New Regional Sales Contract, Different in Style and Substance

There's a new home-sales contract for use by Washington-area real estate agents and their customers.

Like the widely used form it replaces, it is known as the Regional Sales Contract. The Greater Capital Area Association of Realtors made it available Sept. 1.

The local real estate community has been using the old form since 1999. It is supplemented by a jurisdictional addendum, depending on where the property is.

There are some significant changes from the older form. Perhaps the most noticeable is that the new form is five pages longer. The main reason is that the type is larger, making it much easier to read.

This is important for home buyers and sellers; quite often, changes are made in pen directly on the form, and the larger type makes any additions and cross-outs easier to make and to read.

Many of the changes are stylistic. In some cases, numbered paragraphs were moved or merged into other paragraphs.

The more substantive changes involve how appraisal and financing contingencies are presented. The new form contains a "check the box" as to whether the contract is or is not contingent on the buyer obtaining an acceptable appraisal.

That is defined to mean that the appraisal is not less than the sales price. In today's real estate market, it is quite possible that an independent appraisal, commissioned by a lender, will come in at less than the contract price.

If the potential buyer does not have a contingency that the contract sales price will not be equal to or higher than the appraised price, it is possible that the buyer will have to make up the difference.

How does that work? Say the contract price is $500,000, and the buyer plans to put down 10 percent and obtain a loan of $450,000. That would require a cash deposit of $50,000. But if the appraisal is only $470,000, the loan will be only 90 percent of that, $423,000. That would require the buyer to come up with $77,000 at settlement for the down payment, $27,000 more than was anticipated when the contract was signed.

Similarly, the new form contains another "check the box" as to whether the contract is contingent upon the buyer obtaining acceptable financing.

Both changes will be welcome to everyone involved in a sale. Potential buyers will be informed -- assuming they read the contract -- of the possibility of contingencies. Sellers will also have certainty -- when they sign a contract -- about the terms and conditions relating to the sale.

Real estate professionals also benefit. Whether or not they discuss the contingencies with their clients, the form speaks for itself -- in a clear, readable typeface.

The new Regional Sales Contract is long overdue and should make the complex task of buying and selling a whole lot smoother.

Although the form is meant to be used in the District, Maryland and Virginia, the Northern Virginia Association of Realtors has put a hold on the form until Sept. 15 so it can modify the Virginia addendum.

The Regional Sales Contract, GCAAR Form 1301, is available to members of Realtor associations through those organizations.

Benny L. Kass is a Washington lawyer. For a free copy of the booklet "A Guide to Settlement on Your New Home," send a self-addressed stamped envelope to Benny L. Kass, Suite 1100, 1050 17th St. NW, Washington, D.C. 20036. Readers may also send questions to him at that address.