That blog post title isn’t a typo – I’m giving away free forms! When my real estate firm left the NWMLS, I had to find an alternative to the forms that it provides to its members. So I got to work! And now I’m happy to share them with anyone who needs them. If you’re interested, go to the Added Equity blog post about Free WA Real Estate Contract Forms, download the license agreement, and you’ll be off and running!
I attended a Forms Update Training Class put on by the NWMLS recently and learned about a bunch of changes that are coming down the pike on October 15, 2007. And while I posted some class notes and sample Purchase and Sale Agreement documents over on my site, I thought I’d summarize things below.
- Coldwell Banker Bain (and I assume others) will drop the usage of their “own” optional clauses forms which will make co-op transactions smoother and easier for all agents.
- Lots of discussion was given to the Washington State Supreme Court decision Alejandre v. Bull, which was the impetus for many of these changes. I won’t bore you with the details here. But they ruled “economic loss rule” prohibits the Buyer from suing the Seller for negligent misrepresentation regarding the condition of real property when the parties relationship is governed by a contract. The courts want to see the allocation of risk of economic loss in the Purchase and Sale Agreements – Hence the changes.
Purchase and Sale Agreement
- Legal description must be attached as Exhibit A
- No more counter-offer expiration date (use the counter-offer form)
- Paragraph 9 – Buyer to waive or not waive the right to remedy in Form 17
- Homeowners Policy is new default in P&S
- Closing date and Possession date same – or use NWMLS forms 65A or 65B
- New provisions address charges and assessments against the property
- Page 5, item x: 10 day contingency for buyer to verify all information provided by Seller or Listing Agent.
These have been in effect since July, but for clarification sake were covered in the updates class. There are several changes here, but the “Environmental Section” is the main one. Buyer can still waive the right to receive unless one of the items in the Environmental Section is checked yes. In that case, the form can not be waived.
As a side note, foreclosure properties are no longer exempt. No one has a clue why the legislature took that one out.
- Buyer must seek Sellers consent to change lender or loan type after loan application period lapses (usually 5 days)
- Adds changes for “Environmental” Changes of Form 17
- Advises Buyers to do septic inspection (NWMLS Form 22S)
- Neighborhood Review Contingency is back
Optional Clauses Contingency
- Utilities broadened to include others
- Selling Office Commission moved to NWMLS Form 41C
- Seller to produced HOA documents if available
Here in the Seattle area, the buyer of a property gets to choose which Home Inspection Addendum to use, when making an offer to purchase. The primary difference between the two, lies in who has the “unilateral” POWER to keep the contract in-force or not, after the inspection.
The seller can counter by replacing the full inspection addendum with the other variety, but that is rare. I recently had an agent ask if “we wanted” to change the inspection addendum to the one that favored the seller, under the guise that another offer was coming. We decided to call her bluff, and our offer was accepted as written, there being no other offer in hand by the time ours required a response by the seller. Though she was quite surprised that we called her bluff in that regard.
The decision regarding which inspection clause to use, often has very little, if anything, to do with the inspection. It has more to do with whether or not the buyer retains the right to cancel based on the inspection.
I currently have two contracts in escrow for the same party, one on the sale of their property and one on the purchase of their next property. On their sale we have a 35B “Seller’s Opportunity to Repair” inspection addendum, giving them the power to keep their contract in force regarding the sale of their property, at least with regard to the inspection. On their purchase, we have a 35A “Buyer’s Satisfaction” inspection addendum, giving them the right to cancel based on their inspection, to counteract the “resale certificate” out, on their sale contract, since they are buying a home and selling a condo.
To understand the difference between these two addendums, you should review both inspection forms, 35A and 35B AND ALSO the followup forms 35AR and 35BR. The striking difference between the two is more noticeable on the followup form 35BR, with regard to the seller’s power given him by the buyer. If the seller checks the box on the follow up form saying he is going to repair the items, the inspection contingency is satisfied. It becomes a unilateral decision of the seller to satisfy the inspection contingency, whereas the 35A is a unilateral decision of the buyer to cancel.
Simply put, a buyer who makes an offer using a 35A “Buyer’s Satisfaction” inspection addendum, retains the right to cancel based on the inspection. On a 35B, the seller can simply check a little box, agreeing to repair the items in the report, causing the inspection addendum to be satisfied. The buyer cannot disagree with the seller’s choice and walk from the transaction, without risking the loss of their Earnest Money Deposit.
So which should you use? If their are multiple offers, you might be able to avoid a bidding war by using a 35B, which favors the seller, so you can win on terms vs. price. 35B trumps 35A and “no inspection contingency” trumps them all. I don’t recommend no inspection contingency in a blog, though often do in “real life” where I have the opportunity to view the property and ascertain my clients true needs and sensibilities.
It would be interesting to hear from anyone out there in the Seattle area who recently completed a sale, either as a buyer or seller. Which inspection contingency did you use and why? What factors led you to the decision to use a 35B vs. a 35A, or none at all?