January 1, 2016 Form Changes

Nine forms or contracts have been revised, all to be effective January 1, 2016.

K1321 – Residential Sales Contract
K1281 – Exclusive Right to Lease
K1336 – Exclusive Right to Sell Listing Agreement
K1337 – Exclusive Agency Listing Agreement
K1355 – Exclusive Right to Sell Unimproved Land
K1369 – Coming Soon Addendum to Listing Agreement
K1344 – Contingencies and Clauses Addendum
K1118 – Purchaser’s Limited Access to Premises Addendum
K1210 – Walkthrough Inspections

K1321 – Residential Sales Contract

1. Cooperative Broker v. Buyer Broker. The introductory paragraph has been updated to address the term Buyer Broker. We received feedback from the membership that all cooperating brokers were not buyer brokers but could be independent contractors. Therefore we changed the term Buyer Broker to Cooperating Broker. This change is carried through the Contract and any addenda we are updating.
2. Time is of the Essence. The Consumer Financial Protection Bureau created new rules which govern the practice of lenders and settlement agents. The industry is expecting that some delays in settlement may occur as lenders attempt to comply with the new regulations. The new contract language in paragraph thirty-five clarifies the carve-out to time is of the essence and the default provisions. In the event that the contract remains contingent on financing and the settlement must be delayed to allow the lender to comply with the TILA-RESPA Integrated Disclosure rule, such delay will not constitute a default by the Buyer. Under these circumstances, the paragraph also grants the Seller the right to void the contract.

K1334 – Contingencies and Clauses Addendum

1. Sale of Buyer’s Property and Kick-Out. Paragraph four of this contingency has been updated to clarify that in the event a further delay is required to obtain coinciding settlements, the Buyer can declare the contract void but that the parties retain the right to reach an agreement to extend the settlement date on terms acceptable to the Seller and the Buyer. 
2. Settlement of Buyer’s Property. This contingency has been updated to clarify that in the event a further delay is required to obtain coinciding settlements, the Buyer can declare the contract void but that the parties retain the right to reach an agreement to extend the settlement date on terms acceptable to the Seller and the Buyer.
3. Contingent on the Seller Purchasing Another Home. This contingency has been clarified. Rather than requiring a ratified contract for the purchase of another property to satisfy the contingency, the standard is now that the Seller has “identified another home for purchase”. This looser standard will give the Seller the ability to use the entire period allocated to the contingency rather than be obligated to remove the contingency upon ratification of a contract for purchase of another home. The membership requested this change to address the fact that the old language may not have allowed a Seller to remove key contingencies, such as a Home Inspection Contingency, prior to removing this contingency.

K1336 – Exclusive Right to Sell Listing Agreement; K1337 – Exclusive Agency Listing Agreement; K1281 – Exclusive Right to Lease Listing Agreement; and K1355 – Exclusive Right to Sell Unimproved Land Listing Agreement

1. Pre-Marketing (Coming Soon) Paragraph. The language in this paragraph has been clarified. The Pre-Marketing (Coming Soon) Addendum need only be attached if the property is going to be marketed prior to being entered in the MLS as an active listing.

K1369 – Pre-Marketing Addendum to the Listing Agreement

1. The form has been modified to include the ability to conduct Pre-Marketing activities on a property listed for lease.

K1118 – Buyer’s Limited Access to the Premises Agreement (Decorator’s Agreement)

1. This form had not been updated in years. The parties will now have to agree on an access date and the terms of the access by the Buyer or his representatives.
2. The form allows access for the following purposes (1) to measure rooms, windows or show the property to contractors or decorators and (2) to allow the Buyer to deliver furniture to the property prior to settlement.
3. The form specifically prohibits the Buyer from doing work on the property without prior written approval from the Seller.
4. The form clarifies that the Seller will not be responsible for any damage or loss of the Buyer’s personal property and that in the event settlement does not occur, the Buyer will have 15 days to remove his personal property. After that, the Seller may dispose of the personal property in any way he deems fit.

K1210 – Walkthrough Inspection(s)

1. This form has been updated to track the Home Inspection Contingency. The form now accounts for the possibility that multiple walk through inspections were conducted

The following forms have been revised, effective July 1, 2015:

Changed:

K1321- Residential Sales Contract - Click here to view the PDF Format
K1281 – Exclusive Rights to Lease - Click here to view the PDF Format
K1282 – Exclusive Right to Represent Tenant - Click here to view the PDF Format
K1333 – Common Law Lease - Click here to view the PDF Format
K1336 – Exclusive Right to Sell - Click here to view the PDF Format
K1337 – Exclusive Agency Listing Agreement - Click here to view the PDF Format
K1338 – Exclusive Right to Represent Buyer - Click here to view the PDF Format
K1354 – VRLTA Lease - Click here to view the PDF Format
K1355 – Exclusive Right to Sell Unimproved Land - Click here to view the PDF Format
K1369 – Coming Soon Addendum - Click here to view the PDF Format

1. K1321 – Residential Sales Contract

1. Personal Property and Fixtures. The paragraph has been updated to address fuel tanks in one paragraph of the contract, rather than separately in the ADJUSTMENTS paragraph. The parties now must state whether fuel tanks are owned or leased, and include the number of tanks. The paragraph also clarifies that when fuel tanks are owned, the tanks convey. The paragraph further states that the content of the fuel tanks, namely the fuel, which remains in the tanks at settlement, will become the property of the Purchaser unless the parties agree otherwise in writing on the lines provided. The language addressing fuel tanks in the ADJUSTMENTS paragraph has been moved to this new provision.
2. Alternative Financing. This paragraph has been clarified. It now defines the term Alternative Financing more specifically to mean any change to the terms included in the PRICE AND SPECIFIED FINANCING paragraph. The paragraph then outlines the steps to substitute Alternative Financing, and separately addresses substituting lenders.
3. Title. In January 2015, the Standard Forms Committee updated the title paragraph to address the possibility of defects in title that would require a delay in settlement. It gave Purchasers the choice, on settlement date, of voiding the contract or reaching an agreement with the Sellers and delaying settlement until such time as the title defects could be remedied. However, feedback from the NVAR Attorney Roundtable indicated that the language in the paragraph could have been interpreted to deny the Purchaser the option to seek specific performance. The title paragraph has been updated to reflect that the Purchaser does not forfeit any of the remedies available at law.
4. Time is of the Essence. The Consumer Financial Protection Bureau created new rules which govern the practice of lenders and settlement agents. As a result of the new regulations, the industry is expecting that some delays in settlement may occur as lenders attempt to comply with the new regulations. The new contract language provides a carve-out to the default provisions. In the event that the contract is contingent on financing and the settlement must be delayed to allow the lender to comply with regulatory requirements, such delay will not constitute a default by the Purchaser. Under these circumstances, the paragraph also grants the Seller the right to void the contract. 

2. K1336 – Exclusive Right to Sell Listing Agreement, K1337 Exclusive Agency Listing Agreement, K1281 Exclusive Right to Lease Listing Agreement, and K1355 Exclusive Right to Sell Unimproved Land Listing Agreement

1. The term Purchaser has been replaced by the term Buyer.
2. Broker Duties. Has been updated to track more closely to the language in the Code of Virginia.
3. Marketing. The paragraph has been updated to reflect the availability of a Pre-Marketing Addendum to the listing agreement.
4. Types of Real Estate Representations. The explanation of non-agency was removed from the agreement, as it does not apply to the relationship at issue and created confusion.
5. Broker Compensation. The specified options of Sub-Agency and Non-Agency compensation have been removed and replaced with “Other Compensation.” This was done in conjunction with MRIS’s removal of the sub-agency compensation field in Virginia listings.
6. HOA and Condos. (Not applicable to K1281 – Exclusive Right to Lease) The new language more clearly allocates the duties for ordering the documents and the time frames for doing so. It gives the option of ordering them at the time of listing or within three days of contract ratification or “other”.
7. Current Liens. The list of items has been re-ordered so that the first option is, “the property is not encumbered by lien.”.
8. Service Provider Referrals. The new language provides protection to brokers who provide a list of service providers to their clients.
9. Lease Term. (Applies only to K1281 – Exclusive Right to Lease) The landlord must state whether he or she will consider applicants whose source of funds comes through a housing voucher program such as section 8.

3. K1338 – Exclusive Right to Represent Buyer Agreement and K1282 – Exclusive Right to Represent Tenant Agreement

1. Term and Termination. Added the possibility of an early termination fee to the Buyer/Tenant agreements.
2. Compensation. Moved the retainer fee language to this provision to track with the Listing Agreements. The paragraph also clarifies how the buyer/tenant agent is compensated, and the duties of the buyer in the event that the compensation offered in the MLS is less than the parties agreed in the brokerage agreement. In addition, the language was modified so that the Buyer will owe the broker compensation for the purchase of ANY property during the “protection” period after expiration or termination of the brokerage agreement. The previous language limited compensation to properties shown during the agreement period.
3. Types of Real Estate Representations. The explanation of non-agency was removed from the agreement. It does not apply to the relationship at issue and created much confusion.
4. Service Provider Referrals. The new language provides protection to brokers who provide a list of service providers to their clients.
5. Paragraphs were re-ordered to ensure proper flow within the document.

4. K1333 – Lease Common Law and K1354 – Lease VRLTA

1. These documents were sent to Chip Dicks, VAR Legislative Counsel, for their bi-annual legal update. Mr. Dicks made some revisions to reflect 2014 and 2015 law changes. These revisions include additional remedies for landlords to collect damages and costs for an unlawful detainer action.
2. Tenant Insurance. The lease has been updated to delete the requirement to name the Landlord as an additional insured under the Tenant’s renter’s insurance policy, as it was not possible in our marketplace.

5. K1369 – Pre Marketing Addendum to the Listing Agreement

1. This is a new form that was created by the Committee at the request of several large NVAR broker members. This document addresses the new “Coming Soon” status in the MLS, and lays out the marketing activities that the listing agent will undertake before making the property available for sale to the marketplace.

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

Changed:

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 FormatK1367 – Notice Voiding Contract - Click here to view the PDF Format

Residential Sales Contract – K1321

1. 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.
2. 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. 
3. 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.
4. 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.
5. 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.
6. 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.
7. 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.
8. Access to the Property. Walk through inspection can be conducted for a period of seven days prior to settlement.
9. 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.
10. 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.
11. 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.
12. 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

1. The Virginia Jurisdictional Addendum was deleted as it was incorporated into the new Residential Sales Contract.

K1116 – Release of Sales Contract and Deposit

1. 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

1. 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

1. 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.
2. 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.
3. 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

1. 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

1. 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).