Welcome to 2018! I hope you all had a great holiday. With the new year we get a new contract! The new REPC is now the only REPC authorized for use. This means you shouldn’t be seeing any offers on the old REPC anymore; it also means that you need to be familiar with the new REPC. The Division of Real Estate has allowed agents to use the new REPC since September 1st, which means we have had some feedback on its use and some common mistakes made when filling it out. I want to address one of those mistakes today.
The most common mistake I’m hearing about agents making as they fill out the new REPC is in Section 8.3(b). This section says:
8.3 FINANCING CONDITION (Check Applicable Box)
(b) [ ] Financing Required. Buyer’s obligation to purchase the property IS conditioned upon Buyer obtaining the Loan referenced in Section 2.1(c). This Condition is referred to as the “Financing Condition.” If checked, Sections 8.3(b)(i), (ii) and (iii) apply; otherwise they do not. If the REPC is not cancelled by Buyer as provided in Sections 8.1(b) or 8.2(a), then Buyer agrees to work diligently and in good faith to obtain the Loan.
(i) Buyer’s Right to Cancel Before the Financing & Appraisal Deadline. If Buyer, in Buyer’s sole discretion, is not satisfied with the terms and conditions of the Loan, Buyer may, after the Due Diligence Deadline referenced in Section 24(b), if applicable, cancel the REPC by providing written notice to Seller no later than the Financing & Appraisal Deadline referenced in Section 24(c); whereupon ________ of Buyer’s Earnest Money Deposit shall be released to Seller without the requirement of further written authorization from Buyer, and the remainder of Buyer’s Earnest Money Deposit shall be released to Buyer without further written authorization from Seller.
The problem happens in filling in the blank in 8.3(b)(i). We need to understand what we are saying when we put a number into that blank. What we are saying is that if the Buyer cancels the REPC using the Financing Condition after the Due Diligence Deadline and before the Finance/Appraisal Deadline, the Buyer agrees to give up that amount of the Earnest Money to the Seller. For example:
Elaine Buyer is under contract and has a total Earnest Money Deposit of $10,000. When she fills out 8.3(b)(i), she puts in the blank the amount of $5,000, half of her Earnest Money. Later in the transaction, after the Due Diligence Deadline, Elaine decides that the house payment will be too high and sends over a notice of cancelation before the Financing/Appraisal Deadline, using the Financing Condition. Elaine has agreed to give the Seller $5,000 of her $10,000 Earnest Money Deposit.
The mistake that I am hearing about is that agents are filling in that blank with the entire Earnest Money Deposit amount thinking that it is just another place to list out the Earnest Money Deposit. Please remember that whatever you put in that blank is what the Buyer is agreeing to give up if she cancels using the Financing Condition after the Due Diligence Deadline.
This section is a great new tool in the REPC; we just need to know how to properly use it. Remember, if you have questions about the new REPC you can call the UAR Legal Hotline on Monday, Wednesday, or Friday from 8:30-4:00 at 801-676-5211. Best of luck to you this year with the new REPC!