Jim Valentine: New contract forms
Real estate transactions are conducted with written offers. Most transactions that are structured by a real estate agent are done with forms that contain blanks for the agent to fill in with the terms of the specific transaction. That type of form and offering prevents the agents from being accused of practicing law without a license. Because the forms are mostly standardized with “boilerplate” language it is necessary to change them once in a while as the industry changes. Changes can generate from new standards of practice, new laws, or as a result of recent litigation.
Most Northern Nevadans use software programs to write their form offers, the most widely used being the Instanet program offered to agents as part of their Board of Realtors membership. The forms were changed in early January this year, so it is important if you are used to the old forms that you read the fine print again.
There is an interesting change in the Residential Offer form that pertains to the Earnest Money Deposit (EMD). An EMD is required when making an offer and is returned if the transaction fails for a legitimate reason. Sometimes things break down and one or both sides get hard feelings on the matter. The last thing hanging between them is the EMD which sometimes gets to be the rope in their transaction tug of war.
The new contract states that “a party may refuse to execute the document releasing the EMD only if a good faith dispute exists concerning the document or the release of the EMD. If no such dispute exists, the parties shall promptly execute counterparts of said release and deliver same to the escrow agent.” It goes on to state that if only one party makes written demand the escrow agent shall provide a copy of the demand within three business days. If no written objection is submitted to the escrow agent within 30 days they can dispurse the EMD. NRS 645A.175 provides for damages, attorney fees and the EMD that is being disputed if a party fails to sign the document within 30 days thus injuring the other party. If the dispute is valid there is still recourse through an interpleader action.
Other changes include the requirement to have the buyer initial the Satisfaction of Contingencies clause and rewording of the Repairs clause. The Repairs clause now states that the seller understands that buyer has not yet completed inspections, if any. Buyer reserves the right to request additional repairs.” It goes on the clarify that the seller may refuse to complete requested repairs that exceed the agreed on repair limit. This was always understood, but it is good to have it spelled out so as to minimize confusion or confusion of convenience.
Other forms were changed, some with subtle verbiage, some in their layout design. If you are used to the old forms and are doing new business, it’s time to read them again for the first time. Likely they will meet with your approval, but it is important to know what you are contracting to do. As a wise man once said, “Trust but verify!”
Our advice: It would be nice to secure a transaction with a handshake, but that isn’t practical these days. Even with a strong contract unethical people don’t honor their commitment. Real estate transgressions can have a significant financial impact on the victims causing the need for litigation to make things right. A good contract can help mitigate problems before they happen, or litigate problems if done with malice or ill intent. Accidental issues, i.e. death of a family member necessitating the need to rescind a transaction, are usually understood in residential real estate and accepted without negative actions taken.
The pen is truly mightier than the sword. Be aware of what you are signing: the content, intent and consequences.
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. email@example.com.