CVR MLS 2015 New and Revised Forms Reference Guide

CVR MLS 2015 New and Revised Forms Reference Guide On February 25, 2015, the CVR MLS Board of Directors approved six new forms and revisions to the seven other existing CVR MLS transaction documents. This reference guide provides a detailed overview of the changes. A digital version of this reference guide is available on the RAR and SVAR web sites, and on Instanet in the All Forms file. The most significant changes are to the Purchase Agreement, including escrow (deposit) handling, home inspections, brokerage fees, well/septic system inspections, and the addition of a definition for Date of Ratification. Residential Transaction Forms: 1. CVR MLS Residential Listing Agreement--Revised 2. CVR MLS Purchase Agreement--Revised 3. CVR MLS Short Sale Addendum--Revised 4. CVR MLS Release of Purchase Agreement--Revised 5. CVR MLS Buyer s Brokerage Agreement--Revised 6. CVR MLS Buyer Representation Agreement, Non Agency--New 7. CVR MLS Termination of Purchase Agreement--New 8. CVR MLS Withdrawal of Offer/Counteroffer--New 9. CVR MLS Confirmation of Brokerage Fees--New 10. CVR MLS Purchase Agreement for Unimproved land--new Overview of Revisions to the CVR MLS Residential Listing Agreement--Standard Agency a. Section 5 Compensation: The compensation language in this section has been modified to allow for variable types of compensation and fees. The word OR in the first paragraph has been replaced with AND. This change also accommodates the structured compensation option allowed under the CVR MLS Rules and Regulations. b. Section 13 Septic System: This section has been updated to better reflect the various types of septic systems and to facilitate a discussion with the property Owner. The new language requires the Owner to indicate if the property is or is not served by a septic system; and if that answer is yes, to identify the type of system and whether a waiver has been issued by the Board of Health. An

instructional note has been added informing the seller that a separate notice is needed, if a waiver is in place. NOTE: The CVR MLS Limited Service and Independent Contractor Listing Agreements have been similarly modified. Overview of Revisions to CVR MLS Residential Purchase Agreement a. Section 3 ADDENDA. The AS IS Addendum has been added as a selection option. Instead of having to make substantial revisions throughout the Purchase Agreement for an AS IS transaction, the AS IS addendum may now be used for AS IS transactions. No need to make revisions to the Purchase Agreement just complete the AS IS Addendum and attach it to the Purchase Agreement. b. Section 4 PURCHASE PRICE. The line Other Financing Terms has been removed and an optional selection has been added for those transactions where the seller agrees to pay a defined amount towards the purchaser s closing costs, prepaids, discount points and loan expenses. Clarifying language has been added to paragraph 3 of this section. In the event that a purchase is a cash transaction subject to appraisal, the appraisal shall be ordered within ten (10) days of the date of contract ratification. c. Section 5 FINANCING. The language in this section has been revised to conform to the new language and definition contained in Section 25 ACCEPTANCE. d. Section 6 DEPOSIT. This section has been substantially revised to add instructions concerning delayed escrow deposits. The Virginia Real Estate Board has imposed sanctions and fines against several licensees for failing to adhere to the five business banking days deposit requirement set forth in the DPOR Rules and Regulations, citing the lack of specific instructions to the Escrow Agent extending both the date when the escrow deposit will be paid and the date by which the Escrow Agent will deposit the delayed deposit funds. The new language provides for an extended deposit date and stipulates that the Escrow Agent will place the Deposit in an escrow account by the end of the fifth business day following the latter of: (i) ratification and delivery of the Agreement or (ii)the Extended Deposit Date. BROKER NOTE: If your firm uses its own purchase agreement, we recommend that you revise your contract form to include this new protective language. e. Sections 11-12 PROPERTY OWNERS ASSOCIATION/CONDOMINIUM DISCLOSURE A change to the respective Virginia Code section requires a commercial

overnight delivery service as a means of delivery in the event the purchaser exercises their right to cancel the Purchase Agreement. f. Section 14 PROPERTY INSPECTION. There has been considerable confusion over the handling of repairs and repair credits and whether or not repairs must be made by a licensed contractor. In paragraph 2 of this Section, the new language allows a purchaser to reserve the right to request that certain repairs be performed by a licensed contractor. The repairs which the purchaser wishes to have performed by a licensed contractor must be identified on the repair request addendum. The language added to paragraph 3 clarifies that the seller may not require a purchaser to accept a repair credit, if the purchaser has requested repairs be made. Paragraph 4 stipulates that unless otherwise agreed to by the parties, all repairs shall be completed prior to settlement and that the seller will provide the purchaser with paid receipts for any repairs which will not be paid for at settlement. The seller shall also provide purchaser and the settlement agent all written invoices for all other repairs that are to be paid from the seller s proceeds. g. Section 17 BROKERAGE FEE. This section of the Purchase Agreement has been a source of controversy and misperceptions for some time. The purchaser and seller have not understood that changes made to this section of the Agreement do not modify the compensation agreed to in the Listing Agreement or offered in the MLS. Further, Buyer Brokerage Agreements have added an additional layer of complexity to the accurate reporting of compensation and fees related to a purchase transaction. To ameliorate these issues, the brokerage fee detail has been removed from the Purchase Agreement. This change aligns the CVR MLS Purchase Agreement with the VAR Residential Contract of Purchase and the Agreements in use in Northern Virginia and Tidewater, all of which have previously made a similar change. Listing and/or selling brokers must provide the compensation contained in their Listing or Buyer Brokerage Agreements to the settlement agent, by submitting a copy of their respective Agreements or by a written statement indicating the amounts to be paid to the firms. Alternatively, the new optional CVR MLS Confirmation of Brokerage Fees form may be used to transmit this information to the settlement agent. h. Section 22 STANDARD PROVISIONS B. TITLE The Consumer Finance Protection Bureau has announced substantial changes relating to closing disclosures effective August 1, 2015. For all transactions occurring on and after August 1, the TIL and GFE are eliminated and a new Loan Estimate is provided to the borrower by the lender. A series of Broker Town Hall and Membership Meetings are being schedule for late May to provide Brokers and Agents with more information on the coming changes to the settlement process. Currently, lenders have to quote the cost of title insurance in

the GFE, but there is no specific guidance as to the type of coverage selected-- standard coverage vs. enhanced coverage title insurance. But starting in August, most lenders will only quote the standard coverage rates (thereby minimizing the closing costs) unless directed by the parties in a real estate contract to quote the enhanced rates. In the Richmond market, many brokerage firms and closing attorneys encourage a purchaser to obtain an enhanced policy to better protect themselves from adverse title issues. A notice has been added to the CVRMLS Purchase Agreement that alerts the lender to quote the enhanced coverage rate, but does not obligate the purchaser to purchase it. E. Equipment Condition and Inspection. The language in this section has been revised to conform to the new language and definition contained in Section 25 ACCEPTANCE. F. Well AND Septic. This section has been updated to better reflect the various types of septic systems, clarify the level of inspection being requested and whether or not the contents are to be pumped. Corresponding language changes have been made to the CVR MLS Residential Listing Agreement. i. Section 25 ACCEPTANCE. The acceptance paragraph has been re-written to include a new definition and term, Date of Ratification. Date of Ratification replaces all previous references to when this Agreement is fully executed by the parties. You can find this new term in Sections 5, 14, 22E and 25. The question of when a Purchase Agreement is legally binding upon all parties has sometimes been the subject of debate. The insertion of language requiring delivery of a final accepted and signed Agreement and incorporating delivery into the definition of Date of Ratification provides all parties with a mutually agreed upon standard for determining when a binding Agreement is in effect and a reference point for the timing of other obligations provided for in the Agreement. Overview of Revisions to CVR MLS Short Sale Addendum a. Section 4, Time Periods. The language in section 4 (a) Property Inspection was modified to allow more flexibility when establishing the timing of the start of the inspection period. Section (b) Financing. The new language clarifies that the purchaser will make written loan application within the time period specified in the Purchase Agreement and allows the parties to establish when the related financing obligations--including the appraisal and other loan application fees--will be paid. CVR MLS Release of Purchase Agreement

This form has been substantially revised. The previous version incorporated the Listing and Selling Brokers and the release of their respective interests, if any. In some instances, Brokers were unwilling to sign the release and it was not understood that once the purchaser and seller had signed the release, the broker holding the escrow deposit was required to disburse the funds, in a timely manner, regardless of whether either or both brokers had signed the release form. There are proposed revisions to the VREB Rules and Regulations that are awaiting the Governor s signature as of the date this guide was written. Once they have been approved and become effective, Brokers will be required to disburse escrow deposits within 20 days of the date a written release has been executed by the purchaser and seller. Removing the references to the Listing and Selling Brokers eliminates any confusion that might delay the prompt disbursement of the escrow funds and possibly result in a DPOR violation. New language was added in section 4 addressing the obligations that the parties to the agreement may have to their respective brokers. CVR MLS Exclusive Right to Represent Buyer Only one minor change was made to both the Short Form and Long Form of this agreement. In Section 5 Compensation, the conjunction OR was changed to AND, similar to the change made to the Listing Agreement. This substitution allows for a variety of compensation formats and transaction related fees. CVR MLS Buyer Representation Agreement Non Agency, New Form Virginia Agency law requires that agents and brokers enter into written brokerage agreements with their clients. There are now three form options for buyer representation: Standard Agency and Limited Service and the new CVR MLS Non- Agency Buyer Representation Agreement. The new non-agency agreement allows agents and brokers to establish an Independent Contractor relationship with a client, if only a specific service or services will be rendered and payment for those services may or may not be contingent upon the buyer purchasing real property. CVR MLS Termination of Purchase Agreement, New Form Usually the best way to terminate a transaction is for the parties to execute a release. But often times a party to the transaction is unwilling to sign a release. If a right of termination exists under the Purchase Agreement, then using the new Termination of Purchase Agreement would be an appropriate method to deliver the notice of termination from the purchaser to the seller. For example, Section 14 of the CVR MLS Purchase Agreement contains a right of termination during the two day period immediately following the seven day negotiation period. A written release is strongly suggested as the best way to terminate the Purchase Agreement and to authorize the disbursement of the deposit. But if the seller is unwilling to sign a release, then the purchaser could still terminate the Purchase Agreement by using the Termination of

Purchase Agreement. The seller would be free to return the property to active status in the MLS and the purchaser would be free to pursue the purchase of another property. Important practice point: The deposit may not be refunded to the purchaser until a release or other approved authorization per VREB Regulations is obtained. Before giving a notice of termination, a purchaser is strongly urged to contact their attorney for legal advice. CVR MLS Withdrawal of Offer/Counteroffer, New The Withdrawal of Offer or Counteroffer form is appropriate for use when a purchaser or seller has the right to withdraw an offer or counteroffer and wishes to exercise that right. To be effective, the signed Withdrawal forms must be delivered to the notified party or their authorized agent prior to ratification and delivery of the Purchase Agreement. This form is not required to withdraw an offer or counteroffer, such notification may be accomplished by delivery of another type of written notice. CVR MLS Confirmation of Brokerage Fees New The brokerage fee language in Section 17 of the CVR MLS Purchase Agreement has was modified to remove detail of the cooperating brokers compensation. Listing and/or selling brokers must provide the compensation contained in their Listing or Buyer Brokerage Agreements to the settlement agent by submitting a copy of their respective Agreements or by a written statement indicating the amounts to be paid to the firms. Alternatively, the new optional CVR MLS Confirmation of Brokerage Fees form may be used to transmit this information. This convenient new form is not part of the Purchase Agreement and does not require the signatures of both brokers, nor does it require the signatures of the purchaser or seller. Typically, this form will be completed by the listing broker who will report the compensation as stated in the MLS. The form might also be completed by the selling broker if other compensation is due from the purchaser under the terms of the Buyer Brokerage Agreement. CVR MLS Purchase Agreement for Unimproved land New The new CVR MLS Purchase Agreement for Unimproved Land provides contract language and terms consistent with the sale and purchase of vacant lots and unimproved land parcels. Residential Landlord and Tenant Representation Forms: 1. CVR MLS Exclusive Right to Lease Substantially Revised 2. CVR MLS Tenant Brokerage Agreement/Standard agency 3. CVR MLS Tenant Representation Agreement/Non-agency Virginia Agency law requires that agents and brokers enter into written brokerage agreements with their clients. This applies to both sale and lease transactions. The new non-agency Tenant Representation Agreement allows agents and brokers to establish an Independent Contractor relationship with a client when only a specific service or services will be rendered and payment for those services may or may not be contingent

upon the Tenant entering into a lease agreement. The new CVR MLS Exclusive Right to Represent Tenant Agreement would be used when representing a tenant client as a standard agent and compensation is contingent upon the Tenant entering into a lease agreement. The CVR MLS Exclusive Right to Lease Agreement has been substantially revised. Revisions include enhanced detail of utilities and fees included in the rent; security deposit requirements; owner disclosures of Condominium/ HOA use restriction and mortgage status. If you have questions concerning any new or revised forms in the CVR MLS forms library you may contact Peggy Lynch, Vice President of Professional Development and Compliance by phone 804-422-5006 or by email to Plynch@rarealtors.com