In April, 2017 the new FLA/BAR real estate “Standard” and “AS IS” real estate contracts went into effect. Any real estate professional should take this opportunity to read the new contract not only to understand the changes but also as a refresher of their understanding of the contract that is the central document in the majority of real estate transactions.
The new Contracts have many changes but one of the most important concerns the Financing Contingency. The Contract no longer calls for a “Loan Commitment”. Instead, the Contract requires a “Loan Approval”, modifies the contingency period from 45 days to 30 days and allows for both verbal and written “Loan Approvals”. The Contract also states that a “Loan Approval” that requires the Buyer sell their prior home is NOT a “Loan Approval”. In addition, the Contract now requires the Buyer to use “Diligent Efforts” to get the “Loan Approval” and requires that the Buyer provide their lender all requested financial documents in a timely fashion. Finally, the Contract no longer has the 7 day prior to closing provision to cancel the contract in the event the financing falls through.
These are the net results of these changes. The Financing Contingency is now a hard line 30-day contingency and contracts must be cancelled on that thirtieth day or the Buyer’s deposit is at risk. The Buyers must comply with requests from their lender or they are not using diligent efforts and their deposit is at risk. Real estate professionals must be careful to read and understand the “Loan Approvals” they receive in light of the changes to the new Contract.