of the property, including any known issues that may affect its value or habitability.

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Neighborhood Security Disclosure

A document created by the seller which details criminal activity that has occurred near the property in the past two years and any security measures taken or recommended.

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Appraisals, Feasibility Studies and Market Studies

Documents that provide an assessment of the property's value, potential rent income, and feasibility of development.

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Soil Reports, Pest Control Reports, ADA Compliance Reports

Reports that examine the soil conditions, pest infestations, structural integrity, and compliance with accessibility regulations.

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ALTA Survey

A survey that outlines the property boundaries and details any improvements or structures on the site.

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Property Inspection

An inspection of the property by the prospective buyer or their consultants within a specified timeframe after the initial agreement.

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Government Related Licenses and Permits

All licenses, permits, occupancy certificates, inspections, and reports required by government agencies that relate to the property's use and operation.

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Warranties on Fixtures or Components

Warranties or guarantees provided by the seller for any fixtures, components, or appliances within the property.

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Preliminary Title Report

A preliminary title report, which will be provided to the buyer after acceptance of the offer, outlining potential issues with ownership of the property.

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Study Notes

Due Diligence Contingencies Addendum

  • This document outlines contingencies related to a property purchase agreement.
  • Buyer has the right to terminate the agreement if disapproved of certain checked conditions.
  • Buyer/Buyer's representatives cannot disclose information revealed by the Seller.
  • Buyer must return all received items if ownership is not acquired.
  • Seller must provide copies of various documents to the Buyer (e.g., rental income, leases, operating statements, property management agreements).
  • Included are items like tenant rental agreements, option rights, eviction reports, operating incomes/expenses, property maintenance agreements, utility bills, advertising reports, and property disclosures.
  • Geological reports and potentially other disclosures are mentioned.
  • Additional provisions include property disclosures, appraisals, pest control reports, soil reports, architectural/contractors reports, ALTA (American Land Title Association) surveys, topographical studies, and inspections.
  • Documents related to licenses, permits, safety reports, warranties, insurance policies, and financial statements (rent rolls, income/expense) are critical information to review.
  • Buyer can request supplementary items not on this list.
  • The agreement is between a Buyer and a Seller.
  • The timeframe for review is within a certain number of days after receipt.
  • Reports from appraisers, feasibility studies, market studies, and other similar similar reports or studies are included in the review.
  • The addendum may include conditions like reviewing a property's tax bills, assessment statements, and bonds.
  • The addendum specifically mentions reviewing invoices, copies of advertising, marketing budgets, and plans for the current and following year, as well as interviews of individuals involved in property management and administration.
  • Neighbor security disclosures, prepared by the owner, are also covered when determining conditions of the sale
  • Disclosure statements for property conditions (prepared by the owner) are also part of the addendum
  • The agreement outlines conditions regarding environmental impact, easements, and government permits
  • Inventory of personal property and existing insurance policies are included.
  • Trust deeds, liens and other related financial documents are to be scrutinized during the review.

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Related Documents

RPI 279 Due Diligence Contingencies Addendum PDF

Description

Test your knowledge of due diligence contingencies outlined in property purchase agreements. This quiz covers the various rights and obligations of both buyers and sellers, including document disclosures and conditions for terminating agreements. Ensure you understand the essential aspects of property transactions with this informative quiz.

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