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2021 GAR Contract Changes Part 3

1/7/2021

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​The 2021 GAR contract changes are now active.  In past weeks we covered 2021 changes to the Listing Agreement (Engagement) Agreement, the Buyer Brokerage (Engagement) Agreement and the Purchase and Sale Agreement.  This week we summarize important changes to Disclosures, Exhibits and Authorization. 
 
  1. F301 Seller’s Property Disclosure
  1. C(5) and C(6) added 2 additional Systems and Component HVAC questions and the age of the water heater.
  2. C(10) modified P.(a) added “hazardous condition” from animal intrusion, insects, fungi or dry rot.
 
  1. F302:  NEW FORM for Seller’s Disclosure of Latent Defects and Fixtures.  This form is to be used when the Seller has never occupied the property (investors, beneficiaries) or has not occupied the property long enough to know the information to complete F301.  THE SELLER MUST DISCLOSE KNOWN LATENT DEFECTS.
 
  1. F316 The Lead Based Paint Exhibit continues to get tighter. Language has been added to mirror the EPA regulation. New language emphasizes that the Lead Based Paint Brochure must be provided to the Buyer prior to a binding agreement.  Further, the Seller must initial it’s disclosure and the Buyer must initial its Acknowledgement at (c) AND (d) and initial (e)(i) or (ii).  If the Buyer accepts a 10 day opportunity to inspect, the inspection must be completed BEFORE the offer is accepted by the Seller.  Please review the form to be certain the form is understood. EPA fines for omissions are up to $16,000 per omission.
 
  1. F322 Community Association Disclosure. 
 
  1. The Seller must pay for the Closing Letter within 2 days of receiving notice from the closing attorney of how to pay.  The Seller is responsible to pay for any amount over the Seller disclosure. If there is an N/A or a blank link, it is interpreted as $0.00.
  2. Pre-paid annual dues or buyer move in fees are buyer costs.
  3. New paragraph: The Buyer authorizes the Closing Attorney to reveal the Buyer’s identity and contact information.
 
  1. F601 Sale or lease of Buyer’s Property Contingency
    1. New paragraph wherein the Buyer warrants the property is listed, under contract or other.
    2. P.3 updated to include the specifics of the Buyer’s Sale or Lease Terms.
 
  1. F843 Referral Authorization. Updated Language to include referral to builders and real estate related services in addition to brokers and relocation companies.
  2. SS 627. New Special Stipulation.  Expiration of Time Deadlines.  To be used if you don’t want time deadlines to end at 11:59 pm.  “All time deadlines set forth herein shall expire at ____am or pm on the day of the deadline.”
 
For additional detail, please see the RMAA Hub Resources Library for a Power Point of Missy Robinson’s class on the changes, as well as the Campbell and Brannon class presented by Christian Ross and Peter Babcock.  The new forms can also be found in the RMAA Hub in the Resources Library.  There will be additional classes on the changes to the forms.  We highly recommend that you register for one and attend!
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2021 Contract Changes Part 2

12/16/2020

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As noted in last week’s Broker Corner2021-gar-contract-changes-part-1.html, the 2021 GAR contract changes are final.  Last week the changes to the Listing Agreement were summarized. This week we will cover the changes to the Buyer Brokerage Agreement and the Purchase and sale Agreement. For additional detail, please see the RMAA Hub Resources Library for a Power Point of Missy Robinson’ s class on the changes.  The new forms can also be found in the Resources Library.  There will be additional classes on the changes to the forms.  We highly recommend that you register and attend!
 
Important changes to the Buyer Brokerage Agreement:
 
  1. The name has been changed to “Exclusive Buyer Brokerage Engagement Agreement.”
  2. Independent Contractor has been moved to a definition at C97)(i).  No need to select it anymore.
  3. Dual agency is not offered by RMAA.  That has not changed.  If it were offered, there is now a requirement that the Buyer consent to dual agency.  
  4. Section B has been expanded to include an acknowledgment by the Buyer that Buyer is not a party to another Buyer Brokerage Engagement and, if the Buyer is a party to a previous agreement or terminated a previous agreement without consent from the previous broker, the Buyer may have to pay the previous broker a real estate commission.  Further, a commission may be due to a previous broker should there be a purchase or lease on a Protected Property during a Protected period.
  5. Unilateral Extension of the Buyer Brokerage Term for a period the property was under contract: The Broker must now give notice to the buyer within 5 days of a deal falling through, but, in any event, the notice MUST be given before the Buyer Brokerage expires. 
  6. Added under miscellaneous:  Broker has no liability for third party vendors that may have been referred to the buyer.
  7. Notice to Extend Listing Period has been renamed to cover all brokerage agreements (Buyer, Seller or Lease).  The new name is “Notice to Extend Brokerage Engagement Agreement.”
Note that there are other miscellaneous changes in the Exclusive Buyer Brokerage Engagement Agreement, including renumbering and content location changes.  Please review the new Agreement before using it.
 
 
Important Changes to the Purchase and Sale Agreement:
  1. An option was added for Earnest Money to be via ACH.  However, please check with attorneys if the earnest money will be held by them.  Many attorneys will not accept an ACH payment.
  2. Broker Relationships have been changed to “Buyer’s Broker” and “Seller’s Broker.”  The old terminology of Selling Broker and Listing Broker are eliminated.
  3. Section B(3)(c).  Sentence added at the end of the paragraph:  Buyer agrees to indemnify Seller against any and all claims of the county for unpaid ad valorem real property taxes for the year in which the property is sold.
  4. Language in the Right to Inspect paragraph has been expanded to clarify that the Buyer can inspect with prior notice and at reasonable times.  (This would include tomes after the due diligence period has ended.)
  5. Language added to recognize that brokers are express third party beneficiaries to the Agreement. B(10)(b).
  6. Language is added that the Buyer is to examine the propensity of the property to flood and flood zone certifications. B(10)(c).
  7. Language is changed from damaged to destroyed at (C)(3) : Risk of damage to property
  8. Added disclaimer language regarding GAR Forms: “No representation is made that the GAR Forms will protect the interests of any particular party or will be fit for any specific purpose.” C(4)(g)
  9. Written representations of the Seller regarding the property or neighborhood will survive the closing.  (Be sure your Seller knows to complete the Seller Property Disclosure correctly!)
  10. Language added above the signature lines: “By signing this Agreement, Buyer and Seller acknowledge that they have read and understood this Agreement and agree to its terms.”
 
Note that there are other miscellaneous changes in the Purchase and Sale Agreement, including renumbering and content location changes.  Please review the new Purchase and Sale Agreement before using it.
 
There are miscellaneous changes and updates to the New Construction PSA and the New Construction Exhibit.
 
There are several new forms that are welcome additions to the GAR Forms.  Please review them.
  1. NEW! F289 Request for Confirmation of Presentation of Offer/Counteroffer. This is only signed by brokers.  You can use this form if you feel a broker did not present your offer.
  2. NEW! F290 Agreement to Reinstate Contract. This form can be used if a contract was unintentionally terminated and the parties want to continue.  The form does not change deadlines, but if changes need to be made to the original agreement, they can be added in Paragraph 2.
 
Next week we will summarize changes to Disclosures, Exhibits and Authorization.
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2021 GAR Contract Changes Part 1

12/9/2020

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The January 2021 GAR contract changes are final. A Power Point of the changes, written by Missy Robinson of Chicago Title, is posted in the RMAA Hub in the Resources Library.  There are new forms as well which can also be found in the Resources Library.  Important changes to the agreements will be covered here over the remaining weeks of December.  Please be sure to review the changes and new forms before using them for details.


Important changes to the (former) Listing Agreement:
  1. The Exclusive Seller Listing Agreement” will now be known as the “Exclusive Seller Brokerage Engagement Agreement.”  
  2. There are 3 dates to complete: The Start Date, the Marketing Commencement Date, and the Ending Date.  
  3. There is a new “Commission Adjustment to Cooperating Broker clause to comply with the legal obligation for the Seller to approve of how money is used for commission.
  4. Sellers have to consent to dual agency.
  5. When a sale has fallen through and an extension of the listing period is allowed, a time limit of 5 days has been placed on notification by the listing agent to the seller.  The Notice must be in writing in writing and (very important) the Notice to extend must be prior to the expiration of the brokerage agreement.
  6. Added clause: Buyers and Brokers may take photographs, videos and other electronic images so the seller should remove personal property that the Seller does not want in an image.
  7. Broker must list in MLS/FMLS within 1 day of the Marketing Commencement Date (including Coming Soon).
  8. Section C. Language was added referencing the Georgia Law requiring latent defects to be disclosed as well as the Federal law reference that the Lead Based Paint Disclosure is required if the property was built prior to 1978.  (This removes the burden of counseling a Seller to comply.  You have the legal code references.)
  9. For your protection, clauses were added that Broker has no duty to inspect or advise regarding the propensity of the property to flood or flood zone certifications.
  10. For your protection, the clause regarding brokers’ lack of authority was expanded to giving Notices on behalf of the seller other than to forward, if requested by seller, a notice signed by seller.  As usual, a notice received by a broker is deemed to be noticed received by the seller.
  11. A new Seller duty was added to carefully read all contract to sell before signing the, and comply with all duties and all time deadlines.
  12. The Seller Default section was expanded to make clear that if a seller terminates a brokerage agreement without the agreement of the broker, then the broker removing the listing from MLS, Removing signage and ceasing marketing shall not be evidence of the broker’s agreement to mutually terminate, but is merely acquiescence of the unilateral termination.
There are additional details, relocated clauses and other new paragraphs in the miscellaneous section of the new Exclusive Seller Brokerage Engagement Agreement.  Please review the entire document.


Next week we will summarize changes to the Buyer Brokerage Agreement and the Purchase and Sale Agreement.
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Guidelines for Letters and Photos to Sellers. Don’t Inadvertently Violate Fair Housing Laws!

12/2/2020

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Low inventory and high demand have driven highly competitive multiple offer situations.  To distinguish themselves, buyers often send sentimental letters and photographs to sellers to promote and distinguish their offer as the one to accept.  It is important to keep Fair Housing laws in mind, however, whenever your client either sends or receives a letter.
Do not allow a photo to be included.
Including a photo of a buyer with a letter to a seller almost inherently violates fair housing laws. A photo can pull the Seller’s heartstrings, but it can also show race, color, family status or other features of being in a protected class.  This does not just impact the sellers who viewed the photo or the buyers who submitted it, but the real estate licensees who are involved in the transaction. All are culpable under state and federal laws.  If you receive a letter to a seller with a photo, inform the sender that the photo cannot be included.  If the buyer won’t remove it, you should. 
A letter itself may not violate fair housing laws – unless it does.
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NAR Expands Ethics Duty – Fair Housing

11/17/2020

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​NAR’s Board of Directors today strengthened REALTORS®’ commitment to upholding fair housing ideals, approving a series of recommendations from NAR’s Professional Standards Committee that extend the application of Article 10 of the Code of Ethics to discriminatory speech and conduct outside of members’ real estate practices.

Article 10 prohibits REALTORS® from discriminating on the basis of race, color, religion, sex, handicap, familial status, national origin, sexual orientation, or gender identity in the provision of professional services and in employment practices. The Board approved a new Standard of Practice under the Article, 10-5, that states, “REALTORS® must not use harassing speech, hate speech, epithets, or slurs” against members of those protected classes.
The Standard of Practice directly flows from the requirement to not deny equal professional services or be parties to a plan to discriminate. Specifically, bias against protected classes revealed through the public posting of hate speech could result in REALTORS® not taking clients from certain protected classes or not treating them equally, which would lead to violations of the Fair Housing Act due to overt discrimination or disparate impact.

The Board also approved a change to professional standards policy, expanding the Code of Ethics’ applicability to all of a REALTOR®’s activities, and added guidance to the Code of Ethics and Arbitration Manual to help professional standards hearing panels apply the new standard.

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Common real estate legal questions

11/11/2020

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For this week’s Broker Corner, we are showcasing some common legal questions that come up again and again.  Thanks to GAR Legal FAQs for this inspiration!
 
Does a real estate purchase agreement automatically terminate if the buyer does not show up for the closing? 
No, unless the contract specifically provides otherwise. When a party fails to perform under a contract, the contract is terminable due to the breach by that party but is not automatically terminated. For the contract to be terminated, a formal notice of termination must be sent to the breaching party.

Can one spouse sign a contract for another spouse?
No. In Georgia, a person cannot sign a contract for another person unless they are legally authorized to do so. Being married does not give one spouse the legal authority to sign for the other. If a person wants to grant the person’s spouse the right to sign a contract on his or her behalf, he or she would need to sign a power of attorney granting that right.
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Is there any consumer protection law for a property purchase agreement where a buyer has a few days after signing a contract to terminate it? 
With one exception, the answer to this question is no. However, the initial sale of a
condominium unit in Georgia is subject to a 7 day right of rescission on the part of the buyer commencing from the date that a binding contract is created and an acknowledgement is signed that they buyer has received the condominium disclosure package. (See O.C.G.A. § 44-3-111.)

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"Where are rates heading?"

11/5/2020

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A question we get asked a LOT is “how long will rates stay low?”.   Obviously, if I knew the exact answer to that question, I wouldn’t be writing this article for all of you fine folks!   I would be on my private island in the Bahamas or Tahiti sipping on a frozen concoction from a coconut with a little paper umbrella! J   But there are some predictions and I thought it would be helpful for you to have this knowledge for your clients.   First off, the election (if we ever finish this) should not have any immediate impact on rates.  The COVID stimulus package that everyone thought was coming before congress left, didn’t happen and since they won’t all be back until mid-November, rates should stay pretty stable until at least then.  If a big stimulus package is passed that could put upward pressure on interest rates, but it would only move them a little bit.  The big thing that will start to cause rates to move upward will be a viable COVID-19 vaccine.   When that happens, and people in the hardest hit industries can start returning to work and things start to return to normal, I would expect rates to start a more noticeable rise.   

Rates are being kept artificially low right now because the Federal Reserve is buying up Mortgage Backed Securities (MBS) to create artificial demand and drive rates lower.  This was a strategy to help the economy weather the COVID storm. 

But as soon as a vaccine looks to be in place for most Americans, and we start to see growth again, the Fed is likely to stop this policy and let the free market take over again, which will cause rates to rise.   No one knows exactly when that will be, but as you are advising your clients, let them know that any signs of vaccines working and begin distributed will most likely be followed by rising interest rates.   The best predictions we have right now is that rates will stay in the upper 2%’s range (30 year fixed) for the remainder of 2020 and will slowly begin to climb in the late first quarter or early second quarter of 2021.   The predictions show them ending 2021 in the upper 3’s.   Obviously, no one KNOWS what will happen,  but this seems to be the current consensus. 

​Thanks and Happy Thanksgiving to each of you and your families!
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Is Probate in Georgia Really Necessary?

11/5/2020

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A Georgia Real Estate Agent’s Guide to Georgia Probate and Distribution of Real Estate
Is Probate in Georgia Really Necessary?
No! Probate court proceedings aren’t always necessary. Usually, they are required only if the deceased person owned assets in his or her name alone. Assets that  are jointly owned, assets that name a beneficiary (insurance policies, retirement accounts or payable on death bank accounts) and assets in revocable living trusts can usually be transferred to their new owners without probate.
Georgia is unique in that probate court proceedings aren’t always necessary.  If all the heirs agree, probate can be skipped altogether. Commonly, probate is conducted in about  six months to a year, unless, of course there is a court fight over the will  or unusual assets or creditors’ claims that complicate matters.
In certain circumstances, any heir (person entitled to inherit under state law, in the absence of a will) can ask the local probate court for an order stating that no probate is necessary. The court will grant the request if the deceased person did not leave a will, all the heirs agree on how to divvy up the person’s assets, and there are no debts or creditors don’t object to the lack of a probate proceeding.  It will still be important to change the legal ownership to the person that inherits to there is not a title problem.  If there is a court order, an attorney can handle the name change.
The Role of the Executor or Personal Representative (PR) When Probate is Required



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Internal Revenue Code 1031 Tax Free Exchanges

10/29/2020

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Follow the Rules!
Internal Revenue Code 1031 Tax Free Exchanges -

 
When property held for investment or business purposes is sold for more than its original purchase price, any gain from the sale is subject to capital gains tax. However, an IRC Section 1031 exchange—also called a tax-deferred exchange— allows a sale of the investment or business property and a purchase of a like-kind replacement property without paying the capital gains tax. The sale proceeds can be reinvested without paying additional taxes.  Used correctly, the 1031 Exchange is a powerful money-saving tool. But there are rules.  Lots of rules. Breaking the rules means the client’s profit on a sale will result in tax liability in the year of the sale.
 
Most importantly, we as real estate agents are not (generally) tax professionals and cannot give advice regarding the complexities of the Internal Revenue Code.  It is complicated. It changes. And it is  a violation of the code of ethics to offer advice on subjects in which we are not qualified. We should, however, have a general understanding of the process and know what language to use in Purchase Agreements to facilitate the process– both when the client sells the relinquished property and when the client buys a replacement property.  If your client does not have a sophisticated understanding of the portions of the United States Code governing 1031 tax-deferred exchanges, consider advising your client to hire a qualified tax exchange professional.  
 
Steps to be followed by an investor for a successful 1031 tax deferment:


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Builder Contracts

10/23/2020

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​New construction sales are way up and RMAA new construction contracts are way up too.  Unless a new home purchase is substantially complete, there are issues unique to new construction contracts that should be explained to buyers.  It’s always better to be pre-dispose a buyer to new construction issues than to deal with unexpected, unpleasant surprises.  Before you show a new construction property, do some research on the builder and check out their reviews. 
 
First, RMAA housekeeping matters.  Many new home contracts do not include items required by GREC.  When you are presented with the purchase paperwork, please be certain that it includes not just your Georgia Real Estate License number, but also the RMAA Firm License number H-53737 and, if it was in FMLS, the Office Code number.  In the Agency section, the contract should also state that you are representing the Buyer as a client.  If any of the items are omitted, please have them added to the signature block or the special stipulations.  If they are not included, the contract will have to be amended to be GREC compliant.  Hate that extra step.
 
Generally, large merchant builders have their attorneys write a Purchase Agreement that is unique to them. They are often one-sided, protecting the builder over the buyer. Changes are either discouraged or prohibited.  Your job, as the buyer's agent, is to understand it thoroughly, so you can explain it to your buyer.  Some builders do use the GAR New Construction Purchase Agreement.  It will include the items in the above paragraph.
These are some things to look for: 

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