Disclaimer: The content of this article is for informational purposes only and is not intended to be legal advice and should not be relied upon as such. If you have questions about how this information may apply to your specific situation please contact an attorney for specific legal advice and direction.
As of September 1st, the new, new version of the REPC is available for use. You may have already seen one of these come across your desk. I encourage all of you to get trained on this contract soon. It is not mandatory that you start to use this contract until January 1, 2018, but you may start receiving offers written on this contract before then as more and more brokerages opt to begin using the new contract.
UCAR has already scheduled a number of classes on the new REPC. Call or visit us online to get a spot in one of these upcoming classes. (801) 226-3777 or www.ucaor.com
Here’s some highlights form the new contract:
- A section 2.2 has been added which reads: Buyer’s ability to purchase the Property, to obtain the Loan referenced in Section 2.1(c) above, and/or any portion of the cash referenced in Section 2.1(e) above [ ]IS [ ]IS NOT conditioned upon the sale of real estate owned by Buyer. If checked in the affirmative, the terms of the attached subject to sale of Buyer’s property addendum apply.
This means that a Buyer will have to disclose up front whether or not the offer is contingent on the sale of the Buyer’s home. Note that this section references an addendum. The UAR Forms Committee has recently released a Subject to Sale of Buyer’s Property Addendum that could be used in this situation. You will need to get up to speed on that addendum so that you can best help your Buyers. Do not forget that an addendum should be attached if the “[ ] IS” box is checked.
- The terminology in Section 3 has been changed so that now Possession or delivery of physical possession occurs: [ ] Upon Recording; [ ] ____ Hours after Recording; [ ] ____ Calendar Days after Recording.
This isn’t as big of a change as it may appear to be because the old version read that these same options were to occur on or after Closing instead of Recording. So, why the change? The term Closing has been a confusing one in the industry for years because we often refer to Settlement (where we go to sign all the paperwork at the title company) as Closing. But in the REPC, Closing was defined as when funding of the purchase and recording of the transfer of ownership occurred. Because of the mixing of these terms, some Buyers were expecting delivery of the property to occur at the title company as they finished up their Closing which was really their Settlement. If you’re now confused, imagine how confused the Buyers must be. By changing this terminology in the new RECP, the contract now says that delivery of physical possession now occurs when (or after if the appropriate box is checked) Recording takes place. This actually doesn’t change much from the old REPC because Recording was necessary for the Closing to occur. Hopefully this change will help Buyers better understand that they need to wait until the transfer of the property has recorded before they can take possession.
- Section 8.3 now has an option for the Buyer to agree to let a portion of their Earnest Money go hard after the Due Diligence Deadline.
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 the 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.
Let’s look at how this works. Let’s say Buyer puts down $5,000 in Earnest Money and fills in the blank in section 8.3 with $1,000. If Buyer completes due diligence and passes the Due Diligence Deadline and decides to cancel based the Financing Contingency, then Buyer would give $1,000 of the Earnest Money to the Seller and would receive $4,000 of the Earnest Money back.
In the old REPC the Financing Condition was considered a get out of the contract free card because the Buyer had sole discretion over the reasoning for cancelling. The Buyer still has sole discretion in the new version, but the Seller can ask that if the Buyer cancels after the Due Diligence Deadline, that the Buyer give up some of the Earnest Money as a consolation for the Seller being willing to take the property off of the market for that much time. Buyers and their REALTORS® can decide how much they want to risk if anything but this change at least allows the option.
These are just a taste of a few of the changes to the new REPC. Look for a class to help get you up to speed on all of the changes so that you can be ready to role when you receive an offer on this new contract.