Know Your Contract: The Multi-Board Residential Real Estate Contract 7.0
KNOW YOUR CONTRACT:
THE MULTI-BOARD RESIDENTIAL REAL ESTATE CONTRACT 7.0
By Tom Haught
There’s a new contract in town: the Multi-Board Residential Real Estate Contract 7.0. The 7.0 was approved in 2019 as the new standard contract for purchasing residential real estate in Illinois. The Multi-Board Residential Real Estate Contract 7.0 seeks to correct what some considered shortcomings in the predecessor version (the 6.1).
In this article, we are not going to discuss every change, but instead highlight the most important ones. They include:
Financing Contingency. The revised financing contingency no longer requires the buyer to estimate when the lender will be ready with financing. Instead, the financing contingency date defaults to not later than forty-five (45) days after the date of acceptance or five (5) business days prior to the date of closing, whichever is earlier.
Contract Termination. In the revised attorney review provision of the Multi-Board Residential Real Estate Contract 7.0, a change in paragraph 10 states that either party can terminate the contract if both sides cannot come to an agreement on the proposed modifications to the contract after ten (10) business days. This revision makes it clear that both parties must wait the 10 business-day period before terminating the agreement.
Inspection Contingency. Perhaps the most significant change in the new contract is the revised language which states that minor repairs, routine maintenance items and painting, decorating, or other items of a cosmetic nature are no longer allowable reasons for a buyer to terminate the contract. The actual cost to repair those items is of no relevance. However, at least in my experience, this revised language has not stopped any buyer from requesting the repairs of minor and routine maintenance items.
So what should buyers do in response to the new contract? There are three things they should do, immediately after they are under contract: (1) apply for a loan; (2) pay the loan and (3) pay the appraisal fee. If the buyer does not do these three things, and the seller decides not want to cancel the contract, the buyer is moving forward WITHOUT a financing contingency. This is never a good idea unless the buyer is able to pay cash for the property.
For the home inspection, the buyer must know what is and what is not a legitimate inspection issue. For example, if the buyer demands that the carpets be cleaned, or that the water heater be replaced because it’s old, the seller has the right to respond by cancelling the contract.
However, when a buyer views a home that they are interested in buying, they should take note of every deficiency, such as a dirty carpet or an old water heater. The buyer should then make their offer based on the condition of the property, knowing that they will have to have carpets cleaned or replaced and they will soon be on the hook for a new water heater. The purpose of the inspection will be solely for the major components that a buyer has no expertise in evaluating. In other words, if the professional home inspector tells the buyer that there’s a problem with the foundation, plumbing or electricity, those are legitimate items to raise and request repair from the seller.
When a buyer retains the law firm of Gardi & Haught, Ltd. for a real estate purchase, we explain the new Multi-Board Residential Real Estate Contract 7.0 in detail and assist them in every part of the transaction from contract to closing. Contact us by clicking on the free case evaluation button below.