Critical Errors and Fixes
The New Contract isn't even out yet and we've discovered a couple of critical errors made by the Regional Sales Contract Task Force and the Standard Forms Committee (on which I serve).
Two problems:
1. There is no way to make the contract contingent on FHA or VA financing. The Financing Contingency language was moved to new Paragraph 10, which is titled Conventional Financing Terms. There is no similar language in Paragraph 11, which sets out the terms for purchasers that have specified FHA or VA Financing in the paragraph 3 of the Contract.
2. The Appraisal Contingency language in the Virginia Jurisdictional Addendum would appear to create a contingency even if the parties has indicated in the body of the Regional Sales Contract that the purchaser was opting to proceed without regard to an Appraisal.
The Fixes
1. The Standard Forms Committee met today and voted to add a paragraph to the Virginia Jurisdictional Addendum that reads in substance "If FHA or VA financing is selected in paragraph 3 of the Contract then the FHA and VA Financing Contingency Addendum must be attached." NVAR General Counsel will then create a form that takes the langauge of the Conventional Financing Contingency and reproduces on its own from with the title "FHA and VA Financing Addendum."
In the meantime, if you represent a purchaser applying for FHA financing, you can do the same thing by cutting and pasting the langague from paragrapch 10(c) of the Regional Sales Contract onto a blank Addendum form for all the parties to sign.
2. We voted at todays meeting to approve my motion to add the following at the beginning of the Appraisal Contigency paragraph: "If Option 1 is selected and initialed in pagraph 10(b) of the Regional Sales Contract . . ." so that it is clear the contingency language does not apply if the purcahser has selected Option 2 and waived the appraisal contingency.
What problems or inconsitencies have you noticed? Leave a comment. We may be able to fix them.
Disclaimer
Two problems:
1. There is no way to make the contract contingent on FHA or VA financing. The Financing Contingency language was moved to new Paragraph 10, which is titled Conventional Financing Terms. There is no similar language in Paragraph 11, which sets out the terms for purchasers that have specified FHA or VA Financing in the paragraph 3 of the Contract.
2. The Appraisal Contingency language in the Virginia Jurisdictional Addendum would appear to create a contingency even if the parties has indicated in the body of the Regional Sales Contract that the purchaser was opting to proceed without regard to an Appraisal.
The Fixes
1. The Standard Forms Committee met today and voted to add a paragraph to the Virginia Jurisdictional Addendum that reads in substance "If FHA or VA financing is selected in paragraph 3 of the Contract then the FHA and VA Financing Contingency Addendum must be attached." NVAR General Counsel will then create a form that takes the langauge of the Conventional Financing Contingency and reproduces on its own from with the title "FHA and VA Financing Addendum."
In the meantime, if you represent a purchaser applying for FHA financing, you can do the same thing by cutting and pasting the langague from paragrapch 10(c) of the Regional Sales Contract onto a blank Addendum form for all the parties to sign.
2. We voted at todays meeting to approve my motion to add the following at the beginning of the Appraisal Contigency paragraph: "If Option 1 is selected and initialed in pagraph 10(b) of the Regional Sales Contract . . ." so that it is clear the contingency language does not apply if the purcahser has selected Option 2 and waived the appraisal contingency.
What problems or inconsitencies have you noticed? Leave a comment. We may be able to fix them.
Disclaimer
posted by Marcus Simon at
10:14 PM
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1 Comments:
Nice Blog on what can be a very confusing new contract. Thanks.
I just don't get the new paragraph 1 in the VA Jurisdictional Addendum. It goes to great lengths to spell out delivery methods to Buyer and Seller and what constitutes delivery. I don't see how we have helped consumers by having agents/opposite party to the contract make deliveries to them with copies to the Brokers. FedEx will just leave the package on the stoop for example. Unless you intended that any "courier" service (I consider FedEx a Courier Service) would get a signed receipt (the addendum does not state that) There will inevitably be situations where the "official" delivery is made and the "courtesy" copy is mysteriously delayed so the Agent is not aware of it.
It seems to me we are setting up consumers for missing deadlines because something was delivered to their front stoop and the neighbor's dog grabbed it and hauled it off...so they never know they even had a delivery, and they miss the date...FedEx would have a record that they left it at the property but no signed receipt...what then...the VA Jurisdictional is moot on whether a "courier" delivery requires a receipt.
I think most agents would prefer to have everything delivered to them so they could make sure their client would meet whatever deadline is involved.
I think it would make sense to put in (with the client's permission)the two Brokers or Agents contact information in the (B) section to count as the official delivery spot.
Another topic: The statement in item 2 that notices "do not rewuire written acknowledgement".
Some of the most critical communications in a contract are "Notices" that something has happened and the contract is "void" or will be "void in "x" days if something is not done.
If a delivery is made by email or by fax or by whatever method, and the other party is on vacation and not chekcing faxes and emails they have no way to know they have received a delivery. And if the agent was not promptly "courtesy copied" then the consumer is up the proverbial creek.
I guess the net of all this commentary is that there ought to be something that says a courier must get a receipt...and that hand deliveries can't be left at the door without getting a receipt.
Another topic that is not new but was in the old addendum/contract.
TheJurisdictional addendum # 3.B.
This is always confusing to me. The Buyer advises the Seller of a low appraisal qnd that Buyer will not go to settlement unless the Seller lowers the sales price to the appraised amount. It appears that this is a "Notice" that would not need "acknowledgement"?
Seems pretty serious to not know if it was delivered or not.
There is nothing in 3.B that says the contract will be void in 3 days if the Seller does not respond. It just states that if the Seller does not elect to do that, the parties can agree to mutually agreeable terms. In what time frame? if the Seller does not respond at all is the contract "void"? When?
It goes on to state that if the parties fail to agree, this contract is void. After what process and at what time is this point reached?
What if the Seller delivers notice that he won't reduce the sales price? Does that extend the process another 3 days?
10.B is similar or the same as the old Regional Contract's appraisal clause, but the wording is still unclear and the process seems to fall apart after the intitial "Notice".
Glen Horn
ZipRealty
Associate Broker Maryland
SalesPerson Virginia & DC
301-366-4248 (cellular)
glen.horn@ziprealty.com
or
g.horn@comcast.net
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