Jim Valentine on Real Estate
In January every year the Sierra Nevada Realtors organization issues the results of their forms committee efforts for the year. Changes are made based on current practices, flaws in the old forms, and generally to improve the forms that real estate agents use in Northern Nevada.
Many of these changes are in the “fine print” areas, the parts that people often get used to not reading because they know what’s there and count on it being there. It is important to read them closely if you are doing a new transaction from January forward.
One of the biggest changes we see this year is the elimination of a maximum total of repairs to be paid by the seller in the offer agreement. For many years it was the industry standard to put a maximum amount of repairs to be paid by a seller as a result of inspections, disclosures, or observation by the buyer. In that way the seller knew the maximum liability they would have for repair items without further negotiation or rescinding the transaction. Now it will be a matter of what the parties agree to after the inspections are completed.
This can get a bit tricky in practice without adjusting how we conduct our business. If you have a 30-day escrow and it takes 15 days to complete inspections and submit a list or requested repairs, nobody will really know if they are moving in or out until just before the close of escrow. There will now be a minimal time to complete any repairs, and there won’t be an established cost that can be used by both parties as a target to settle the repair component of the transaction with a credit rather than work performed. Surely credit amounts will continue to be negotiated by buyers and sellers due to the convenience and reduction in hassle factor while preparing to move, but there is no guarantee that there will be a meeting of the minds. Something to keep in mind as you write or accept an offer.
The repairs section now also provides for the following: “Items of general maintenance or items of cosmetic nature, excluding conditions of safety, soundness, or security of the property, not expressly addressed in this agreement, are deemed accepted by buyer.” These two changes are an attempt to remedy the abuses that were often tried by buyers to get credit for items that were not truly repair items in an effort to use up all of the repair allowance. The allowance was merely a ceiling, not a negotiated credit amount, but it is gone now.
Another significant change now allows a buyer to reserve the right to cancel the agreement and retain their EMD if a seller falls under the FIRPTA guidelines (Foreign Investment in Real Property Tax Act). It only takes one of the sellers to fall under the FIRPTA guidelines to make this effective. Sellers confirm their foreign status when they accept the offer so be sure to look to see if you have a FIRPTA Seller after they accept it.
The Earnest Money Deposit section now includes the option for wire transfer which is the preferred method of delivery these days. The default time frame for submission of the EMD is now two days instead of 1 so as to accommodate the wire transfer process. The fixture section now includes things attached as of the date of the agreement. If you are keeping your grandmother’s chandelier over the dining room table, remove it before you enter the market to avoid confusion.
There are many other changes on the many forms used to sell, list, lease, manage, or amend real estate agreements so be sure to read the 2023 forms carefully as you proceed with your real estate endeavors this year. The forms are meant to be easy reading and comprehension, but there can be unintended consequences from implemented changes so be sure the forms you use work to memorialize your intentions.
Change is good if it is understood and properly used. The new forms are what is now being used so get familiar with them.
When it comes to choosing professionals to assist you with your Real Estate needs… Experience is Priceless! Jim Valentine, RE/MAX Realty Affiliates, 775-781-3704. firstname.lastname@example.org