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The New Real Estate Contract And What It Means For You

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At the beginning of this year revisions to the local real estate contract took effect and the most discussed change is the removal of something called the Normal Working Order Clause and the addition of some home inspection clauses. They all relate to the condition of the property and the appliances and fixtures within it. We're only one month in to the new contract's existence so time will tell if it is better than the previous one. In the meantime, however, we asked MRIS for their thoughts on the matter (they're the group who manage all the public real estate listings for the DMV) and we've pasted it after the jump.

Contract Renovations in the Region Helping Homebuyers Avoid Potential Pitfalls

As the nation anxiously watches the housing market to see how it will play out this year, local buyers and sellers are adjusting to the revised home sales contract from the Greater Capital Area Association of REALTORS® (GCAAR) and Northern Virginia Association of REALTORS® (NVAR) that took effect on January 1, 2012. The new forms inaugurated the removal of the Normal Working Order Clause, which means that homes that use the regional contract in Northern Virginia, D.C. and much of Montgomery County are sold “as-is.” The new contracts only require the property to be “free and clear of trash and debris, broom clean and in substantially the same physical condition as determined.”

One month into 2012 and we’re seeing that the new forms are helping buyers and sellers have a more balanced transaction. The old contract contained language that the basic systems in a home – electrical, plumbing and appliances – all had to be in normal working condition. Since only those systems were warranted, sellers did not need to fix any issues that fell outside of these areas. As a result, a buyer might ask a seller to fix a light in the oven but a crack in the foundation could have been overlooked. The revised contracts now allow the buyer and seller to negotiate all aspects of the home inspection without making one item more important than another. From carpets to countertops, anything is negotiable.

While some feel that the ball has landed in the sellers court, buyers still maintain some leverage through one of two options: (1) Home Inspection Contingency, provides buyers with the right to conduct a home inspection and provide the seller with a list of items to replace/repair or provide a credit, or (2) General Inspection Contingency, allows a buyer to void the contract after an inspection if the home is found to be inadequate or substandard.

“Increasing the transparency of the home buying process alleviates surprises for both buyers and sellers and sets the stage for a better consumer experience,” said John L. Heithaus, chief marketing officer for MRIS. “Negotiating a purchase agreement requires the knowledge of an experienced real estate professional. If you are in the market for a new home this year, make sure you engage the services of a real estate professional that can help you navigate the home inspection and contract negotiation process.”
Don’t let your contract negotiations fall through the cracks. In today’s complex market, it’s more important than ever to work with a real estate professional to build a strong foundation for contract success.

· MRIS [OfficialSite]
· New sales contract forms shift balance away from buyers [WaPo]