On October 1, the Cincinnati Area Board of Realtors and Dayton Area Board of Realtors issued a major update to the form residential purchase contract in use by most Realtors in the two marketplaces. This blog entry explores the major changes to the Contract.
Most Realtors in both the Cincinnati and Dayton marketplaces use form contracts prepared by their Board of Realtors. Because of the cross-over of the two marketplaces (West Chester, Springboro, etc.), several years ago, the two Boards started issuing a joint contract form. Both Boards have undertaken extensive training of their members for this most-recent significant set of changes.
The changes include:
- The most significant change is a complete re-write of the inspection contingency. In the sizzling residential market of 2020 and 2021, desperate buyers trying to secure a contract on a home — after losing out in multiple multiple-offer situations — would buy a home quickly, maybe rashly, sight-unseen with an inspection contingency. During the previously open-ended contingency period, they would for the first time “decide” if they wanted to buy the home. If they terminated (which came with increasing frequency), the seller lost a crucial 10-20 days at the beginning of the marketing period and ended up with a home back on the market with the stigma of a failed sale. This was frustrating for Realtor and seller. The changes include:
- Requiring that the inspector be licensed in Ohio (or specialists in more narrow fields).
- Allowing access for inspection.
- “Minor, routine maintenance and cosmetic items” cannot be the basis for termination.
- Importantly, if the seller fails to timely respond to buyer’s request for repairs, he is deemed to have agreed to make those repairs.
- In the event of certain undisclosed significant defects, the buyer has the right to skip the repair offer/counteroffer process, and simply terminate the contract. These bases are:
- The presence of asbestos
- The presence of lead-based paint
- The presence of hazardous materials
- A converse problem has also emerged due to the unusually active marketplace, which is that a seller would (in my word) scheme to cause a buyer to default under the contract, such as not allowing access for inspections. The requirement for seller cooperation is made explicit.
- All timelines in the contract form are “time is of the essence,” except the closing date, which allows for an extension of up to seven days if both parties are “proceeding in good faith performance.”
- The buyer is in default if earnest money has not been paid within three days.
- Clarification is made as to the authority of the seller to sign in a fiduciary and corporate capacity.
- Clarifies that the title agent or closing attorney is representing neither buyer nor seller.
- The contract better explains Ohio’s confusing timing of real estate tax payments and prorations, and continues the option to elect the Dayton short proration or Cincinnati’s full proration at closing.
- Clarifies that seller is responsible for Home Owner’s Association transfer fees, along with the cost of obtaining HOA documentation.