Q&A from Purchase Contract Classes

There were some questions asked during the classes for the new CBR Purchase contract that were common to all classes.  Therefore, we wanted to answer those questions for you as a follow up.  Also, if there were any areas that were not clear we wanted to clarify those points for you.

The answers are provided by a committee of Bill Clifford, Chairperson of the CBR Standard Forms Committee, Jamie Zitesman, Attorney and Columbus Bar Association representative to the CBR Standard Forms Committee, Steve Browning, Attorney and Chair of the Bar’s Real Property Law Committee and Kristin Rosan, Attorney and Divisional Legal Counsel for the Ohio Division of Real Estate & Professional Licensing.

When is the deadline for using the new purchase contract?
ANSWER:  There is no deadline.  The CBR Residential Purchase Contract is provided as a service to members.  Companies are under no obligation to use the contract.

What if a Broker wants to make a permanent change to the CBR approved contract for his or her Brokerage?
ANSWER: To be allowed to still have the Columbus Board of REALTORS® logo and the Columbus Bar Association logo on the contract, the Broker must put a strike out line through the language the Broker wants to permanently delete.  Then the Broker would insert the Broker’s new language in Courier type, 12 point, bold.

By following the above procedure, the Broker can permanently modify the approved contract and still have an approved CBR contract with the Board and Bar logos. 

The change of type size, style and bold type will help associates quickly see what is changed.

If the Broker decides to change the printed verbage in the contract by omitting the current language instead of striking it out and/or inserting the Broker’s own language but it is not in Courier, 12 point, bold type, then the contract is no longer an approved contract by the Board of REALTORS® and the Bar Association.  The two logos cannot be used on the contract.

If an associate receives a contract without the Board of REALTORS® and the Bar Associations logos on the document, they should read the contract in its entirety.  The omission of the logos is a sign that even if the contract format looks the same as the approved contract… the printed language is not the same.  

Whenever you receive an offer/contract it is always advisable to read the complete contract.

In paragraph 1.2:
If I have inserted in the contract that the financing will be conventional and then find out the Buyer must go FHA or VA to get financing what happens?  Who pays fees?
ANSWER:  Hopefully you have had the Buyer in to be pre-approved before you showed the Buyer any properties.  The Buyer would then know ahead of time what type of loan the Buyer would qualify for, what the monthly payments would be and price range the Buyer could qualify for. Then there would be no need for a change.

If the Buyer is going to change the type of financing for the purchase, then the Buyer needs to send an addendum to the Seller stating the type of financing the Buyer is using and reach a written agreement on who will pay what fees, if any.

In paragraph 4:
“Inspections and Tests”, if the Buyer does all the inspections in 5 days, but the contract says the Buyer has 10 days to complete them, can the Buyer unilaterally waive the balance of the 10 days? 
ANSWER:  The Seller and Buyer can agree to waive the balance of the Specified Inspection Period in writing.  One party cannot unilaterally waive the Specified Inspection Period. 

The intent of the language in the contract is to provide a specific time frame for Specified Inspection Period and a specific time frame for reaching agreement for the repairs in the Agreement To Remedy Period.  This way everyone knows the specific time frames for the two events to be accomplished.  

Under the old contract, we typically saw 10 days to complete the combined inspections and remedy agreement.  Now, you could break that time frame into 7 days for the Specified Inspection Period and 3 days for the Agreement To Remedy Period and still have your 10 day time frame.  There is no magical combination of days.  It should be based on the inspections the Buyer wants to have completed and typically how long it takes the inspectors to finish the inspections and provide the Buyer with reports.  Therefore, when you enter the number of days for the two periods keep in mind how long the inspections will take and insert the appropriate number of days.

If the inspections are done in 5 days and there is time left in the Specified Inspection Period, the Seller may want to wait for the balance of the time left to make sure the Buyer doesn’t come up with any additional inspections the Buyer may want.  

If the Buyer and Seller agree in writing to waive the balance of the time left in the Specified Inspection Period, the Buyer has forfeited the Buyer’s rights to any additional inspections and/or test under paragraph 4.

When would the Agreement to Remedy period begin?
ANSWER:  The agreement to Remedy period begins the day after the end of the Specified Inspection Period. If both parties waive the balance of the time in the Specified Inspection Period, then the agreement to Remedy period would begin the day after the date of the written agreement to waive the balance of the Specified Inspection Period.

Can the Inspection period and the Agreement to Remedy period run concurrently? 
ANSWER: No

In paragraph 4.3(a):
It talks about the insurability; does this paragraph let the Buyer out of the contract if the premiums are too high in the Buyer’s opinion or only if the property is not insurable?
ANSWER:  The Buyer may terminate the contract if the house is not insurable.  Also, if the premiums that the Buyer has to pay are too high, then, according to the attorneys from the Columbus Bar Association, the Buyer has an out per paragraph 4.4, which states that “if the Buyer is not in good faith satisfied”

In paragraph 8:  It says, “ through date of possession Seller pays charges that may become a lien.
                                                 And
In paragraph 8.1:  Adjustments shall be made through the date of closing for rental, interest on any mortgage assumed by the Buyer and condominium or other association periodic charges. 

Condo fees can become a lien.  Is there a conflict between 8 and 8.1?
ANSWER: Paragraph 8 is for fees or charges that are dependent upon usage.  Paragraph 8.1 is for specific fees or known charges that should be prorated at closing.
 If the Buyer is going to let the Seller stay in the condo after closing for a period of time, then the Buyer may want a rental agreement to cover the cost of the condo fees and any other fees or cost the Buyer may have to pay.

In paragraph 9:
What if substantial damage occurs and the Seller fixes it without notifying the Buyer?
ANSWER:  Even if the Seller is willing to fix the damage at the Seller’s expense, the Seller is still required to give notice to the Buyer in accordance to paragraph 9.   The Buyer’s offer was based on the original condition of the house and not on a damaged property that has been repaired.

If the Buyer is willing to accept the Seller’s repairs at the Seller’s cost, then obtain that agreement in writing signed by both parties and proceed with the contract.

In paragraph 10:
When does earnest money have to be deposited into the Broker’s trust account and may the Broker deposit the earnest money into the trust account after acceptance?
ANSWER: The Ohio Division of Real Estate will look to the purchase agreement (CBR contract), brokerage policies or client instructions in evaluating whether a licensee has failed to timely deposit earnest money.

If the Broker has specific procedures regarding the immediate deposit of earnest money, the licensee should follow those procedures.  Likewise, if the client wants the earnest money deposited prior to acceptance, the licensee should act in accordance with the client’s instructions. 

Licensees should never cash earnest money checks or deposit the money into their personal accounts.  That is in violation of the law. 

The CBR contract says, “Upon acceptance of this contract by both parties in writing, the Broker shall deposit the earnest money deposit in its trust account”.  Absent brokerage policies requiring immediate deposit or client instructions otherwise, the Broker must deposit the earnest money within a reasonable time of acceptance of the contract.  The Ohio Division of Real Estate defines a reasonable time as 3-5 days.

If your client wants to remit the earnest money after acceptance of the contract, then:

• When completing the CBR contract, do not write anything in the earnest money deposit box located in paragraph 10. Leave the earnest money deposit box blank. 
• Write in paragraph 1.3 a contingency statement.  For example, the contingency may provide that the Buyer’s agent will obtain from the Buyer an earnest money deposit of a specified amount within 48 hours after written acceptance by both parties, that the deposit will be held by the Buyer’s agent in the brokerage trust account in accordance with paragraph 10 and that Buyer’s failure to remit the deposit within the time prescribed shall result in the immediate termination of the contract.  
• After receipt of the earnest money, send a copy of the check to the seller’s agent, as evidence that the contingency has been fulfilled.

In paragraph 12:
Does this paragraph mean that e-mails can only be in PDF format and not in Microsoft word or scanned and sent?
ANSWER:  Yes.  In the full version of Adobe Acrobat, the sender of e-mail can send e-mail in PDF “protected format”. The party receiving the e-mail cannot change any of its content.  All the receiving party can do is open the e-mail and read it or print it as it was sent. 

In paragraph 14.1:
Should this paragraph be modified to say, “ At the time the Seller delivers possession, the premises shall be in the same condition as of the date of acceptance of this contract, except for any alterations or repairs pursuant to paragraphs 4 through 4.4b, except as provided in paragraph 9, and normal wear and tear excepted.   
ANSWER: No.  The current language is appropriate and additional language is not needed.  The Buyer and Seller have agreed to the alterations or repairs by signing the Request to Remedy.

Time frames start from date of written acceptance by both parties, does that mean the date the acceptance is when the contract is delivered to the other party with all signatures or the date the parties signed the contract?
ANSWER:  The date of acceptance by all parties in writing is the date that starts a clock running for the items in the contract.  That is because the date of signature is a provable date.  In most cases the counter to the other party gives a date and time that the counter is open.  Therefore, if you have not heard from the other party it would be wise to call the coop agent and find out if you have an accepted offer in writing and ask that it be sent to you.  

In conclusion, for questions about the contract or procedural processes, please discuss them with your Broker, consult with your attorney or call the Ohio Division of Real Estate.