Effective September 1, 2006, a new sales contract became available for use by real estate agents in the Washington metropolitan area. The form, entitled Regional Sales Contract, was promulgated by the Greater Capital Area Association of Realtors (GCAAR), a trade association representing real estate agent and brokers in this area.
For several years, the real estate community has been using a Regional form, which must be supplemented by a jurisdictional addendum, depending on the location of the Property.
Basically, the new form tracks the old. However, there are some significant changes.
Perhaps the most significant change is that the new form is five pages longer. The main reason for this new length is that the form is in larger font, making it much easier to read. This is important for potential homebuyers and sellers; quite often, changes are made in pen directly on the form contract, and the larger type makes any additions and cross-offs easier to accomplish and read.
Many of the changes are stylistic. In some cases, numbered paragraphs were moved or merged into other paragraphs. Here are some of the most important changes:
Financing and Appraisals: The new form contains a "check the box" as to whether the contract is or is not contingent on the buyer obtaining an acceptable appraisal. This is defined to mean that the appraisal is not less than the Sales Price.
In today's real estate market, it is quite possible that an independent appraisal, commissioned by a lender, will come in at less than the contract price. If the potential buyer does not have a contingency that the contract sales price will not be equal to or higher than the appraised price, it is possible that the buyer will be obligated to make up the difference. Let's look at this example: the contract price is $500,000, and the buyer plans to put down 10 percent and obtain a loan of $450,000. This will require a cash deposit of $50,000. But if the appraisal only is $470,000, the loan will only be $423,000 (90 percent). This will require the buyer to come up with $77,000, $27,000 more in cash at settlement than was anticipated when the contract was signed.
Similarly, the new form contains another "check the box" as to whether the contract is contingent upon the buyer obtaining acceptable financing.
Both of these changes will be welcome news to everyone involved in a residential real estate sales transaction. Potential buyers will be informed -- assuming they read the contract -- as to the existence of contingencies. Sellers will also have certainty -- when they sign a contract -- as to the terms and conditions relating to the potential sale.
Real estate professionals also benefit. Whether or not they discuss these contingencies with their clients, the form speaks for itself -- in clear, readable type face.
The new Regional Sales Contract (GCAAR Form 1301) is long overdue and should make the complex task of buying and selling a whole lot smoother.
It should be noted that although this form is to be used in Maryland and Virginia as of September 1, the Northern Virginia Association of Realtors has put a hold on the form until September 15, 2006, in order to modify the Virginia Addendum.