What Realtors REALLY Need To Know About The 7.0
With the 7.0, we’re addressing price, earnest money and closing credit all in one place rather than assorted figures all over the contract, which makes it much clearer for you (and attorneys and lenders).
- Line 10: What type of property is it?
- Lines 13-14: Add the storage number
Buyers typically want to inspect storage units. In the past contract, there wasn’t a line for the storage unit and now there is. So when you fill out the contract, make sure the storage number is filled in to avoid delays down the road.
- ALWAYS have 1 of the following 3 paragraphs initialed:
3. Cash with mortgage allowed but not required
This area used to be a bit complicated for realtors to complete and now with the 7.0 has been made simpler. You only need to ensure that one of these paragraphs are initialed for “loan,” “cash” or “cash with mortgage allowed but not required.”
- No need to insert mortgage deadlines anymore!
Contract states either 45 CALENDAR (not business) days or 5 BUSINESS days prior to closing (whichever comes FIRST).
- 10 business day deadline to apply for loan (shopping encouraged!)
- BUT, also note 10 business day deadline to order AND PAY FOR appraisal - if not, seller has 5 days to terminate. IF YOU WANT TO WAIT UNTIL AFTER ATTORNEY REVIEW TO SPEND MONEY ON THE APPRAISAL, make sure you notify the attorney to have this added in ATTORNEY REVIEW.
FYI while the contract requires Buyer to order an appraisal by a certain deadline, you don't want to order that appraisal until you're through the attorney review and inspection period. After all, if $500 was just spent on an appraisal but a deal can’t be reached, that’s $500 that could be lost. This is good advice that you – the agent – can give your client directly.
A) The seller is required to have all utilities turned on for the inspection & provide access to every part of the property.
B) DO NOT SEND THE INSPECTION REPORT TO THE SELLER SIDE.
The seller only gets an inspection report if explicitly requested. This provision was added to protect sellers from being put on notice of issues that they would have to disclose to the next buyer. If you represent the Seller, be careful before opening an inspection report that you receive!
C) The 7.0 severely limits what can be requested during the inspection period and if you ask for something that's not permitted, it gives the Seller the immediate right to terminate – even if you withdraw the request.
No cosmetic items are permitted! If it is in working order and not a threat to health or safety, you are NOT allowed to request repairs or credits for it, so set your client’s expectations appropriately. A burned-out light bulb. Peeling paint. A hole in a screen door. These are very minor details and a deal cannot be held up in negotiation across several days over such things.
Make sure that if there is a cosmetic issue that you factor that in to your initial negotiations because the attorney can't change that in the inspection contingency.
Other Areas Of Note
- Anticipate more closings to take place at attorney offices and brokerages. The 7.0 explicitly allows for this when they are closest to the property, and many title companies are offering this service now to their attorney title agents.
- Possession: Tenants must be out by closing, unless explicitly agreed otherwise.
- There are now two places to indicate dual agency and home warranty. Both a checkbox on first page AND appropriate paragraph.
- Make sure you include all of buyer's and seller's contact info as well as their attorney's info when filling out the contract. If you don't, you will be on the hook for notices.
Don’t gloss over this last point. We don’t want to see you on the hook for legal documents. To see to it that your clients are protected, make sure you have the attorney’s information on the contract. If there is a deadline missed, you will be held liable for it with charges that probably could have been avoided.
The seller now has 10 days (instead of 5) to apply for condo documents, so parties may need to work to get them sooner to avoid delays.
7.0 Addendum for Multi-Unit building
If the property is a multi-unit, make sure to include this very helpful addendum, which obligates the seller to provide leases, rent roll, etc. and gives the buyer 10 days from receipt to conduct due diligence. Note this addendum says the buyer is taking property WITH tenants - so if the buyer wants tenants out by closing, let your attorney know.
Now Leave The Rest To Us
While it’s crucial to be mindful of these particular aspects of the new contract, we also know you’re not practicing contract law. In fact, one of the primary goals of the 7.0 contract is to reduce the risk to realtors when preparing the contract. So not only has the 7.0 been simplified for your perspective but also for your protection. For so many other details that can help get your deal closed on time, every time, turn to our team of highly accessible real estate attorneys at Miles & Gurney, LLC. We’re here for you at every turn.
For questions about any and all matters related to contract version 7.0 prior to your next transaction, call Miles & Gurney at 312.929.0974.