In June 2010, a newly revised FAR/BAR Contract was released for use in the Florida real estate industry. (FAR = Florida Realtors®. BAR = the Florida Bar.) Additionally a revised As-Is FAR/BAR Contract and Comprehensive Rider were also released for use. The previous forms became obsolete in October and were discarded from the various Realtor® and title company websites at that time. So now is a great time to get informed about the changes to these new forms. There are classes available that go into great detail explaining the form updates and I highly recommend for everyone to take one of these classes in order to keep up with all the changes. This article will touch upon the highlights of the contract changes but is no substitute for taking an actual class. As you read through this article, it will be extremely helpful if you can get the new contracts in front of you to review as I go through them line by line. If you do not have a copy of the new forms, please contact your local Realtor®, title company, or myself to get a hold of them.
There are two main reasons these forms have so greatly increased in length. First and foremost, the font size was increased from the previous "mice type" that the old contract had. Secondly the FAR/BAR Contract was merged with the FAR Contract. So now instead of 2 different contracts floating around, there is simply one contract. Additionally many of the old paragraph and standard numbers have been moved around to the point that the new contract is almost unrecognizable compared to the old one. Below are the actual new changes to the contract that I believe are important to investors.
- There is now a place for initials at the bottom of each page.
- The document title and on Line 4 is "Residential". The contract cannot be used on commercial or vacant land deals. (Residential means a 1 to 4 family building.)
- Lines 11-21. Specifies in more detail what is and is not included in the personal property being transferred along with the real estate.
- Lines 13-14. States that the personal property being transferred will be the same items existing on the property on the date of the initial offer.
- Line 21. States that the personal property is included in the price and has no contributory value.
- Line 25, 38, and several other places reference the word "Collection" as opposed to "clearance". Collection is then defined in Standard S.
- Lines 27-28 give you options regarding when to escrow the earnest money deposit.
- Line 41 requires that the executed contract be delivered. It used to just require written communication that it had been executed.
- Paragraph 5a (Lines 51-53) Added to comply with new Truth In Lending Act laws.
- Lines 63-64. Details about removing all personal items and trash prior to closing.
- Line 76. Allows the buyer to obtain financing even if it is a cash deal.
- The old 7 day/3 day notices regarding obtaining financing and a loan commitment have been deleted.
- Lines 98-101. Financing subparagraphs 2 and 4 have been added for property condition issues and financial failure of buyer's lender.
- Paragraph 9. This sets forth in much more detail who pays what closing costs.
- Lines 113-115. New category stating costs for closing out government permits.
- Lines 117-119. If seller does not make necessary repairs, then 125% of the cost can be escrowed at closing until repairs are completed.
- Paragraph 10b (Lines 170-172). New disclosure regarding permits.
- Paragraph 10d (Lines 175-180). New disclosure regarding potential flood zones.
- Paragraph 12a (Line 205). Inspection period has been changed to 15 days or 5 days prior to closing.
- Lines 225-227. Torn screens, fogged windows, missing roof tiles now must be repaired.
- Lines 239-243. Allows seller to order a 2nd inspection and a 3rd inspection if required repairs are disputed by the parties
- Paragraph 12d. Allows for an inspection to verify building permits.
- Lines 304-305. Repairs must be made by an "appropriately licensed person"
- Paragraph 14. Reduced liability for real estate agents
- Paragraph 16. Requires mediation prior to litigation in earnest money disputes.
- Line 403. Instead of having a fill-in-the-blank line it has the words "residential purposes."
- Standard D. (Line 433) Requires lease information to be provided to buyer within 5 days after inspection period. (Line 435) Requires the property's income and expense statements for preceding 12 months to be provided to buyer.
- Standard F. In computing days, requires use of calendar days and national legal holidays.
- Standard G. Defines "Force Majeure".
- Standard M (Lines 517-518). New language regarding escrowing 125% of repairs.
- Standards Q, S, T, U are all new boiler plate legal paragraphs.
- Lines 571-573. New checkboxes regarding counter offer and rejection of the offer.
In addition to the above clauses, the new FAR/BAR As-Is Contract has a few extra changes that have been made to it. Below are the new changes to the As-Is Contract.
- Paragraph 9a (Lines 106-109). Seller must still maintain the property until closing or 125% of the cost of the neglected repairs can be escrowed at closing.
- Paragraph 10b (Lines 157-159). Requires unpermitted work to be disclosed.
- Paragraph 12a (Line 195). The default inspection period is now 15 days.
- Paragraph 12c (Line 214-222). Seller will assist with closing out permits.
The Comprehensive Rider has a few new changes as well. A new rider "F" regarding an appraisal contingency has been added. The short sale rider has been added as rider "G". This rider has had material changes made to it including requiring a release of the deficiency for the seller, allowing the buyer side to communicate with the short saling lender, and requiring the earnest money deposit to be placed into escrow at the time the contract is signed. A new rider "M" regarding Defective Chinese Drywall has been added. A new rider "AA" regarding either buyer or seller having a real estate license has also been added.
If you want to know what has been moved to where, you can check out our handy FAR/BAR reference guide in the previous article: New FAR/BAR contract cheat sheet - where things have moved to. Or if you have questions about the new contract, I will be glad to help you figure it out or write one up. In my opinion, the main things to note for investors are regarding open permits, disclosing repairs that were made without permits, and using licensed professional to do the repairs.