Big Changes Proposed to the CR/CBA Purchase Contract – Part II
As discussed in a previous article (Part I), the Columbus Realtors and the Columbus Bar Association are currently working on significant changes to the standard residential purchase agreement, in response to the new Consumer Financial Protection Bureau’s new TRID rules. This is the second article about the major changes and of course I’ve failed to resist urges to add in some commentary. This is Part II – Appraisal Contingency and Earnest Money.
Appraisal. The proposed contract includes a standard appraisal contingency which provides if the property is appraised for less than the purchase price, the Buyer has a right to terminate by written notice to the Seller or Seller’s Agent. The notice must be provided within 5 days of Buyer’s receipt of the appraised value. If the Buyer fails to timely terminate, the Buyer’s right to terminate is waived.
The Earnest Money section is revised to include the Buyer’s option of placing earnest money with the Buyer’s Broker at one of two different times in the transaction: (i) within 3 days of acceptance, or (ii) within 3 days after the expiration of the inspection contingency. I believe consideration should be given to including an option to place the earnest money with a title company. We are all familiar with the obligation of a Broker to hold earnest money in the event of a failed transaction and dispute as to its disposition. The advantage to placing it with a title company is the title company will follow the agreements set forth in the contract as to the disposition and is not obligated to simply hold the money in the event of a subsequent dispute. Such may avoid effective loss of the earnest money deposit or litigation to recover the same.
Proposed changes add a requirement that the Buyer notify the Seller in writing that the Earnest Money has been paid. If the Buyer fails to notify, the Seller may terminate. Language is also included that the Seller’s right to terminate lapses upon receipt of the notification. Unclear is how long the seller has to terminate and what happens if the notice is provided after 3 days of receipt.
Additional proposed changes worthy of note include the addition of attached media brackets (excluding the flat screen) as a fixture to be conveyed. In Inspections and Tests, inspection of the premises and improvements, fixtures and equipment is moved to the top of the list of inspections the Buyer is encouraged to conduct. The Gas Line Warranty section is amended to delete the requirement that the warranty be purchased from a gas line repair company. last, the Seller is obligated to pay condo association fees charged in connection with the pending sale at least 15 days prior to closing.
Keep in mind all of the changes discussed above are just in the “proposal” stage. However, you should expect that these changes or substantially similar ones are forthcoming in the near future. If you have thoughts or recommendations, let the Columbus Realtors know and I will be sharing my thoughts with the Columbus Bar Association.