A new version of the Residential Real Estate Purchase Contract was released by the Columbus REALTORS® and the Columbus Bar Association on 5/24/17. The new release features several amendments that are collectively less significant than the major changes made in 2016. It is nevertheless important that REALTORS® familiarize themselves with these changes.
Changes to financing provisions (paragraph 3)
The financing provisions added to the contract in 2016 included a requirement set forth in paragraph 3.2(c) that the Buyer deliver a loan commitment to the Seller within either 30 calendar days or another time frame agreed by the parties. This created a problem for some transactions involving lenders that were unable or unwilling to deliver a loan commitment within the default 30-day time frame. Revised paragraph 3.2(c) makes the loan commitment delivery requirement optional (“this subsection 3.2(c) is not applicable if number of days not inserted”).
The appraisal contingency provision (paragraph 3.2(d)) has also been amended. Previously, the Buyer had three calendar days from the time he/she received “notice of the appraised value” to terminate if the property was appraised for less than the purchase price stated in the contract. Under revised paragraph 3.2(d), the Buyer’s time frame for termination runs from the time the Buyer receives a copy of the appraisal.
Damage or destruction of premises (paragraph 11)
Paragraph 11 has been substantially rewritten. Because most REALTORS® rarely, if ever, deal with properties that have been substantially damaged or destroyed while in contract, the newly-inserted notice at the beginning of the paragraph is very important and bears repeating: “IT IS STRONGLY RECOMMENDED THAT, UPON DISCOVERY OF DAMAGE OF DESTRUCTION OF PREMISES, THE PARTIES RETAIN LEGAL COUNSEL.”
Under the previous version of paragraph 11, upon notice of damage or destruction, the Buyer had a time-limited right to rescind the contract and be reimbursed by the Seller for expenses incurred in furtherance of the transaction. Revised paragraph 11 reverses the Buyer’s rights by giving the Buyer the time-limited option to agree to extend the closing date to the extent reasonably necessary to allow Seller to restore the premises to its previous condition, or accept the premises in its damaged condition with an assignment of insurance proceeds, if any are available. If the Buyer doesn’t agree to accept the premises in its damaged condition, or if the parties are unable to agree to extend the closing date to restore the premises within 10 calendar days of receipt of the Seller’s written notice of damage or destruction, the contract automatically terminates and the earnest money deposit, as well as any non-refundable deposits that may have been agreed to by the parties, are refunded pursuant to paragraph 12.
Non-Foreign Seller (new paragraph 13.7)
The Foreign Investments in Real Property Tax Act of 1980 (26 USC Section 1445(f) et seq., commonly known as “FIRPTA”) imposes an obligation on the Buyer to withhold a portion of funds due to the Seller from any transaction for real estate in excess of $300,000 where the Seller is a “foreign person,” generally defined as a non-U.S. business entity or person who is not a U.S. citizen or resident alien. Some, but not all title agents have been protecting buyers by requiring sellers to either sign the affidavit required under FIRPTA declaring that the seller is not a “foreign person” or withholding funds as required by law. The new paragraph will make this a contractual obligation, and will likely prompt all local title agents to perform this service for buyers.
Questions about the contract?
A copy of the new contract form with my explanatory annotations is available at ColumbusRealtors.com/forms
(members only page). The annotated contract provides explanations and useful information for all of the most important contract provisions.
William D. Fergus, Jr., Esq., OSBA Certified Specialist, Residential Real Property Law is with HOLFINGER STEVENSON LAW FIRM. He can be reached (614) 610-9908.