New Real Estate Contract For Maryland And DC

Written by Posted On Thursday, 10 September 2015 12:12

If you're buying or selling a house in the District or Montgomery County after Oct.1,you'll be working under a new sales contract.

For as long as I can remember, when writing contracts for the purchase of residential real estate, we used what is known as the Regional Sales Contract. It was a boilerplate document that required an addendum to comply with the laws and customs of the various jurisdictions.

So, in the District, you included the Jurisdictional Disclosure and Addendum for Washington. In Northern Virginia, you used a similar form.

As of January of this year, however, the Northern Virginia Association of Realtors opted to use its own residential sales contract. That prompted the Greater Capital Area Association of REALTORS (GCAAR) to review its forms and to create a contract that would work better for agents and consumers in Montgomery County and the District, which make up GCAAR's jurisdiction.

The new form, the GCAAR sales contract, "has eliminated the redundancy found in prior versions, shortened the length of theJurisdictional Addenda... to improve the agent and customer experience," according to the group's training instructions.

Those who object to the voluminous amounts of paper used in real estate transactions will be pleased to learn that when the new forms are used, there will be eight fewer pages in Montgomery County and up to four fewer pages in the District.

There are a number of technical changes in the new forms. For instance, the words "Date of Contract" at the beginning of the form are changed to "Date of Offer." This is intended to avoid confusion as to when a contract is ratified. That date is highlighted at the end of the contract, just above where the parties sign their names.

Here are some other significant changes:

The words "Time is of the essence" are moved from the end of the old contract to the very top of the GCAAR contract. This provides an important reminder that when a number of days are specified for certain actions to be taken, those deadlines are carved in stone and if you miss a deadline, you may be out of luck. For instance, if you have five days to have a home inspection and you don't get it done or get the deadline extended by mutual consent, you lose the contingency.

The new form does not use dollars except for the final price; instead it includes percentages for the down payment and financing. This is intended to take into account price negotiations that often continue between buyers and sellers and that alter the amounts of the down payment and financing. "Now the parties can simply negotiate the sales price and not have to constantly change the dollar amounts for the other sections," according to GCAAR. " It makes the contract cleaner and more legible."

Since termites are not the only vermin that can affect real estate, the heading "Termite Inspection" is changed to "Wood Destroying Insect Inspection." The old form allowed either seller or buyer to pick up the cost of such an inspection; the new form refers only to the buyer - unless the buyer will be obtaining a VA loan.

Even when there is a fully ratified contract, the new form gives buyers the unilateral option to void the contract and have their deposit refunded until they have received all of the required forms and information related to lead-based paint.

In addition, a misconception about ratification has been corrected. Previously, it was thought that if a buyer had not acknowledged receipt of forms related to lead-based paint (for properties built before 1978), the contract could not be ratified. GCAAR - based on its research - concluded that a contract "is ratified without these forms" when the parties sign all of the contract documents.

An important change can be found in the Addendum of Clauses. The old form was a six- page document containing 24 miscellaneous clauses such as Seller Credits and Post Settlement Air Conditioning and/or Swimming Pool Inspection Contingencies. In my experience, potential buyers had to wade through all of the clauses, and at most, they generally checked off only two or three.

Now, the Addendum of Clauses will be separated into two parts, A and B. GCAAR says the reason for this change "was to put the contingencies most used in one and those less frequently in the other." For example, part A includes Seller's Credits to Buyer, Home Inspection and Appraisal Contingencies and Post Settlement Occupancy Addendum. Part B contains all the other issues that were contained in the one large document.

Your real estate broker or agent should become familiar with the new forms. GCAAR is holding training sessions between now and Oct. 1.

Regardless of which form you use, here's an important suggestion: Do not leave any blanks in the contract. If there is something not applicable, just write in "N/A" or even draw a line through the blank. This will keep anyone from adding fraudulent language to the contact after it has been ratified.

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Benny L Kass

Author of the weekly Housing Counsel column with The Washington Post for nearly 30 years, Benny Kass is the senior partner with the Washington, DC law firm of KASS LEGAL GROUP, PLLC and a specialist in such real estate legal areas as commercial and residential financing, closings, foreclosures and workouts.

Mr. Kass is a Charter Member of the College of Community Association Attorneys, and has written extensively about community association issues. In addition, he is a life member of the National Conference of Commissioners on Uniform State Laws. In this capacity, he has been involved in the development of almost all of the Commission’s real estate laws, including the Uniform Common Interest Ownership Act which has been adopted in many states.

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