January 1, 2015 Form Changes
One dozen forms or contracts have been revised, all to be effective January 1, 2015. This includes the Regional Sales Contract, the Virginia Jurisdictional Addendum, and others.
Matthew Rathbun Explains The 2015 Form Changes
K1321 – Residential Sales Contract - Click here to view the PDF Format
K1345 – Virginia Jurisdictional Addendum - Click here to view the PDF Format
K1116 – Release of Sales Contract and Deposit - Click here to view the PDF Format
K1297 – Useful Information About Real Estate Transactions - Click here to view the PDF Format
K1339 – VA Financing Contingency Addendum - Click here to view the PDF Format
K1340 – FHA Financing Contingency Addendum - Click here to view the PDF Format
K1359 – Conventional Financing Addendum - Click here to view the PDF Format
K1210 – Walk-Through Inspection - Click here to view the PDF Format
K1367 – Notice Voiding Contract - Click here to view the PDF Format
Residential Sales Contract – K1321
- The Regional Sales Contract. The Regional Sales Contract has been significantly modified. Upon review of the practice and forms available in DC and Maryland, the Standard Forms committee concluded that the Regional Sales Contract was a concept that had run its course. After review of the various jurisdictional addenda, it became clear that the jurisdictional addenda modified the contract to such a point that there really was no longer a core contract that could be used across all three jurisdictions. In light of this, the Committee worried that for individuals infrequently practicing across jurisdictions, the Regional Sales Contract may have created a false sense of security in that agents may not have been aware of just how different each jurisdiction was.The committee created a Residential Sales Contract. This contract will no longer require the use of a jurisdictional addendum as the provisions have been incorporated into the body of the main contract. This contract will not be useable in other jurisdictions.
- Contract Date v. Date of Offer. The previous version of the contract used the term contract date in the first paragraph of the contract. This lead to some confusion from the members as to the difference between contract date and date of ratification. The term contract date was misleading because it was intended to capture the date the offer is made. To that end, the committee changed the term contract date to the date of offer.
- Price and Specified Financing. Significant confusion arose out of the old definition of specified financing. We have changed the name of the paragraph so that now all that is in the Price and Financing paragraph constitutes “specified financing”. This is intended to resolve questions around what is specified financing and when does a purchaser lose the protection of the financing contingency when modifying his financing. A purchaser can change lenders and so long as the purchaser satisfies the requirements of paragraph 15, Alternate Financing. Thepurchaser will continue to enjoy the protection of the financing contingency. However, if a purchaser decides to go from a VA to a conventional loan, for example, the purchaser will have to execute the correct financing addendum and obtain the seller’s consent.
- Deposit. The purchaser now has to select whether they have already given the EMD to the escrow agent or whether they will deposit it in the future. If they select the second option, they must state the number of days they have to deliver the EMD. This change was made to allow out-of-town purchasers, who may not have delivered the EMD to the escrow agent yet, to sign an offer using electronic signatures and not make an untrue statement that they had already delivered the money.
- Delivery. The Delivery paragraph has been simplified. The party has to select the method of delivery and then has a blank line to place the corresponding contact information. So if the seller selects delivery is to occur by email, then the seller can place his email address and that of his agent on that line or just his email address or just that of the agent’s. This will give parties more flexibility.
- HOA. This paragraph has been updated to reflect the changes in the law. If the seller hand-delivers the HOA documents to the purchaser, he will have to obtain a receipt from the purchaser. The language which previously allowed the purchaser to select what format they would like the documents delivered has been modified to more closely track the statute, which leaves the selection of the format of the documents (electronic or hard copy) up to the seller. The purchaser will now have to provide their preferred address of delivery for both electronic and hard copies so that the seller may deliver using whatever format they have the documents in.
- Condo. This paragraph has been updated to reflect the changes in the law. If the seller hand-delivers the documents to the purchasers he will have to obtain a receipt from the purchasers. The language which previously allowed the purchaser to select what format they would like the documents delivered has been modified to more closely track the statute, which leaves the selection of the format of the documents (electronic or hard copy) up to the seller. The purchaser will now have to provide their preferred address of delivery for both electronic and hard copies so that the seller may deliver using whatever format they have the documents in.
- Access to the Property. Walk through inspection can be conducted for a period of seven days prior to settlement.
- Wood destroying insects. The paragraph has been updated to allow for inspection of any wood destroying insects, rather than just termites. This conforms with the practice of many inspectors and the requirements of many lenders.
- Title. The title paragraph addresses, among other things, the circumstances under which the parties realize close to settlement that there is a title defect on the property. The paragraph then gave the option to the seller to delay settlement if the defect was of such a nature that it could be remedied within thirty days from the original settlement date. The language did not address what would happen to the purchasers, their carrying costs etc. The new language remedies that by giving the purchasers the choice, on settlement date, of voiding the contract or to reach an agreement with the sellers and delay settlement until such time as the title defects can be remedied.
- Title Insurance. The CFPB created new rules which govern the practice of settlement agents and their ability to provide purchasers quotes for title insurance. As a result of the new regulations, the sales contract has to specify whether the settlement agent is allowed to quote the purchaser both a standard title insurance quote as well as an enhanced title insurance quote. The new language in the contract gives the purchaser the choice of getting a quote for the standard or the enhanced coverage.
- Oil Tanks. The Adjustments paragraph has been updated to remove the confusion that arose from the sentence “Any heating or cooking fuels remaining in supply tank(s) at Settlement will become the property of Purchaser, unless leased.” The provision now says “Unless otherwise agreed to in writing, any heating or cooking fuels remaining in supply tank(s) at Settlement will become the property of Purchaser.”
2. K1345 – Virginia Jurisdictional Addendum
- The Virginia Jurisdictional Addendum was deleted as it was incorporated into the new Residential Sales Contract.
K1116 – Release of Sales Contract and Deposit
- The Release of Sales Contract and Deposit form was amended to add a new paragraph warning the parties that the release may not end liability to their respective broker under the applicable brokerage agreement.
K1297 – Useful Information About Real Estate Transactions
- The Useful Information About Real Estate Transactions form was amended to add gender identity to the list of protected classes in the fair housing paragraph, and to add a new paragraph addressing the Foreign Investment in Real Property Tax Act (FIRPTA). The new paragraph explains what FIRPTA is, what duties each party may have, and that they should seek competent legal, tax, and/or financial advice.
K1339 – VA Financing Contingency Addendum; K1340 – FHA Financing Contingency Addendum; K1359 – Conventional Financing Addendum
- The Deed of Trust paragraph in all three Financing Addenda had common language moved into the Price and Specified Financing paragraph of the new contract. All that remains in the first paragraph of each addenda is language that is unique to that particular type of financing.
- Additionally, the list of seven, non-exclusive, reasons a Purchaser could be in Default have been removed. The Seller Subsidy/Seller Loan Charges paragraph was retitled as “Seller Subsidy”. Finally, each form was modified in the Financing Contingency paragraph to add “Days after Date of Ratification” in after the blank. Staff will instruct forms vendors to make this field flexible so that parties can enter either a number, or add a specific date and strike through the new language.
- On the Conventional Financing Addendum, the Appraisal Contingency paragraph 3.C. has been changed to mirror the VA and FHA Appraisal Contingency paragraphs which require the Purchaser to provide a written statement from the lender indicating the appraised value in the event of a low appraisal.
K1210 – Walk-Through Inspection
- The language at the end of the form was clarified to state that neither the broker nor the settlement agent shall be liable in the event of one party breaching any repair agreements.
K1367 – Notice Voiding Contract
- A new form was created to use when voiding the contract pursuant to a paragraph of the contract or one of the addenda. The purpose of the form is to prompt parties who want to void the contract to point out which paragraph they are voiding under and will give agents pre-drafted language to use, rather than having agents create language when their clients need to void a contract.
The following forms were updated to conform with the new Residential Sales Contract and with minor formatting changes:
K1020 – Seller Post Settlement Occupancy
K1025 – Purchaser’s Acknowledgment of Receipt of Condominium Disclosure
K1033 – Addendum for Lead-Based Paint Testing
K1117 – Addendum
K1118 – Purchaser’s Limited Access to Premises Agreement
K1126 – Purchaser’s Acknowledgement of Receipt of Property Owners’ Association Disclosure Packet
K1225 – Purchaser Pre Settlement Occupancy Agreement
K1273 – Notice
K1306 – Escalation Addendum
K1331 – Notice Removing the Financing Contingency
K1342 – Home Inspection and Radon Testing Contingency
K1343 – Home Inspection Contingency Removal Addendum
K1344 – Contingencies and Clauses
K1349 – Appraisal Contingency Notice
K1351 – Short Sale Contingency Addendum to Residential Sales Contract
K1356 – Information for Purchasers Concerning Bank Owned Properties
K1360 – Private Well and/or Septic System Addendum
Video: Matthew Rathbun Explains The 2015 Form Changes. To watch the video click here
PDF: Click here to download the 2015 Contract Update overview in PDF Format
(We encourage you to feel free to use this PDF for educational sessions, however you must keep all attribution to Matthew Rathbun and NVAR).