There are several changes agents should be aware of in the new 6.0 contract which has recently replaced the 5.0 contract. Outlined below, in sequential order, are the five significant agent-specific changes:
- PIN numbers for parking spots must now be inserted if available.
- EARNEST MONEY now has to be tendered on ACCEPTANCE or within ___ days (the agent adds) AFTER acceptance. This change reflects how agents have actually been handling earnest money in practice. The previous contract called for initial earnest money due upon acceptance or a stated term before acceptance. In the past, agents often would write an offer and tender initial earnest money at the same time. I have also seen agents hold the initial earnest money past the acceptance date before delivering to the other party. The final change in paragraph 4 added the language (“Escrowee”) for the attorneys and title companies who oftentimes hold funds.
- The MORTGAGE CONTINGENCY section represents the most significant area of change in the 6.0 contract. Agents must pay attention to the 2 dates in parts A and B in paragraph 8. If the dates are not adhered to, both parties have the option to cancel the contract upon giving proper notice (2 days from expiration date). Section A requires the Buyer to provide evidence that the loan has been submitted for underwriting approval either 1) within 30 days (if left blank) of acceptance or 2) a date specified. This addition is not necessary because the “Clear to Close” date is the time sensitive issue for a closing to occur. Section B covers the “Clear to Close” date which needs to occur either 1) within 45 days from acceptance (if left blank) or 2) a specified date. To avoid confusion and add clarity, the agent should always specify the dates. This will help when closing sooner than 45 days from acceptance. Please note that if there is no mortgage contingency, than you have to fill out paragraph 36 as discussed later. Finally, agents should remember that appraisals must now be ordered within 10 days of acceptance.
- Paragraph 36 of the 6.0 contract includes a NON CONTINGENT FINANCING section that one selection has to be initialed. Part a) applies only to cash deals and b) is when the Buyer is waiving their mortgage contingency but may be obtaining a mortgage. I have seen agents fill out this section by mistake even when there is a mortgage contingency. So please do not initial anywhere in paragraph 36 when there is a financing contingency or it will be waived.
- There are changes to the SELLER REPRESENTATIONS which is now located in paragraph 23. The new contract calls for disclosures of building violations, lawsuits, survey disputes, permit issues and improvement issues from the Seller. This is in addition to the previous disclosure of existing or pending special assessments and special service/assessment areas. Disclosures now survive closing and redisclosure is required if anything has changed. Therefore, when taking a listing, agents should remember to address these items.
Any questions? Feel free to reach out to me at email@example.com, and good luck in using the new 6.0 Contract.
Mark Cahan, is a Chicago Lawyer specializing in Real Estate Law. He uses Chicago Title.