Mid Year GAR? Forms Changes Released

How Changes Work

The Georgia Association of REALTORS? Forms Committee meets each month to address requests from Realtors and items brought to the committee from the subcommittees. Major changes are released January 1. A smaller number of changes are released mid year. Those changes are usually corrections, reactions to unintended consequences of the January 1 changes, urgent changes in the industry, and other items which were resolved in the first part of the year and are ready for release. This article will review the mid-year changes that are substantive. The comprehensive list of changes, which include other slight language modifications and clerical error corrections, can be found on the garealtor.com website.

Brokerage Changes

F101 Exclusive Seller Brokerage Engagement Agreement and F104 Non-Exclusive Seller Brokerage Engagement Agreement

?B(4)(b) Sharing of Broker’s Commission with Cooperating Broker – In addition to some slight language modification, a sentence was added to make it clear that there is no obligation to pay commission to the cooperating broker if ?A(4) has zero cooperating commission.

NOTE: It is important for Buyer's Agents to verify their commission at the time they are showing the property and address this potential prior to that in the Buyer Brokerage Engagement Agreement so that they are compensated for their work.

F110 Exclusive Buyer Brokerage Engagement Agreement and F113 Non-Exclusive Buyer Brokerage Engagement Agreement

?B(4)(a) Buyer’s Commission Obligation in Purchasing Real Property – Added language that broker may be paid more than the commission stated in this Brokerage Agreement if offered by Seller or Seller’s Broker. Added language that Buyer agrees that closing attorney will collect and disburse commissions owed.

NOTE: This change makes it clear that the Buyer's commission obligations are the minimum compensation the Buyer's Agent may receive. Some brokerages may credit a portion of their fees to the client at part of their business model, so the brokerage agreement needed to clearly state that the Buyer's Agent is entitled to the full cooperating commission paid by the Seller or the Seller's Sgent.

F152 Mutual Termination of Brokerage Engagement Agreement

?3 Removed option that protected period survives termination.

NOTE: Agents should be clear as to their rights under the three potential ways that a brokerage agreement may end. In a mutual termination, the client has no further obligations under the remainder of the agreement, or any protected period contained therein. In a unilateral termination, the agent's rights to commission extend for the remainder of the term and the protected period. If the brokerage agreement expires, the agent still has the rights under the protected period but will be owed no commission if the client hires another agent.

Contract Changes

F201 Purchase and Sale Agreement and Sale Agreement and F210 Lot Purchase and Sale Agreement and F228 New Construction Purchase and Sale Agreement

?B(3)(a) Seller’s Contribution at Closing – Added language that Seller’s contributions could also cover Buyer’s commission obligations.

NOTE: In order to prevent confusion or disputes, it is made clear that the Buyer's portion of commission is a closing cost like all other closing costs. If it is included as part of the seller paid closing costs, this is not an additional commission for the Seller. It is simply an allocation of the total amount the Seller agreed to pay toward the Buyer's costs.

?B(8)(a) Right to Inspect Property – Modified language regarding lead-based paint.

NOTE: This change references the 10 day right to inspect for lead-based paint. If the Buyer has the right to a 10 day inspection for lead-based paint in the F316 Lead-Based Paint Exhibit these days will run from the Binding Agreement Date. This right for 10 days exists regardless of the number of days selected in ?A(8) for Due Diligence.

?B(10)(b) Brokerage - Modified existing language and added language that parties agree that closing attorney will collect and disburse commissions owed.

NOTE: This reflects the requirements of RESPA that all charges be reflected in the settlement statement.

F204 Condominium Resale Purchase

?2 Common Expenses Assessments – Eliminated last sentence which states that the Buyer would pay any initiation or capital contribution fee.

NOTE: This was old language that conflicted with the requirement in the Community Association Disclosure that the Seller accurately disclose these fees or they become a Seller charge at closing.

Financing Changes

F407 FHA Loan Contingency Exhibit and F410 VA Loan Contingency Exhibit

?11 Amendatory Clause – Added statement that the amendatory clause applies even when financing contingency period has terminated.

NOTES: There is nothing that can be done contractually to eliminate the rights that an FHA or VA Buyer has to terminate the contract if the property does not appraise for the purchase price. This language and the language added in January 2022 to the rules for interpreting the contract is a response to the increase in contracts attempting to contract away these rights. While many may feel that a Buyer should be able to remove the right to make their offer more appealing in a competitive market, the FHA and VA guidelines make this impossible.

New Special Stipulations

SS110 No Commission Owed by the Buyer

See GAR Special Stipulation for Actual Language

NOTE: This gives standard language to Buyer's Agents who will look solely to cooperating commission for their compensation.

SS528 Contingency for Receiving Condominium Questionnaire

See GAR Special Stipulation for Actual Language

NOTE: This is a response to the temporary Fannie Mae / Freddie Mac underwriting guidelines in the wake of the 2021 Florida condo collapse and the subsequent investigations into the prior warning regarding the structural integrity of the building. Lenders may require additional documentation to verify that there are no deferred structural issues. The condo associations and their management companies have not, as a whole, been particularly helpful in providing this. The special stipulation attempts to balance the concerns of the Buyer and the Seller. It will be important for Sellers to be proactive to make sure their association or management company will respond to the documentation requests should they arise.

Miscellaneous Changes

F304 Seller's Property Disclosure Statement Exhibit (Condominium)

?C(3) Structural Items, Additions and Alterations – Added two additional subsection questions.

NOTE: This is a fraction of the questions and issues raised in the temporary Fannie Mae / Freddie Mac underwriting guidelines referenced above in the discussion of Special Stipulation 528. The hope is that this will spur the Seller into verifying that there will not be an issue selling the property and will alert Buyers who may have concerns or will be obtaining financing under the temporary guidelines.

F510 Closing Attorney Acting as Holder of Earnest Money Exhibit

?4 Rights and Duties of Closing Attorney Acting as Holder – Added language that Closing Attorney cannot deduct fees from earnest money.

NOTE: This does not remove the potential of costs and fees if there is an earnest money dispute interpleader action. This merely prevents the closing attorney from taking a portion of the earnest money as their fee for acting as the holder of earnest money in the contract or because the transaction does not close.

F511 Agreement of Closing Attorney to Serve as Holder of Earnest Money

?1 Terms of Closing Attorney Acting as Holder – New subsection (c) added.

NOTE: This is companion language to the addition to the F510. Unless a party has agreed in writing to compensate a closing attorney for costs when a transaction does not close, the closing attorney cannot take a portion of the earnest money as compensation for their time or costs

Conclusion

These changes are largely reflective of the recent changes in the world and our market. As always, the goal of all of these forms is to protect the parties to the contract or to at least make obligations and responsibilities clear.Want to Learn More or Stay Informed?

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