Another New Contract Class

Now that we have all been using the contract for about 6 weeks I have begun to notice a pattern in the questions and concerns that I have been hearing about the new contract. I have put together a new 2 hour class (not yet approved for credit) to address the most common problems and questions agents are encountering as they actually begin to use the New Sales Contract. The outline material is very similar to the materials I presented with Jon Lyon and Don DeBragga at the NVAR trade show earlier this month.

I have found, though, that the agents find the class much more useful in the smaller setting of our McLean training room here at MBH (6862 Elm Street, Suite 200, McLean,VA 22101). If you or any of the agents in your office are interested in attending please send me an e-mail or send an e-mail to Dinah Montgomery ( dmontgomery@mbh.com ) so we will know how many to expect for seating and refreshment purposes.

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Contract Quiz – Lender’s Letter

Which of the following statements are True?
o Sellers are better protected if they require their Purchaser’s to attach a Lenders Letter in order to remove the financing contingency.
o Mortgage Broker’s Cannot Provide the Lender’s Letter.
o It is impossible to know if a loan meets underwriter and investor guidelines until a day or two before settlement.
o A lender letter cannot be provided until the appraisal and title report are complete
o Many lenders have local underwriting departments

Myth: Sellers are better protected if they require their Purchaser’s to attach a Lenders Letter in order to remove the financing contingency.
o Seller’s position is stronger (legally speaking) with fewer contingencies. Contingencies are generally construed to benefit the Purchaser.
o Making it more difficult to remove a contingency give Purchaser’s more time to get out of the Contract without consequence.
o Get the assurance you want from the Purchaser up front – we still know a good “pre-approval” letter when we see one.
o Use Paragraph 12 to stay abreast of the progress of the loan in lieu of the letter

Myth: Mortgage Brokers Cannot Provide the Lender’s Letter.
o The word “lender” by itself is not a defined term in the contract. A good mortgage broker can get all 6 items in an honest and truthful lender’s letter
o Use common sense . . . Talk to the Broker BEFORE ratification and after. Ask lots of questions and demand answers. Use Paragraph 12 after ratification.

Myth: It is impossible to know if a loan meets underwriter and investor guidelines until a day or two before settlement.
o This is a deliberately vague term. Meets guidelines does not equal “approved”.
o New Contract doesn’t say WHO has conducted the review. Most investors provide written underwriting guidelines for their loan programs that are furnished to originators (lenders, loan officers, and mortgage brokers).

Myth: A lender letter cannot be provided until the appraisal and title report are complete.
o The Appraisal contingency is completely separate from the Lender’s Letter and financing contingency provisions of the contract. You can remove the financing contingency and still have an Appraisal contingency in place.
o Although most letters will contain a caveat for satisfactory appraisal and title review, it is still safe to remove the financing contingency before those items are complete
o As noted above, appraisal contingency may result in a reduced sales price or a void contract – either way the buyer remains protected.
o Paragraph 19 requires Title to be marketable and insurable. Lender’s rarely require anything more than insurable title.

Reality: Many lenders have local underwriting departments.
o There are plenty of local lenders that complete the entire origination and underwriting process in the Washington Metropolitan area. Most are not affiliated with any particular Title Company and can provide great low rates and closing costs without taking away your (the agent’s) ability to close the deal where you feel most comfortable.

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New Contract Quiz - Delivery
Which of the following statements are True?

1. The New Contract requires delivery of copies directly to the Buyers and Seller.
2. If all the terms of a New Contract are accepted in writing and faxed or E-mailed to the other side, it is still not Ratified until it is acknowledged in writing.
3. Notices are deemed delivered the day they are placed in the U.S. Mail, return receipt requested. This is known as the “mailbox rule”
4. A FEDEX left at an empty house is Deemed delivered, even if no signature was required.
   
   1. Myth: The New Contract requires delivery of copies directly to the Buyers and Seller.

Agents may still put their address, and/or their e-mail address and/or their fax number in the blanks for the place of Delivery to Buyer and Seller. If deliveries are “addressed to” the buyer or seller and sent c/o agent as specified in 1B, delivery will be deemed to have occurred when delivered to agent and agent will be responsible for communicating information to their clients. The New Contract is flexible enough to allow agents to practice in their comfort zone – some will want everything to go directly to their clients, some will want the opportunity to present all information to their clients

2. Myth: If all the terms of a New Contract are accepted in writing and faxed or e-mailed to the other side, it is still not Ratified until it is acknowledged in writing.

Date of ratification is a defined term in paragraph 29 of the New Regional Sales Contract. The Sales Contract is not binding on the parties until it is accepted and Delivered. Time is still measured from the Date of Ratification, however. A real concern: Can a Seller pocket a Ratified contract but not be bound by it until the time periods have expired?


o Myth: Notices are deemed delivered the day they are placed in the U.S. Mail, return receipt requested. This is known as the “mailbox rule.”
o Notices are deemed delivered the day they are Delivered by the mail carrier if they are sent using a return receipt service from the post office. See www.newregionalsalescontract.com for more details on various return receipt options available from the USPS
o The Mailbox Rule is general contract case law and does not apply because our contract has specific language about delivery requirements and U.S. Mail


Delivery: Myth v. Reality
o Reality: A FEDEX left at an empty house is Deemed delivered, even if no signature was required.
o Notices are deemed delivered the day they are Delivered by professional courier service. This includes FEDEX and UPS and DHL
o If this is the method used, not acknowledgement is required
o A business record (tracking number information) provides adequate proof of delivery to the specified address. As long as the address it was delivered to is the address specified in Va. Jurisdictional Addendum it is delivered

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New Contract Class at NVAR Trade Show - Testimonial

I received the following e-mail today from a real estate agent who attended a contract class I put on last week:

"Marcus,

what a pleasure being in the training session friday. Based on that session I negotiated a contract later that day and dropped the previously requested 10 days finance contingency and a couple of other items. We finally reached an agreement and got the contract ratified. Bottom line, the session was very helpful. It was my 3rd session on various new contract info. 2 of the 3 sessions I attended were offered by MBH. thanks for giving to the industry. It makes a difference. "

I am sorry I haven't updated the page in a while, but I left for Rome on the 4th and just got back last Thursday. I taught my class on Friday and drove to Indianapolis for a family function for the weekend. I am back in the office doing settlements and getting caught up, and getting ready for the NVAR Tradeshow on Thursday where I will be sharing the same tips, strategies and lesson on the new contract that are helping agents successfully negotiate contracts in today's market.

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Additions Confusion in the New Regional Sales Contract

Don't be confused by the list of additions in Paragraph 32. Unfortuntely, some of these were labeled for their specific jurisdiction, and others were not. Specifically, the Condo/Coop Addendum is not used in Virginia. The Virginia Jurisdictional Addendum covers the dislcosures required by the Virginia Condominium Act. The Well and Septic Contingency also is not a Virginia form. We cover those issues in the Virginia Jurisdctional addendum as well.

Also notice we took out the No check box for the Jurisdictional Addendum, since you really have to have one.

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