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HomeMy WebLinkAbout9D - HUD Property Purchase CITY COUNCIL AGENDA REPORT AGENDA ITEM: CONSIDER APPROVAL OF A RESOLUTION APPROVING A PURCHASE AGREEMENT WITH THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT TO ACQUIRE PROPERTY AT 16812 CREEKSIDE CIRCLE, AND A PURCHASE AGREEMENT APPROVING THE SALE OF THE SAME PROPERTY TO R & K SALES, INC. DISCUSSION: History: Randy Simpson and Ken Beske (d/b/a R & K Sales, Inc.) have proposed to the City a $10 million development which would provide 78 owner-occupied market rate dwelling units for persons 55 years of age and older, and 12,000 square feet for retail development. The City Council has previously adopted a resolution approving, in concept, public assistance in the form of tax increment financing. There exists one single family dwelling unit on the property proposed for development. This agenda item would enable this property to be utilized as part of this development. Current Circumstances: R & K Sales representatives have advised the City that a HUD-foreclosed property is available for purchase at 16812 Creekside Circle. R & K Sales proposed that the City acquire the property at appraised value from the Department of Housing and Urban Development. R & K Sales would then purchase the property from the City and sell it to the Muellers who now occupy a residential dwelling unit on the property proposed for development. R & K Sales has entered into an agreement with the Muellers which would transfer title of the two properties. To complete the transaction, the City Council needs to authorize the execution and submission of a purchase agreement to the Department of Housing and Urban Development, and a purchase agreement between the City and R & K Sales, Inc. Attached is a copy of the HUD standard agreement which we are requesting be modified by the addition of one paragraph (also attached). The purchase agreement has been accepted by Randy Simpson and Ken Beske and executed copies, together with the down payment, will e provided to me by this Friday. I will have the executed copies at the Council meeting. All of these documents have been either prepared or reviewed by Steve Graffunder who works with the City Attorney on real estate matters. Conclusion: The Council should determine if the acquisition and sale of this property is appropriate to facilitate this development. 16200 Eagle Creek Ave. S.E., Prior Lake, Minnesota 55372-1714 / Ph. (952) 447-4230 / Fax (952) 447-4245 1:\COUNCIL\AGNRPTS\2001\CREEKSIDE CI~~~MR>RTUNITY EMPLOYER y- ~ ~ I '1 -IT ISSUES: ALTERNATIVES: RECOMMENDED MOTION: Does the proposed action benefit the general public? The City Council has already concluded that the Lakefront Plaza project is beneficial since it initiates the redevelopment of the downtown, provides an opportunity for greater population density downtown, promotes lifecycle housing in the community, and adds 12,000 square feet of retail space to the downtown area. This residential property must be acquired for the project to proceed. What is the cost to the public? The attorney time devoted to this transaction will be reimbursed as part of the purchase transaction. The cost of the property will be fully reimbursed to the City by R & K Sales, Inc. Are safeguards built into the transaction? Building Official Bob Hutchins has inspected the Creekside Circle property to evaluate it. He was accompanied by R & K Sales and Mueller family representatives. Mr. Hutchins' memorandum regarding the condition of the property based upon his cursory examination has been incorporated into the sales documents to clarify that the Muellers are buying the property "as is" and no warranties are expressed or implied. The City is requiring a $50,000 earnest money down payment. If R & K Sales does not proceed with the property acquisition, the City will have funds to make any corrections it deems essential with the remainder of the money available to pay marketing, realtor and foregone interest costs. The closings for the property are to be concurrent so that the reimbursement of funds occurs immediately. (1) Adopt a Resolution authorizing the acquisition and sale of property located at 16812 Creekside Circle and authorizing the Mayor and City Manager to execute the purchase agreements. (2) Adopt the purchase agreements with modifications. (3) Take no action. Alternative (1). Adopt a Resolution authorizing acquisition and sale of the property located at 16812 Creekside Circle and authorizing the Mayor and City Manager to execute the purchase agreements. 1:\COUNCIL\AGNRPTS\2001\CREEKSIDE CIRCLE PA.DOC RESOLUTION 01-XX A RESOLUTION AUTHORIZING CITY ACQUISITION AND SALE OF PROPERTY LOCATED AT 16812 CREEKSIDE CIRCLE TO FOSTER COMPLETION OF THE LAKEFRONT PLAZA PROJECT. Motion By: Second By: WHEREAS, the City Council desires to promote the redevelopment of downtown Prior lake; and WHEREAS, the lakefront Plaza project proposed by R & K Sales, Inc. will be the first redevelopment project in the downtown area; and WHEREAS, in order for the lakefront Plaza project to occur, a residential homestead on the property proposed for development must be acquired and the owners of said property relocated to another homestead; and WHEREAS, a property located at 16812 Creekside Circle, Prior lake, is available for acquisition by the City at appraised value due to forfeiture to the Department of Housing and Urban Development; and WHEREAS, the Mueller family has expressed their desire to acquire the property at 16812 Creekside Circle and relinquish possession of their existing homestead, and has entered into a written purchase agreement with R & K Sales, Inc.; and WHEREAS, to consummate the transaction, the City must acquire the property at 16812 Creekside Circle from the Department of Housing and Urban Development and re-sell the property to R & K Sales, Inc., who in turn will convey the property to the Muellers. NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF PRIOR LAKE, MINNESOTA that: 1. The Mayor and City Manager are authorized to execute a purchase agreement in the amount of $125,000 to acquire the property located at 16812 Creekside Circle, Prior lake, Minnesota, from the Department of Housing and Urban Development, and to execute the necessary documents to facilitate the purchase. 2. The Mayor and City Manager are authorized to execute a purchase agreement in the amount of $125,000 for the sale of the property located at 16812 Creekside Circle, Prior lake, Minnesota, to R & K Sales, Inc., and to execute the necessary documents to facilitate the sale. PASSED AND ADOPTED THIS 2ND DAY OF APRil, 2001. YES NO Mader Mader Ericson Ericson Gundlach Gundlach Petersen Petersen Zieska Zieska City Manager, City of Prior lake 16200 Eagle Creek Ave. S.E., Prior Lake, Minnesota 55372-1714 / Ph. (952) 447-4230 / Fax (952) 447-4245 AN EQUAL OPPORTUNITY EMPLOYER .11 T .. r 11 Sales Contract u.s. Department of Housing and Urban Development Office of Housing Property Disposition Program Federal Housing Commissioner I. ~). THE CITY OF PRIOR LAKE, MINNESOTA I HUO Case No. 271-747500 (Purchaser(s)) agree to purchase on the terms set forth herein. the following property. as more particularly described in the deed conveying the property to the Secretary of Housing and Urban Development: 16812 CREEKSIDE CIRCLE S.E. PRIOR LAKE, MINNESOTA (street number, street name, unit number, if applicable, city, county, State) 2. The Secretary of Housing and Urban Development (Seller) agrees to sell the property at the price and terms set forth herein. and to prepare a deed containing a covenant which warrants against the acts of the Seller and all claiming by. through or under him. Title will be taken in the following name(s) and style: r.rfV OF PRTOR T AKFr A MTNNF:SOTA MUNTCTPAT, r.ORPORATTON 3. The agreed purchase price of the property is ........................................................................................................ ~ 3. $ 12') .000 Purchaser has paid $ -0- as earnest money to be applied on the purchase price. and agrees to pay the balance of the purchase price. plus or minus prorations. at the time of closing, in cash to Seller. The earnest money deposit shall be held by NA 4. 0 Purchaser is applying for FHA insured financing [0 203(b), 0 203(b) repair escrow, 0 203(k)] with a cash down payment of $ due at closing and the balance secured by a mortgage in the amount of $ for months (does not include FHA Mortgage Insurance Premium, prepaid expenses or closing costs Seller has agreed to fund into mortgage.). o Said mortgage involves a repair escrow amounting to $ . @ Purchaser is paying cash or applying for conventional or other financing not invol ving FHA. 5. seller will pay reasonable and customary costs, but not more than actual costs, nor more than paid by a typical Seller in the area, of obtaining financing and/or closing (excluding broker's commission) in an amount not to exceed ..... ~ 5. $ 6a. Upon sales closing, Seller agrees to pay to the broker identified below a commission (including selling bonus, if offered by seller) of .................................................................................................................... ~ 6b. If.broker identified below is not the broad listing broker, broad listing broker will receive a commission of: .. ~ 7. The net amount due Seller is (Purchase price [Item 3] less Items 5 and 6) ........................................................... ~ 8. Purchaser is: 0 owner-occupant (will occupy this property as primary residence) 0 investor o nonprofit organization 0 public housing agency fi] other government agency. Discount at closing: % Discount will reduced by amounts, if any, listed on Line Items 5 and 6. 9. Time is of the essence as to closing. The sale shall close not later than 30 days from Seller's acceptance of contract. Closing shall be held at the office of Seller's designated closing agent or 10. If Seller does not accept this offer. Seller 0 may ~ may not hold such offer as a back-up to accepted offer. II. Lead based paint addendum 0 is ~ is not attached; Other addendum 0 is g] is not attached hereto and made part of this contract. 12. Should PurchaserreCuse or otherwiseCail to perform in accordance with this contract,induding the time limitation,SeIlermay, at Seller's sole option, retainaIJ or a portion oC the depositas liquidated damages. The Seller reserves the right to apply the earnest money ,or any portion thereoC,to any StUnS which may be owed by the Purchaser to the Sellerforrent. Purchaser(s) Initials: Seller's Initials: 13. This contract is subject to the Conditions of Sale on the reverse hereof, which are incorporated herein and made part ofthis contract. Certification of Purchaser: The undersigned certifies that in affixing hislher/its signature to this contract he/she/it understands: (1) all the contents thereoC (including the Conditions oC Sale) and is in agreement therewith without protest; (2) he/she/it is responsible Cor satisfying itself as to the full condition oC the property; and (3) that Seller will not perCorm repairs after acceptance of this contract. purceM):oWPp~f5~nae1Kt~ig'lJrINNESOTA Purcr~2'CrOA<frGtE CREEK AVE. S. E. PRIOR LAKE, MN 55372 -0- -0- 6a.$ A 6b. $ v- I 7. $ 125,000 BY FRANK BOYLES, CITY MANAGER Purchaser(s) Social Security Number (SSN) or Employer Identification Number (EIN) (include hyphens) Phone No: 41-6005469 (952)447-9801 Seller. Secretary of Housing and Urban Development By: (type name & title. & sign) X Date Purchaser(s)Signed Contract: 2/21/01 Date Contract Accepted by HUD: Certification of Broker: The undersigned certifies that: (1) neither he/she nor anyone authorized to act for him/her has declined to sell the property described herein to or to make it available for inspection or consideration by a prospective purchaser because of his/her race, color, religion, sex. familial status, national origin, or disability; (2) he/she has both provided and explained to the purchaser the notice regarding use of Seller's closing agent; (3) he/she has explained fully to the purchaser the entire terms of the contract, including Condition B on the reverse hereof; and (4) he/she is in compliance with Seller's earnest money policy as set forth on HUD forms SAMS-1111, Payee Name and Address, and SAMS-I111-A, Selling Broker Certification, which he/she has executed and filed with Seller. Broker's Business Name & Address: (for IRS reporting) (include lip Code) Broker's EIN or SSN: (include hyphens) SAMS NAID: NONE Signature of Broker. Broker's Phone No: x Type or print the name and phone number of sales person: This section for HUn use only. Broker notified of: . Authorizing Signature & Date: o Acceptance Back-Up No. Rejection Return Earnest Money Deposit X Previous editions are obsolete Original ref. Handbook 4310.5 fonm HUD-9548 (1/99) Conditions of Sale A. A1I asst:ssmt:nts. including improvement assessmt:nts which are avail- F. If this property is being offered with FHA insured mortgage financing able for payment without interest or penalty for advance payment. available. Seller's acceptance of this contract constitutes a commit- taxes. rent. and ground rent. if any. shall be prorated as of the closing ment to insure. conditioned upon Purchaser being determined by Seller ~~-'!W.s._"" ......,.......~..,_"... . ~_,"""'_ . '__~ """"". ~._ ~ _ _ , ~. '''''lor Direct Endorsement Underwriter to be an acceptable borrower and f"'BYSetletm:~k~~n&'~p.~~I1t~tiil~ '~or'''''im~a~ti~ "col!cerning :the~ further conditioned upon Seller's authority to insure the mortgage at ~~.,~~~.~....:. '--;""."<<'7"-'" .-c- "',," ", _.' ',. _', :, ~ . '.' ';"i''', .'.., "', "-;,' '',) the time the sale is closed. 'con(btion'of'theI'roperty,mdudlJlgbutnoCllID1tedtomec~lUlu:~r, ":'> . 'f."'" .......... '.' .....'...../..7'..--... '. .... ....... .... ../'"'' [~:"~yste~s~ify,ba-seme~t~.Jo'undation,.structur~i: or.co;Uplhmce'Wiili{ "G...Purchase~' understands that SeUer'slisting.- price is Seller's 'estl. ..j >:i-;l=()d~i,zoni~gor buildingrequirements,and.will make no, repairs. t~ :,;.c.,.:.~~~ orfurr,~nU~Ir'II1l!~!~,hyalue. -"~,: ,';':;-:";:;"'~;;i:'~i:.~..;,t'>:;"j:...~ ~;;~5~XiheiP:rope,rtyaftl~r.executi(Jnofthiscontract. "Purchaser under-1 H. No member of or Delegate to Congress or Resident Commissioner ;;/:,:~:!~nd~'thatregardlessor wbetherthe;prope~t:is being financed! shall be admitted to any share or pan of this contract or to any benefit ~,:'..~:;~ith!'al~'F~-i~nredlDortgage,Sellerdoesnotguarantee orl that may arise therefrom, but this provision shall not be construed to m;.t~;;"~tfantthat,theproperty is free oC visible or-hidden stluctural~ extend to this contract if made with a corporation for its general 1','.,",:_'.>', '. ,:-,",:,,_,:':-: ,'...,:-_--'c,;-"~':'- ,.:",. ,,',' .,',,_'., ,'" _ _' ,''':, ---.' k-;,/'Jef~dS~iel'mltedamage,lead~basedpaint, or any other-condition; benefit. ri:,'j;',t,b8fJIlay re~derthe propertY-uninhabitable or otherwise unus-j I. Purchaser and Seller agree that this contract shall be binding upon their w,;;'\.able., Purchaser'iacknowledgesresponsibility for takingsuch~ respective heirs. executors. administrators. successors or assigns but is ~!f:~:~~tion' asi:t'lJ;elie05snecessaryto satisCy itself th~t the p~operty i~ assignable only by written consent of the Seller. ~#'(Yf:~~:~::i:~o~n~;:;:~r~l::~i~::e:sWt~:::::tti~:S:;Z:6t~ft;ni:nf:j J. If this property was constructed prior to 1978. Seller has inspected for t."., > .,.,., 'c: . ... '. ... .' ,. .... '.. " defective paint surfaces (defined as cracking. scaling. chipping, peel- ;./~oliditionexistingoldhe date of this.contract.'l:tiSfmportant Cor; ,''C.'.......c.. ... . ". .. . .. '., ,<> ,"'-"'.''''''.' ing or loose paint on all interior and exterior surfaces). Seller's ~"'>,,'P-urchaser to hav.ea homeinspedion performedollth~propertyiD" inspection found no defecti ve paint surfaces. or if defecti ve paint ~;,:,. ~rder to identify any possible deCects. If FHA insured ~tiancin~ is; surfaces were found. Seller has treated or will treat such defective .' :used~ up to~iOOof the co.St to perform the ,irisPec'ti~iimay"be! fi '. d' -' , h . N . f h . ..... .. . .. .. .'. ~~rac;s.in.a mann.er pr.esc.ribe. d by Se.ller. pri.o...r to cl..osing. P.'u. ;'.,;.,1:. :~ser?1 ,. ..' Iiance lJ1to~t,~.riiortgage~' ... arnes'.o.....OIJi~~~sP. .e.,c.^ bO.n~?!B....panles,.i S 11 -,'.--- f': .:.~.:~.nde;.st~Iidsancfagreesthaithe'. e. er. s InSJJ~~t.iO~~an.,~. Of t~e. a.. '.t-...".:.:.. can be Cou~din the yellow pagesofyo~rtele~bo~edir~()ryu~deIC;' d" . . 2L .'~~_l!~:l:9mg~~;Ei'Q~~. 111SJl~~~Q..I!_.S~~D'i~,.'. ~','~;i:~i'2.2;;~;ii:::tj'~~;::'.;~;b;;;;j 7:,;ment lsnotintended t(),nor, oes .It gllasa~!~~',~r.::'Yar:;:.lnt;~at,all:( ~!,I~;d:?~f~,~~:in~'~e~..al!.potentiallei~4~.~",~,)J~,in,t~:@ir~;ha~~j c. If financing is involved in this transaction (Item 4). Purchaser agree" ~~_"!i.!l,~J!!!I:~!~~~S;eI~p~~r.:j Purchaser acknowleages thaf that should he/she/it fail to provide documentation indicating that he/she/it has received; cop~apamphlet which discusses lead-based proper loan application was made in good faith within 10 calendar days paint hazards and has signed. on or before the date of this contract. the of the date this contract was accepted by Seller. and/or thereafter Lead-Based Paint Addendum to Sales Contact - Property Built Before otherwise to put forth good faith efforts to obtain necessary financing, 1978. Purchaser understands that the Lead-Based Paint Addendum Seller shall have the option of rescinding this contract and retaining all must be signed by all Purchasers and forwarded to Seller with this or a portion of Purchaser's earnest money deposit. contract. Contracts which are not in conformance with these require- D. Seller may rescind this contract and return all or a portion of ments will not be accepted by Seller. Purchaser's earnest money deposit under the following conditions: K. The effective date of this contract is the date it is accepted (signed) by I. Seller has not acquired the property. the Seller. 2. Seller is unable or unwilling to remove valid objections to the title L. prior to closing. 3. Seller determines that purchaser is not an acceptable borrower. Tender of the deposit shall release the Seller from any and all claims arising from this transaction. E. Purchaser may not perform repairs nor take possession of the property until sale is closed. Risk ofloss or damage is assumed by Seller until sale is closed. unless Purchaser takes possession of the property prior thereto. in which case State law shall apply. (I) If sale involves FHA insured financing and after damage the property no longer meets the intent of Minimum Property Standards (MPS), Seller may. at its option. perform repairs or cancel the contract and return Purchaser's full earnest money deposit. If. after damage, the property still meets the intent of MPS, Purchaser has the option of accepting the property as-is. with a purchase price adjustment at Seller's sole discretion, or cancelling the contract and receiving refund of full earnest money deposit. (2) If sale does not invol ve FHA insured financing. Seller will not repair damage but may, at Seller's sole discretion. reduce the sale price. Purchaser has option to cancel the contract and receive refund of full earnest money deposit. Tender of the earnest money shall release Seller from any claims arising from this transaction. If the amount stated in Item 5 exceeds actual and typical financing and/ or closing costs. such excess shall not be paid by Seller and may not be used by Purchaser to reduce amount(s) due Seller. M. Seller's policies and requirements with regard to earnest money (in- cluding forfeiture thereof), extensions of time in which to close the sale, back-up offers. and allowable financing and/or closing costs are detailed in instructions issued to selling brokers. N. Seller makes no representations or guarantees that the property will, in the future, be eligible for FHA insured mortgage financing, regardless of its condition or the repairs which may be made. 9..~.fs1 P. This contract contains the final and entire agreement between Pur- chaser and Seller and they shall not be bound by any terms, conditions. statements". or representations, oral or written, not contained in this contract. Previous editions are obsolete ref. Handbook 4310.5 form HUD-9548 (1/99) . II I ill Conditions of Sale (continued) Q. Purchaser may rescind this contract if (1) title is not marketable or is not made marketable by the date of closing or (2) Purchaser does not close on the sale of the property concurrently with the purchase of the property from Seller. Upon such rescission, neither party shall have any further obligation to the other under this contract, and neither party shall be liable to the other on account of such rescission. Seller's Initials Purchaser's Initials PURCHASE AGREEMENT THIS PURCHASE AGREEMENT is made on , 2001 between the City of Prior Lake, a Minnesota municipal corporation, with offices at 16200 Eagle Creek Avenue SE, Prior Lake, Minnesota ("Seller"), and R & K Sales, Inc., 2933 Spring Lake Road SW, Prior Lake, MN 55372 ("Buyer"). IN CONSIDERATION of the promises and covenants contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Seller and Buyer agree as follows: 1. Sale of Property. Seller agrees to sell to Buyer, and Buyer agrees to buy from Seller the real property located at 16812 Creekside Circle SE, Prior Lake, Minnesota, and legally described in the attached Exhibit A, together with all improvements, easements and rights benefiting or appurtenant thereto (collectively referred to as the "Property"). 2. Purchase Price and Manner of Payment. The total purchase price (the "Purchase Price") to be paid by Buyer to Seller for the Property shall be One Hundred Twenty- five Thousand and 00/100 Dollars ($125,000.00). a. Fifty Thousand and 00/1 00 Dollars ($50,000.00) as earnest money (the "Earnest Money"). Upon receipt of the Earnest Money from Buyer, Seller shall deposit the Earnest Money into Seller's general account and commingle it with Seller's other funds. b. The balance of the Purchase Price in certified funds or by wire transfer on the Date of Closing. 3. Acceptance Deadline. The offer to purchase contained in this Agreement (the "Offer") shall be revoked and shall be null and void on March 30, 2001 at 4:30 p.m. (the "Acceptance Deadline"), unless Buyer has accepted the Offer by the Acceptance Deadline. In order to constitute acceptance of the Offer, Buyer must execute this Agreement and provide a copy of the fully executed Agreement to Seller in the manner provided for giving notices specified in Paragraph 16 of this Agreement. 4. Closin2 and Possession. The closing of the purchase and sale contemplated by this Agreement (the "Closing") shall be immediately after the Seller closes on the purchase of the Property, or such other date as may be mutually agreed to by the parties (the "Date of Closing" or "Closing Date"). The Closing shall take place at the offices of the Seller or at such other place as may be agreed to by the parties. The parties shall deliver the following documents at Closing: a. Seller's Closing Documents. On the Closing Date, Seller shall execute and deliver to Buyer the following (collectively, "Seller's Closing Documents"): III II ill 1. Quit Claim Deed. A Quit Claim Deed, Minnesota Uniform Conveyancing Blank No. 31-M. b. Buyer's Closing Documents. On the Closing Date, Buyer will execute and/or deliver to Seller the following (collectively, "Buyer's Closing Documents"): 1. Purchase Price. The balance of the Purchase Price in cash, certified funds or wire transfer. 11. Transaction Costs. Any of the Transaction Costs, as defined in Paragraph 6(a) of this Purchase Agreement, incurred by Seller. 111. Title Documents. Such Affidavits of Purchaser, Certificates of Value or other documents as may be reasonably required in order to record the Seller's Closing Documents. 5. Possession of Property. Seller shall deliver posseSSIOn of the Property immediately after the Closing. 6. Allocation of Costs. Seller and Buyer agree to the following allocations of costs regarding this Agreement: a. Transaction Costs. Buyer shall pay any and all out-of-pocket the costs incurred in connection with Seller's acquisition of the Property from the U.S. Department of Housing and Urban Development ("BUD") and the sale of the property to Buyer (collectively, the "Transaction Costs"), including, but not limited to, the following (i) the cost of the title insurance commitment as provided in this Agreement, (ii) the cost of preparing the Seller's Closing Documents, (iii) the Seller's closing fee charged by the Title Company, (iv) the State Deed Tax due on the recording of the Quit Claim Deed, (v) Seller's legal fees, (vi) Seller's closing costs regarding the acquisition of the Property, as shown on the closing statement from such closing, including, but not limited to, the premium for a title insurance policy, and (vii) any other out-of-pocket cost or expense incurred by Seller in connection with the acquisition or sale of the Property. Transaction Costs shall not include any charges for time expended by the City Councilor City Administrative Staff in connection with the acquisition or sale of the Property. Buyer agrees to pay the Transaction Costs regardless of whether the Closing is consummated, unless Seller defaults in the performance of its obligations under this Agreement. b. Real Estate Taxes and Special Assessments. 1. Any general real estate taxes that are not paid by BUD and are outstanding as of the Date of Closing shall be paid by Buyer. -2- 11. Buyer shall assume all special assessments levied, pending, or constituting a lien against the Property as of the date of this Purchase Agreement, including without limitation any installments of special assessments (including interest) payable with general real estate taxes in 2001 (the "Special Assessments"). 7. Title Evidence. As soon as reasonably possible but no later than fourteen (14) days after the date of this Agreement, Buyer may obtain, at Buyer's sole cost and expense, a commitment (the "Title Commitment") by the Title Company to issue an ALTA Form B 1990 Owner's Policy of Title Insurance, in an amount equal to the Purchase Price, to insure Buyer's title to the Property (the "Title Evidence"). Seller shall make available for Buyer's inspection any title insurance commitment obtained by Seller in connection with Seller's acquisition of the Property. Seller agrees to use reasonable efforts to attempt to avoid duplication of the cost of title insurance policies. 8. Title Examination, Title Corrections and Remedies. Within ten (10) business days of Buyer's receipt of the Title Evidence, Buyer shall review the Title Evidence and deliver written notice to Seller stating that either (i) title to the Property is marketable, (ii) title to the Property is not marketable and that Buyer will waive any title defects and proceed to closing, or (iii) title to the Property is not marketable and that Buyer is terminating this Agreement because of the title defects. If Buyer does not give such notice within such time period, any defects in the title to the Property will be waived and Buyer shall not thereafter be entitled to terminate this Agreement based on title defects. If title is marketable, or is made marketable as provided herein, and Buyer defaults in any of the agreements herein, Seller may elect any of the following options, as permitted by law: 1. Cancel this Agreement as provided by statute and retain all payments made hereunder as liquidated damages; 11. Seek specific performance within six (6) months after such right of action arises, including costs and reasonable attorney's fees; or 111. Seek damages from Buyer, including costs and reasonable attorney's fees. If title is marketable, or is made marketable as provided herein, and Seller defaults in any of the agreements herein, Buyer may, as its sole remedy, terminate this Agreement and obtain the return of the Eamest Money. 9. "As Is" Sale. The Property, the improvements thereon, and any personal property located on the Property are being sold on an "as is" and "where is" basis, with all faults and defects, and without any warranties of any kind, including, but not limited to, warranties as to physical condition or fitness for a particular purpose. Buyer acknowledges and agrees that (i) Buyer has satisfied, or will satisfy, itself about the physical condition of the Property, the improvements on the Property, and any personal property, (ii) that Buyer has not relied on any -3- .11 'JI' II ill representations of Seller regarding the physical condition of the Property, the improvements on the Property, or any personal property, (iii) that the Memorandum of Robert D. Hutchins dated February 22, 2001 is not a representation or warranty that the Property, or any part thereof, is in satisfactory condition, and (iv) that Buyer has not relied on anything contained in said Memorandum in determining whether to purchase the Property. 10. Indemnification. Buyer agrees to defend, indemnify and hold Seller harmless from any and all losses, damages, expenses, claims, liabilities, and actions, including reasonable attorney's and consultant's fees, arising from, based on, or related to any person or persons, including, but not limited to, Leander Mueller and Loretta Mueller, and their heirs, successors and assigns, asserting a claim against Seller based on the physical condition of the Property, the improvements thereon, and any personal property. To further confirm that the Muellers are releasing Seller from any claims relating to the physical condition of the Property, Buyer shall obtain the Muellers signature on the Acknowledgment attached hereto as Exhibit B and deliver an executed original to Seller within ten (10) days of the date of this Agreement. 11. Representations and Warranties of Buyer. Buyer represents and warrants to Seller that Buyer is a duly organized corporation under the laws of the State of Minnesota; that Buyer is duly qualified to transact business in the State of Minnesota; that Buyer has the requisite of power and authority to enter into this Agreement and the Buyer's Closing Documents to be signed by Buyer; such documents have been, or will have been by the Date of Closing, duly authorized by all necessary action on the part of Buyer and have been duly executed and delivered; that the execution, delivery and performance by Buyer of such documents do not conflict with or result in violation of Buyer's governing documents or any judgment, order, or decree of any court or arbiter to which Buyer is a party; and such documents are the valid and binding obligations of Buyer and enforceable in accordance with their terms. Buyer's representatives are real estate professionals licensed by the State of Minnesota. Buyer will indemnify Seller, and Seller's successors and assigns, against, and will hold Seller, and Seller's successors and assigns, harmless from, any expenses or damages, including reasonable attorney's fees, that Seller incurs because of the breach of any of the above representations and warranties, whether such breach is discovered before or after Closing. Consummation of this Agreement by Seller with knowledge of any such breach by Buyer will not constitute a waiver or release by Seller of any claims due to such breach. Each of the representations and warranties set forth above shall survive the Closing. 12. Seller's Contin2encies. Seller's obligations under this Purchase Agreement are contingent upon Seller's successful closing on the purchase of the Property from BUD. Unless this contingency is satisfied, removed, or waived by Seller on or before the Date of Closing, Seller shall have the right to cancel this Purchase Agreement by giving Buyer written notification of Seller's election to so cancel. Upon delivery of such written notification, this Purchase Agreement shall be null and void, and Seller and Buyer agree to execute a cancellation of this Purchase Agreement. 13. Wells. A Well Disclosure Statement accompanies this Agreement. -4- 14. Brokers. The parties represent to each other that they have retained no other brokers or agents in connection with this transaction and shall indemnify each other for any claims, demands, causes of action and costs, including reasonable attorneys' fees, arising from any broker or agent claiming a commission or fee with respect to this transaction. 15. Survival. All of the terms, conditions, representations, warranties, and indemnifications contained in this Agreement shall survive and be enforceable after the Closing. 16. Notices. Any notice required or permitted to be given by either party upon the other is given in accordance with this Agreement if notice is directed to Seller by delivering notice personally to anyone of the undersigned of sellers; or if notice is directed to Buyer, by delivering notice personally to anyone of the undersigned buyers; or if mailed in a sealed wrapper, properly addressed, by United States registered or certified mail, return receipt re- quested, postage prepaid; or if transmitted by facsimile, copy followed by mailed notice as above required; or if deposited cost paid with a nationally recognized, reputable overnight courier, properly addressed as follows: Ifto Seller: City of Prior Lake 16200 Eagle Creek Avenue SE Prior Lake, MN 55372 Attn: Frank Boyles, City Manager with a copy to: Suesan L. Pace, Esq., City Attorney for City of Prior Lake HALLELAND, LEWIS, NILAN, SIPKlNS & JOHNSON Pillsbury Center South 220 South Sixth Street, Suite 600 Minneapolis, MN 55402-4501 If to Buyer: R & K Sales, Inc. 2933 Spring Lake Road SW Prior Lake, MN 55372 Notices shall be deemed effective on the earlier of the date of receipt or the date of deposit as aforesaid; provided, however, that if notice is given by deposit, that the time for response to any notice by the other party shall commence to run one (1) business day after any such deposit. Any party may change its address for the service of notice by giving written notice of such change to the other party, in any manner above specified, ten (10) days prior to the effective date of such change. 17. Miscellaneous Governin2 Provisions. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, legatees, representatives, successors, and assigns. This Agreement shall be construed and interpreted in accordance with the laws of the State of Minnesota. No failure on the part of a party to this Agreement to exercise, and no delay in exercising, any rights contained in the Agreement shall operate as a -5- III 'if II ill waiver of such rights, nor shall any single or partial exercise of any rights hereunder preclude any other or further exercise of such rights or the exercise of any other right. The remedies provided in this Agreement are cumulative and not exclusive of any other remedy provided by law or equity. All terms and words used in this Agreement shall be construed to include any other number and any other gender as the context or sense of this Agreement or of any paragraph of this Agreement may require as if such terms or words had been fully and properly written in the appropriate number and gender. Any exhibits to this Agreement are a part of this Agreement. Captions are provided for convenience and ease of reference only and do not affect or modify the terms of any of the provisions of this Agreement. All of the provisions of this Agreement are separable, so if any provision of this Agreement is held to be ineffective by a court of competent jurisdiction, the remaining provisions of this Agreement shall remain in full force and effect unless the invalidated provision is so fundamental to this Agreement that the remaining provisions do not reflect the parties' intent. This Agreement contains the entire agreement of the parties with respect to the subject matter of this Agreement and supersedes any and all prior Agreements and understanding between the parties with respect to the same. The terms of this Agreement have been cooperatively negotiated by and among the parties hereto, and this Agreement shall not be construed against any party hereto as its author. This Agreement may be modified only by a written instrument executed by both parties. There are no third party beneficiaries of this Agreement, intended or otherwise. Time is of the essence for each and every term of this Agreement. This Agreement may be executed in counterparts and, upon execution, each counterpart shall be considered an original. IN WITNESS WHEREOF, Seller and Buyer have executed this Agreement as of the date first written above. SELLER: BUYER: CITY OF PRIOR LAKE R & K SALES, INe. By: Wesley M. Mader, Mayor By: Randy Simpson, Its President By: Frank Boyles, City Manager By: Kenneth Beske, Its Vice President -6- EXHIBIT A (Legal Description) Lot One (1), Joanna Stepkas High-view Third, according to the recorded plat thereof, Scott County, Minnesota III r II Ii IJ EXHIBIT B ACKNOWLEDGMENT AND RELEASE Leander Mueller and Loretta Mueller acknowledge, understand, and agree as follows: 1. That the property they are acquiring at 16812 Creekside Circle SE, Prior Lake, Minnesota (the "Property") is not new, has been the subject of a mortgage foreclosure, and has not been occupied by the City of Prior Lake (the "City"). There a number of defects in the condition of the Property, some of which are described in a Memorandum by Robert D. Hutchins dated February 22, 2001 (the "Memorandum"). The inspection described in the Memorandum was a visual inspection only, and was not intended to discover all of the potential defects in the condition of the Property. The Property may contain other defects not described in the Memorandum, some of which could be serious. The Muellers acknowledge that they did not rely on the Memorandum or any other statement or representation of the City in determining whether to accept the Property in exchange for their current property. The Muellers acknowledge that they have satisfied themselves about the condition of the Property, and that they are acquiring the Property "as is" and "where is," with all faults and defects. 2. The Muellers, for themselves, and their heirs, successors, and assigns, release the City from any and all claims arising from, based on, or related to the physical condition of the Property, the house and other improvements on the Property, and any personal property that may be located on the Property. 3. The Muellers acknowledges that the exchange of their current property for the Property is a voluntary transaction and is not being made under any threat of acquisition by eminent domain by the City. The Muellers waive and release the City from any and all claims for relocation assistance, services, payments, benefits, reimbursements, damages, losses, costs, and expenses (including, without limitation, attorney's fees), if any, to which the Muellers might otherwise be entitled if the transaction were not a voluntary transaction. Date: Leander Mueller Date: Loretta Mueller LEAD-BASED PAINT ADDENDUM FOR HOUSING CONSTRUCTED BEFORE 1978 Lead Warnine Statement Every purchaser of any interest in residential real property on which a residential dwelling was built prior to 1978 is notified 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 of any interest in residential real property 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. A risk assessment or inspection for possible lead-based paint hazards is recommended prior to purchase. Lead Paint Contineency This contract is contingent upon a risk assessment or inspection of the property for the presence of lead-based paint and/or lead-based paint hazards at the Purchaser's expense until 9:00 p.m. on the tenth calendar day after ratification of this contract. (Intact lead-based paint that is in good condition is not necessarily a hazard. See the EP A pamphlet "Protect your Family From Lead in Your Home" for more information.) This contingency will terminate at the above predetermined deadline unless the Purchaser (or Purchaser's agent) delivers to the Seller (or Seller's agent) a written contract addendum listing the specific existing deficiencies and corrections needed, together with a copy of the inspection and/or risk assessment report. The Seller may, at the Seller's option, within three (3) business days after delivery of the addendum, elect in writing whether to correct the condition(s) prior to settlement. If the Seller will correct the condition, the Seller shall furnish the Purchaser with certification from a risk assessor or inspector demonstrating that the condition has been remedied before the date of the settlement. If the Seller does not elect to make the repairs, or if the Seller makes a counter-offer, the Purchaser shall have three (3) business days to respond to the counter-offer or remove this contingency and take the property in "as is" condition or this contract shall become void. The Purchaser may remove this contingency at any time without cause. Seller's Disclosure (initial) _ (a) Presence of lead-based paint and/or lead-based paint hazards [check (i) or (ii) below): D (i) Lead-based paint or lead-based paint hazards are present In the housing ( explain). IZI (ii) Seller has no knowledge oflead-based paint and/or lead-based paint hazards in the housing. III T iI Hl _ (b) Records and reports available to the seller [check (i) or (ii) below]: D (i) Seller has provided the purchaser with all available records and reports pertaining to lead-based paint and/or lead-based paint hazards in the housing (list documents below). [XI (ii) Seller has no reports or records pertaining to lead-based paint and/or lead- based paint hazards in the housing. Buyer's Acknowledgment (initial) _ (c) Purchaser has received copies of all information listed at (b) (i) above. _ (d) Purchaser has received the pamphlet "Protect Your Family from Lead in your Home". _ (e) Purchaser has [check (i) or (ii) below]: D (i) Received a lO-day opportunity (or mutually agreed upon period) to conduct a risk assessment or inspection for the presence of lead-based paint and/or lead- based paint hazards; or C8J (ii) Waived the opportunity to conduct a risk assessment or inspection for the presence of lead-based paint and/or lead-based paint hazards. Agent's Acknowledgment (initial) _(f) Agent has informed the seller of the seller's obligations under 42 D.S.C. 4582(d) and is aware of his /her responsibility to insure compliance. Certification of Accuracy The following parties have reviewed the information above and certify, to the best of their knowledge, that the information provided by the signatory is true and accurate. SELLER: BUYER: CITY OF PRIOR LAKE R & K SALES, INC. Wesley M. Mader, Mayor By: Its By: By: Frank Boyles, City Manager - 2 - Leander and Loretta Mueller: February 28, 2001 Reference to the property located at 16812 Creekside Lane Prior Lake MN This letter is to address our verbal conversation on Feb. 20 th and 28 th, 2001. As the potential Fee owner and representative of Lee and Loretta Mueller the terms agreed to are listed as follows. R&K Sales Inc. an entity owned by licensed real estate agents Randy Simpson and Kenneth Beske in conjunction with the City of Prior Lake will purchase the home at 16812 Creekside Circle. R&K Sales Inc. will deed 16812 Creekside Circle ( legal description to conform to PID 251040010 ) to Leander and Loretta Mueller, their trust, or representative of their choosing. In exchange, Lee and Loretta agree to deed their property located at 4692 Dakota Street Prior Lake (legal description to conform to PID 250010670), to R&K Sales Inc. R&K Sales Inc. will also at the time of closing furnish the Muellers a check for the amount of$4500 (Four- thousand five hundred dollars) for carpet and repair allowance. This may be used at the Muellers discretion. R&K Sales Inc. will pay for all normal transfer fees on both homes to include closing fee, deed tax, abstract update, assessment search, conservation fee etc. In the event of any title ownership problems on 4692 Dakota Street such as leans or clouds on the title the Muellers will have to take care of these issues at their expense to provide clear title to R&K Sales Inc. The exception to this is the garage and shed at 4692 Dakota Street does encroach on to the adjoining property and road right away. R&K Sales Inc. acknowledge this and accepts this fact with no expense to the Muellers. R&K sales Inc. will allow possession of the home located at 4692 Dakota Street for 60 days after deed transfer. R&K Sales Inc. will also allow removal of any items, cupboards, lights, flowers, trees, shrubs etc. R&K Sales Inc. do require that all personal property be removed from the premise. R&K Sales Inc. will accept the property located at 4692 Dakota Street in AS- IS condition Leander and Lorreta and their representatives accept the home located at 16812 Creekside Circle AS- IS , no warranties are implied or expressed. R&K Sales Inc., The City of Prior Lake and the Department of Housing and Urban Development have never occupied the home and will have no liability for the condition of the home or mechanical systems and will be held harmless. R&K Sales Inc. and the Muellers agree to cooperate by signing documents required by the lending institution, The City of Prior Lake and BUD to facilitate this transaction. The Muellers have read and understand the attached document from the City of Prior Lake inspection by Robert Hutchins building inspector and accept home as stated. This will also be included with the purchase agreement as required by the City of Prior Lake. This proposal has been explained in the company of Bob McAlister and both parties agree to sign appropriate documents for transfer of the above properties. ~el~~ 3 -/-0/ Date ~~# .' ~e~ Beske R&K Sales Inc. ./ ~" .:tc-u.Z6v ~ Loretta Mueller ~ -1-0 J Date III I Hl 02/27:/0., TUE 11: 25 FA..'i: 61H4i4245 CITY OF PRIOR LAKE I4i 00 2 1\11 ~morandum Dli rE: February 22, 2001 Tel Frank Boyles FF:')M: Robert D. Hutchins ~\)\A Rli HUD house at 16812 Creekside Circle SE Tb I is the result of an inspection performed on February 21, 2001, to determine elf:1 Jents of the BUD house at 16812 Creekside Circle SE. The following ob:< ~rvations were made during the inspection: 1. !:xterior Grade a. Yard grade appears flat with very little slope away from house and garage. Also house is not raised above adjacent grade. One foot of snow cover made it difficult to make a determination of the lot grading. . 'b. Roof gutter downspouts terminate at comers of house, transferring roof drainage along exterior of foundation. 2. !foundation a. Water Moisture: Wetness, mold and mildew are present on some areas of the interior portion ofthe concrete block foundation. b, .Basement floor: There is heaving of the basement floor due to hydrostatic pressure under the concrete floor slab. The heaving is indicated by cracks in the slab. The width of cracks is 1/1 6" +. c. Walls: The concrete block foundation seems to be in fair structurJI shape. d. Water collection system: A "Beaver" water collection system has been installed around the inside perimeter of the foundation. Three sump pump baskets have been installed to collect water run off. All three baskets were void of water. 3. Electrical Wiring a. Exposed wiring in the basement appears that it has been installed incorrectly, b. Electrical panel: A newer panel has been installed and an electrical sticker has not been posted indicating that an electrical inspection had been conducted. 4. I Vlechanical l. Water heater; Diameter of drainpipe on temperature and pressure valve is incorrect. Vent connector and connection at flue is incorrect. l. Gas lines: Flexible pipe at kitchen is non-code complying. Abandoned gas lines are not capped, .. Flue vent: Combustible debris in base of flue, 5. Vater Damage I. Roof leakage: Living room ceiling has water damage from roof valleys. " Th! house was constructed in 1964. There is no record of any building permits issued for the: JBrCeL Besides the items above. there are minor maintenance items that need to be cor ected. Overall the house appears to be structurally sound. An aesthetic assessment of the. lOuse was not conducted. The interior of the detached garage was not inspected.