On November 1, 2021, a revised Florida Realtors/Florida Bar (FR/Bar) Residential Contract for Sale and Purchase went into effect. Below are the changes in this contract with the explanation or comment for each change.
Paragraph 1(d) - Personal Property
Line No. 18-20
More items were added to the personal property list. These items include thermostat(s) doorbell(s), television wall mounts, and television mounting hardware. Mailbox keys were also added as an essential item that gets lost or is not passed to the Buyers most of the time.
Storm protection items and hardware are also included under this personal property clause. This is one of the most important things safety-wise, which sometimes can significantly increase the value of the property and has caused disputes for not being included in the purchase.
Items added due to:
Increase in smart home devices; and
The popularity of securing televisions to walls.
Paragraph 4 - CLOSING; CLOSING DATE
Line No. 50-52
This paragraph adds the wording for two conditions for the Closing to happen. The closing date shall be when all funds required for Closing are received by Closing Agent and Collected pursuant to STANDARD S.
Also, as another requirement for the Closing to occur, “ALL” closing documents required to be furnished by each party according to the contract shall be delivered. We assume that the delivery of documents needs to be to the closing agent or Lender.
MONEY IS TO BE COLLECTED BY THE CLOSING AGENT FOR CLOSING TO OCCUR, NOT THE SELLER.
Paragraph 5(a) - Extension of Closing Date
Line No. 56-59
This clause talks about the closing date extension if the Buyer’s Lender’s closing funds are unavailable due to the Consumer Financial Protection Bureau “CFPB” Closing disclosure delivery requirements. Lenders are required to provide the Borrower with the Closing Disclosure three business days before the scheduled Closing, so Borrowers have time to double-check that all the loan details are correct. Sometimes, closing funds are unavailable by the closing date because the required disclosure has not complied with the three mandatory business days. This delay prompts an extension of the closing date.
For this closing date extension to be granted, two new conditions need to be met. Providing that paragraph 8B has been checked; the first item should be that the loan approval has been obtained, and the second item is that the Lender’s underwriting is complete.
The closing date shall be extended for such a period necessary to satisfy the CFPB requirements. However, this shall not exceed seven days.
3 New Components:
Loan Approval obtained
Lender underwriting completed
Closing will result in an extension of up to 7 days if the CD is not timely
delivered.
Paragraph 6(b) - CHECK IF PROPERTY IS SUBJECT TO LEASE(S) OR OCCUPANCY AFTER CLOSING
Line No. 72-76
The changes to this paragraph try to account for the disclosure of any occupancy agreement, especially those by seasonal rentals or short-term vacation rentals. This change intends to incorporate more current forms of rentals that will occur after closing if they exist or if the Seller intends to enter.
Paragraph 7 - ASSIGNABILITY
Line No. 85
The new change defaults to a contract not being assignable if no box is checked.
Paragraph 8(a) - FINANCING
Line No. 88
Any reference to Lender requirements has been deleted and simply is the option for a cash transaction.
Paragraph 8(b) - FINANCING
Line No. 89-96
This paragraph adds two tasks to be accomplished within the Loan approval Period. In addition to obtaining approval of the loan under the terms described under (b)1, the Buyer’s Lender or Mortgage Broker needs to receive an appraisal or alternative valuation of the property satisfactory to the Lender. This appraisal or valuation needs to be sufficient to provide the Buyer financing and proceed to Closing. “Appraisal”
This new addition was made to expedite the receipt of the appraisal if required by the Buyer’s Lender. With the previous contract, the appraisal could be received by the closing date, which sometimes resulted in delays and possibly not closing if the price was below the contract price and no agreement could be reached between parties.
The idea now is that the property can go back to the market sooner if the appraised value received by the expiration of the loan approval period is lower than the contract price.
Paragraph 8(b)(i)
Definition of Loan Approval
Line No. 98-101
This paragraph adds wording to define the Loan Approval as financing approved and satisfactory appraisal received by the Lender within the Loan Approval Period.
Loan Approval which requires Buyer to sell a property, will be considered Loan Approval if Rider V entitled Sale of Buyer’s Property is attached.
Paragraph 8(b)(ii)
Line No. 106-108 & 110
This paragraph adds that the Seller MUST make a written request to Buyer to obtain the Buyer’s mortgage loan application status. This includes appraisal and loan approval, including any property-related conditions of the loan approval.
Paragraph 8(b)(iii)
Buyer’s options if he obtains the Loan approval or not during the loan approval period.
Line No. 111-114
If the Buyer obtains the loan approval within the loan approval period, Buyer shall notify the Seller of this approval in writing prior to the expiration of the loan approval period.
If the Buyer can not obtain the loan approval within the loan approval period, the Buyer can proceed without approval if Buyer believes he will get the approval and close. Buyer shall notify the Seller in writing of his decision to continue before the expiration of the loan approval period.
Paragraph 8(b)(iv)
Inability of the Buyer to obtain loan approval within the loan approval period.
Line No. 115-119
Buyer may terminate the contract if he cannot obtain a loan approval or timely meet the terms of the loan approval within the loan approval period. For this to happen, the Buyer must have acted in good faith to obtain the loan approval; the Buyer must also give written notice of termination to the Seller before the expiration of the loan approval period and not be in default of the terms of the contract.
The Buyer would lose the deposit if the Buyer had no ability to meet the loan approval conditions.
Paragraph 8(b)(v)
Buyer’s failure to timely deliver written notice as provided for in Paragraph 8(b)(iii) or (iv)
Line No. 120-123
Suppose Buyer fails to deliver any written notice timely to the Seller prior to the expiration of the loan approval period for either being approved or not by the Lender. In that case, the Buyer shall proceed with the contract as if the contract were a cash transaction 8(a). However, the Seller may elect to terminate the contract by delivering a written notice of termination to Buyer within three days after the expiration of the loan approval period.
If few words if the Buyer keeps silent on the loan approval, the transaction will become a cash transaction. Provided the Seller does not decide to terminate the contract within three days after the expiration of the loan approval period.
Paragraph 8(b) (vi)
Failure to close
Line No. 126-127 & 129
Suppose Buyer fails to close the contract after giving written notice to Seller for obtaining loan approval or for not obtaining loan approval but satisfied in the ability of later obtaining this as per 8b(iii). In that case, the deposit shall be paid to the Seller. Unless, the failure to close was due to the Seller’s default or the inability to satisfy other contingencies of the contract or due to property-related conditions of the loan approval, not including appraisal valuation. In which case, the Buyer shall be refunded the deposit, releasing the Seller and Buyer of further obligations under the contract.
In a few words, if notice of loan approval was obtained or that Buyer intended to obtain loan approval and close but NO CLOSING, the deposit goes to Seller unless failure to close is due to (1 )Seller default or (2) property conditions.
Low appraisal no longer results in deposit going back to Buyer at Closing.
The appraisal is NOT a property-related condition.
Paragraph 9(f) - SPECIAL ASSESSMENTS
Line No. 196-198
This paragraph adds the instance in which if the public body/assessing authority does not allow prepayments, the special assessment payments would default to option 9(f)a - Seller pays installments due before Closing and Buyer pays installments due after closing.
This change primarily applies to entities that have set up installment payments with the Seller but would not allow the prepayment of the whole amount due before Closing.
Paragraph 18 Standard F - TIME
Line No. 432 & 436-438
It clarifies that calendar days are based on the location where the property is located. The best example is if the Buyer is from California and the property is located in Florida, all time calculations will be based on Florida local time.
Also, this paragraph extends any periods or dates specified in the contract, except for Time of Acceptance and Effective Date as described in paragraph 3, to the next “Calendar” day, which is not a Saturday, Sunday or a day on which a national legal holiday is observed. This includes the extension of any day a national legal public holiday is observed because it fell on a Saturday or Sunday.
An Observed Holiday is when a public federal holiday is celebrated on a date that is not the actual event’s anniversary date.
Paragraph 18 Standard G - FORCE MAJEURE
Line No. 439-440 & 442
These changes expanded the non-requirement to exercise or perform any right or obligation under the contract or be liable to each other for damages due to the unavailability, disruption, or delay of services, insurance, or required approvals essential to the Closing as a consequence of a Force Majure event.
The best example of this disruption of services was during the pandemic, which obligated some Buyers or Sellers to not comply with their obligations or rights under the contract. With this change in this paragraph, either party will not be liable when an event like this arises.
Line No. 446-447
Also, the beginning of the Force Majure event is now defined as the day the disruption in services, insurance or required approvals essential to Closing begins. For example, before hurricane landing, services get disrupted days before preparing for the hurricane, interfering with the performance of a contractual obligation of Sellers or Buyers. The beginning date will start on the day of the disruption.
Paragraph 18 Standard K - PRORATIONS; CREDITS
Line No. 492-493
Special district assessments will be prorated and not negotiated.
Paragraph 18 Standard O - CONTRACT NOT RECORDABLE; PERSONS BOUND; NOTICE; DELIVERY; COPIES; CONTRACT EXECUTION
Line No. 532
Facsimile transmission and email are new forms of written notices. Text messages, social media posts, or other electronic means, not email or fax, are excluded as written notices.
Paragraph 19 - ADDENDA AND ADDITIONAL TERMS
Two more addendums are added:
DD. Seasonal/Vacation Rentals
EE. PACE Disclosure
COUNTER-OFFER
Counter-offers rejection from the Sellers is not required to be in writing.