FR BAR “AS-IS” Contract – Financing Section Face Lift
As some may know, I am a member of the committee that drafts the FR BAR contract. Yes, “FR” is correct, the “A for Association” was dropped. Among the other positive changes to the contract, the financing section received a much needed face-lift. The changes will go into effect November 1, 2021.
The quick takeaways on the revisions to the financing section are:
- 1. “Appraisal” is now a defined term and is part of the defined term Loan Approval (meaning Loan Approval cannot be obtained without an Appraisal). There is no longer a trailing condition which a buyer can use to terminate the contract if the property fails to appraise after the Loan Approval Deadline.
- 2. The definition of Loan Approval has been rewritten as “a loan meeting the Financing and Appraisal terms of Paragraph 8.(b)(1) and (2).”
- 3. If buyer receives a Loan Approval and there is a condition buyer cannot satisfy, buyer has the option of terminating the contract. In the current version the language is cloudy and buyer is obligated to deliver notice of Loan Approval to seller upon receipt of Loan Approval without regard to conditions on the Loan Approval.
- 4. If buyer cannot obtain Loan Approval within the Loan Approval period BUT buyer is satisfied with their ability to obtain Loan Approval at some later date and proceed to close as scheduled, buyer may deliver notice to seller. This is not a new concept, however it is rewritten for clarity.
- 5. If after buyer has delivered notice of Loan Approval to the seller, buyer’s lender denies financing, the only appropriate “out” for buyer other than a seller default or seller inability to satisfy a contract contingency is that the lender does not approve of a “property related condition”. While property related condition is not defined, the consensus is that a condominium with insufficient reserves is a property related condition. Mind you, the seller has every right to request that the buyer provide the seller with any Property related conditions contained within the Loan Approval (in advance, upon receipt of the notice of Loan Approval).
Scott Marcus regularly lectures to agents either through Zoom or in person. Should any agent offices wish to contact Scott to schedule any educational instruction, they may do so at 954.987.7550 or firstname.lastname@example.org.