Get Real Estate Podcast
Get Real Estate Podcast
New Contract of Sale Updates with Thomas Drechsler and James Beslity, Esq.
Maryland REALTORS® CEO, Chuck Kasky, Esq. is joined by Staff Attorney James Beslity, Esq. and Thomas Drechsler, Regional Council Sage Title Group and Chair of Maryland REALTORS® Contracts Taskforce, to implement major provisions and improvements within the contract of sale.
The contract of sale is a main tool real estate agents and REALTORS® use to conduct property transactions.
Listen as Thomas and James depict the rigorous 10-month process of reviewing and updating the contract to provide more clarity, streamline processes, and reorganize information for Maryland REALTORS®' members and their clients.
Updated contract will be available October 1, 2022 on MDRealtor.org
If you are listening to this podcast first. Thanks a lot. I appreciate your time and attention. Second, it's fair to say that the tools you use the most to make a living as a real estate agent in realtor are the MLS and the contract of sale. So consumers get their information on properties from many sources, obviously, including our MLS, but most by accounts, uh, bought through the national association of realtors over 85% of homeowners. Even if they start their search online, ultimately use a realtor when it's time to commit, and that's where you come in, because for that, they need to enter into a contract of sale to either purchase or sell their property. And we provide you, we at Maryland realtors that is provide you with that invaluable tool of the trade. Each time we survey Maryland realtors, we consistently find that the most valuable member benefits are the statewide forms, the legal hotline, our magazine, and our conference among many others. But those are the top ones. The statewide forums library has been developed over many, many years and would cost hundreds of thousands of dollars if anybody had to do that on their own. And it's quite an involved process. And we'll talk a little bit about that today, but our main purpose for this episode is to provide a very quick update on significant changes coming beginning October 1st. So this fall, the rollout of the new contract forms will be significantly different from previous years. And this is our first kind of dipping our toe into getting members the information they need to get comfortable with those changes. Hello, I'm Chuck Caskey, Maryland realtors, CEO, and you are listening to get real estate, Maryland realtors podcast. Of course, as I said, we'll follow up this podcast with many and varied resources to ensure all of our members have the opportunity to get comfortable with the look and feel of the forms, the body of the contract, that first 12 pages or so will look significantly different to you. And we're gonna talk a little bit about that, but, uh, and again, this is the first step in that process. We will be producing a series of videos for distribution as well as classes, which can be used to train our members on use of the forms. And as always our legal department staff is available for CE classes as well as office visits. Joining me today are Tom Dresler and James Belek. Tom is regional counsel for Sage title group and was chair of the task force that we'll talk about in a moment Tom's an experienced teacher. He loves teaching this stuff. He and I meet regularly for breakfast. And I'll tell you if you want to geek out, come to breakfast with us, cuz we talk about some very, very deep weed stuff. Um, and one of the things that I'm most proud of about 10 years ago now, Tom and I realized there was an unmet need for a disclosure class. So if you've taken the disclosure class, which Tom still teaches and is teaching soon, he said, that's the class that Tom and I and Bob Flyn jointly developed. And I'm glad to see that it's still being taught. Cause it was, that was an unmet need. And but Tom loves to teach contracts. He's read this contract. He's, he's lived with it for many years and that's how this all started because Tom had some ideas for some changes and you know, the old phrase, no good deed goes unpunished. So Tom's good deed was to say, Hey, I have some ideas for how to improve the contract. And so our Marilyn realtors, president Craig Wolf tapped him on the shoulder and said, Hey Tom, here's your chance.<laugh>, here's a task force. You're gonna chair. Let's see what you come up with and, and the results have been outstanding. So we're gonna talk a little bit about that as well. Of course, James is a staff attorney here at Maryland realtors and a very experienced instructor. So please reach out to James or anybody from the legal department. But James, I know has a very specific affinity for this and he'll talk a little bit about that. So as we roll out the new forms, please, don't be afraid to reach out to us for help. So welcome Tom.
Speaker 2:Thank you Chuck. Very much
Speaker 1:Then. Welcome James.
Speaker 3:Thank you Chuck.
Speaker 1:So we'll start at the beginning, Tom breakfast. We you've got a, you, you, you think a lot about this stuff and I respect you very much for that. So how'd this all come about? What was your experience? This was, I think your first foray into, you know, a, a state association task force. I'm not mistaken, correct me if I'm wrong. Certainly chairing one, at least as long as I've known you going on 15 years or more now. So tell me what that was like. And then we'll launch into some of the specifics. What was the process that you employed? Cause it was a very successful taskforce. Not every taskforce has been successful over the year. So what was your formula? What was the experience like?
Speaker 2:Yeah, thanks. So I guess the, the, uh, word to the wise is be careful what you say to an association president, but very early on when Craig was preparing to take the reins as president of the Maryland realtors, he was developing some of his initiatives. And I think one of his questions was, is there a way to make the contract, the form contract that we have a little more, user-friendly not just to our members, but to consumers as well. I I'm the recipient of contracts pretty much every day. I notice some of, most of'em are over 50 pages. And so I, I thought that Craig was right on, there's probably a way that we could improve this. So I told Craig that, you know, I certainly would be willing to kind of serve, uh, to, or to head up a task force. That word got back to Chuck and, and Craig and Chuck appointed nine members to work on a task force with me. The great thing about the members is I didn't select them, but they were very well credentialed and they represented the state of Maryland from Garra county all the way down to the Eastern shore. We have representatives throughout the state and all of them had very unique experiences with our contracts. So we had a initial meeting to kind of set up the parameters in how we would go about this. But one of the things that I think we noticed is that the contract could be organized into topic ideas. So for instance, the current version, you know, you can find paragraphs rating waiting, relating to financing on a number of different pages. And so what we thought is it might be helpful to consumers as well as our members to kind of organ organize those into broad topic categories. So we, we did put all the general provisions together in the front, which is what everyone's used to. So the purchase price, the property address, the party's names are all gonna be right up front, just like it was before. And then we've grouped all the financing slash payment of the purchase price paragraphs together as well. The second large topic we wanted to put all together was a property condition and inspection. So what is the buyer buying? What rights do they have to inspect the property to ensure it's condition? Then we kind of moved into another large group of property specific disclosure. So our contract wires by law, that certain disclosures be made to buyers who are looking to buy a property. So for instance, if it's within a homeowner's association or if it's a condominium, there's some very specific property disclosures that have to be made. We then took all of those general disclosures. So it seems like Chuck, every year, the legislature produces a new law that begins with the phrase, all contracts in the state of Maryland must contain the following provision. And so I know when those laws get enacted, it's a struggle for the forms committee to incorporate those provisions. You know, it's an ever increasing and ever enlarge contracts. So we wanted to put all those general disclosures into one area. Next area would be just to, we group those into a topic of the transfer of title and closing. So what are the provisions that apply to that? And lastly, we talked about, we put in the final section, dispute resolution and breach a contract and how we deal with that. So I'm excited that the committee kind of came up with that flow. Cause I think it does, uh, it's gonna make the existing provisions kind of make more sense to people. Now that we've put,'em all kind of grouped into topic ideas within that. We did tackle a couple of problems. So James who famously takes a lot of calls off the hotline shared, uh, how many calls he would get over the transferring recordation tax paragraph. And we had a number of members who shook their head and said, James is absolutely right. People get stumped by that often. So in addition to reorganizing everything, we really wanted to tackle the language in that paragraph and make it a little more, a little more reasonable
Speaker 1:Specifically for first time buyers. Yeah.
Speaker 2:Yes. Yeah. So we wanted to make sure that they, it wasn't as confusing. We didn't wanna change the intent of it or, or anything like that, but we wanted to make it a little more readable. And the last thing that we did when we're reorganizing, we really noted that the, this phrase that we used throughout our contract called data contract acceptance was not really well defined many years ago, Al Monsour wrote an article about what that date is, but we thought it important to kind of put that in the body of the contract to define what that was. So, um, that was the structure of it. So I think what the members are gonna see in October is, is kind of a, a better organized document. Something that's gonna be a little more easier to read, not just for them, but for the buyers and sellers who wanna go through that as well.
Speaker 1:Yeah. Let me just jump in two things. Whenever we talk or now I talk to members about the contract. One of the first things they say is it's too long, then you know, there's too much stuff in there and it's too much for people to absorb. And my response is, uh, typically been, I agree, and on the one hand, uh, on the other hand, I've heard of people on then not more than, and on more than one occasion, I've talked to members who practiced in real estate, in Maryland, who thought our contract was overly inclusive and too long and too complicated. Who may, who moved to other states where the contract is three or four pages came back to Maryland and said, wow, I really appreciate that our contract is comprehensive. It actually covers things that in a lot of states you don't get, and I'm not talking about states where attorneys like north Jersey, for example, in New York, Southern New York and, and north and New Jersey where those where attorneys write real estate contracts, not, not real estate agents, um, that's a whole other category of conversation, but they appreciate that. It's comprehensive. Number one. So there's a balancing act. And what I point to, and we've done this by the way, every time a new disclosure requirement law is in front of the general assembly, we take the contract and we highlight exactly what you described. Those things that are passed by the general assembly, who, you know, one could argue, operates as a, in somewhat of a paternalistic nature at times. I mean, these are adults entering into a contract. And one can, I think legitimately argue about the degree of protection that these people need. You know what I mean? But I'm looking just now if you thumb through that contract and now that they're all basically in the same place, that's four pages. I mean, it's a full 30%, easily 30% of this contract is nothing but things that the general assembly has required us to include. It's not it's out of our hands. And, and you can usually tell those because they say things like, oh, oh, shell could display conspicuously mm-hmm<affirmative>. And, and sometimes they even describe what conspicuously means, you know, in a box or all caps or bold. And some of them are all caps in bold and underlined and that's conspicuous to them, but it is sort of like so much noise after what, what was the point of diminishing returns on all of these disclosures? And we've made that argument to the general assembly over and over and over again. And at times we have defeated legislation to add yet another disclosure. And so that's my first reaction. When, when people say that their contract is too long, I could tend to agree. But at the, on the other hand, I'd say it's really out of our hands. We can lobby. And we can tell the general assembly that despite their best intentions, just people aren't gonna benefit from that per that specific disclosure, whether that argument wins the day or not is, is out of our hands at some point. And the only other point on first time buyer,<laugh> the old saying, no good deed goes unpunished, right? So I don't even know it's got it's way more than 10 years ago now, but there were always people who said, ah, we gotta, but you know, the, the, the contract at the time said, party split. And if you wanna do something else, you need to, you need the addendum. So I wrote that originally, cause the paragraph, as it exists currently, I wrote more than 10 years ago. And I was like, there you go, everybody, you don't need the addenda because it's the agreement that parties will split the local transfer recordation tax. And the seller pays the remainder of the state transfer tax that is not waived for the first time buyer. And that's basically what it said was a complicated, you know? Yeah. I invited people for 10 years. I invited people do better, rewrite it, do better, cuz that's best I could do. And we all know that people still include the first time buyer addendum and says party split.<laugh> no matter how often we taught it for 10 years, we taught. And if you look at the first time buyer addendum at the top, in all caps in bold, it says, do not use this addendum. If the parties are just splitting because you already agreed to split. And so we're facing this battle and, and James, I wanna get your take on this as well. You're a little new yet. You're not as jaded<laugh> but it gets frustrating when you know, you hear, well, my manager it's on our it's on our checklist. Hmm. You know, the first time buyer, the same thing with lead paint disclosure. Well, you don't need the lead paint disclosure. If the property was built in 2020, you don't need the lead paint disclosure. Well, it's on our checklist and my manager, I won't get paid, you know, unless it's included, right. We hear this, you hear this all the time, all the time. So, so part of this is a little bit frustrated because we, we do, we, we do the best, but we do need our members to be engaged and receptive to the changes and to really pay attention and learn. And they're gonna have to, because there's some really new stuff. And we talk about as is and inspections. And we're gonna ask James to go through those a little bit later. You know, it, it does change the focus of the practice. So that's why I wanna start to talk a little bit about that, but that's just a little background, but Tom. Yeah. I think you, you outlined the, the, the way it's gonna look very well. And I think the members are gonna find that it really is easier to understand because of the way the categorization of the different provisions within those sections. So to Tom, what was it like the, the actual process anywhere from, I don't know, walk in the park to dental surgery, like where, where, you know, root, well, you know, day at the pool root canal, like where did this experience fit for you?<laugh>
Speaker 2:Yeah, I would never put it up to root canal level. I wouldn't say
Speaker 1:I was James might. No, I'm sorry.
Speaker 2:Well, so the good news is Chuck is the folks that you appointed to serve on the committee were all very strong minded individuals who had, uh, some very, uh, good thoughts about how to make this a better contract. And so sometimes it was a very, I won't say heated discussion, but it was a good, solid debate. I will be honest that there were some ideas that I walked into the process holding beer to. And those were wedged from me by folks who knew much more and had good experience to say, yeah, this is why the language says what it says. So there was a lot of stuff that were, was left untouched that I originally began the process thinking it should be touched, but later seeing that it didn't need to be. So, yeah, I mean, and, and, and so how we worked it as a committee, I divided up, I put two people to kind of micromanage and take a deep dive on each of the sections, right. And then I would meet with them throughout the week or the week. Sometimes we'd have one, two or three zoom calls, just the three of us to kind of go down what the recommendations are. And then we would meet as a group once a month. And each group, each pair of individuals would present their thoughts to the group. And again, it was, we didn't, nobody rolled over on any of the changes. Everybody had really good solid discussions about spirit and discussions. Spirit
Speaker 1:Spirit
Speaker 2:Is a better word. Thank you, James. Yeah.
Speaker 1:Respectful.
Speaker 2:Yeah. No, but, but look, I, I kind of feel like it really helped all of us get a deeper appreciation for how difficult this is. You know, Chuck, you, you talked about the length of it. And I, I do think one of the culprits is the general assembly who passed laws, but the other, I think major issue that we're just that, that contributes to the overall size is this is a one contract fits all attempt here, you know? Yes. If I was gonna do a contract on this piece of undeveloped property, I would make it much shorter, cuz I, I could take all this stuff out, but that's not what we want to do as an association. We want to give our members one document that they could use for almost any purchase, whether it's within a homeowner's association, whether it's a condominium, whether it's a standalone property. And so I gotta feel like you guys did a great job putting together the original contract to serve as it's a multi-use contract, which I think tends to by definition, make it a little bit longer. So
Speaker 1:That's a very good point. Yeah. Yeah. So pull, pull out of, of, so, so we know we have some what we would call more reorganization, right. And, and so that's one class of changes. Do you focus on one or two? Cuz there are some real substantive changes here. So let's go a little bit. Well, first of all, this, this was about what seven, eight months this process
Speaker 2:Say 10 or 11. I think we started back. I think you appointed every back in September, October.
Speaker 1:Right? Right.
Speaker 2:Yeah. So,
Speaker 1:And then wrapped up just, just finished Zeke in, in July. Right. So that's true. Yeah, exactly. So, um, thanks again for, for yours and on all the volunteers commitments because we couldn't do this without our volunteers obviously. So pick out like one or two before we turn it over to James for the other documents changes and, and James has input obviously in some of the real substantive changes, what's different when they start this contract October 1st, they go to ZipForm or whatever their provider accelerate, whatever, whatever their forms, provider or platform is or come to our website and they get that October 1st, uh, rolled out new form. What substantively the first substantive change that's gonna hit them is what
Speaker 2:I think that's a great, great question. I think the first substantive change, the, and, and I think the biggest change is we've structured. The new contract to be in as is contract. And, and so when we were kicking this around at the task force level and, and we started talking about this as is addend and, and how it's used today, I think many of our members don't really realize that that form came into being right after we had the big crash in 2008, we had a lot of REO sales and, and literally we had a lot of sellers say, I'm just selling the property as is. I'm not cleaning it out. I'm not doing anything. And so there was a need at that time for this thing called an as is addenda. And that was the purpose of the reason for, of that coming into being. Uh, but what we saw over the last year is kind of an overuse of that and situations that were really inappropriate. And so, and, and we all agreed that it was overused and probably used in situations where it wasn't appropriate. We also realized that when you talk about an as is contract, what you're talking about as a contract that does not impose repair obligations on the seller. And so when you looked at the main body of the contract, there was only one repair obligation and that was termites. So if termites were found the contract imposed the obligation, uh, to repair up to 2% of the purchase pricing, Chuck you'll remember that came in way back to, you know, in the FHA VA days, when that was a requirement, it's still required with F H or with VA, but we thought, well, since that's kind of antiquated and why don't we move that into a VA, uh, addenda only, and now we've created, which is really an as is contract. So if you go top to bottom, there's no repair obligations on the seller throughout the main body of the contract. So we've made the as is addendum almost obsolete, but the committee recognized that there are some times where these additional as is provisions are needed. So for instance, in the hoarder sale or the REO sale, where, or in a state sale where the estate says, we're not cleaning it out, you, you take it as is. We did create for those situations, this document called additional as is provisions. So I think probably the number one training issue that we're going to face with the new version of the contract is making sure people understand that the contract itself is as is there's no requirement on a seller to repair anything and that we no longer need this thing called an as is addendum. So I think that's, that's a paradigm shift.
Speaker 1:Yeah. So let's dive a little bit deeper into that. And, and James had turned to you here cuz the, the development of these additional forms fell outside of the task force gen, is that, am I right about that? Or am I wrong about that?
Speaker 3:No. So, so I would say the three biggest things that you're gonna see that originated with the task force are of course are refresh contract of sale. And I, I really appreciate it at the outset of the podcast today, you gave a little bit of historical context for the development of our contract of sale. Yeah. I really want our members to think of this. If they think of our contract as a house, this was a renovation we have not torn this house down. We have not, I did not run through there with a can of gasoline and set the thing on fire. No, we went to the kitchen and the bathrooms and like every home, sometimes you need an update and this is that update. That's gonna make everything more appealing, user friendly and most importantly, give our members the confidence to transact their business effectively.
Speaker 1:So, so talk a little bit about that. The, the as is addendum that Tom talked about, which is part and parcel of the inspections addendum as Tom mentioned. So first of all, I will, I wanna start by saying goodbye to box B and, and all of our members will, will know what I'm talking about. And most will applaud that there may be some pushback. I have to tell you, I know know we tried to do this by the way. Not, well, not in this, not on this scale, but about seven or eight years ago, we, the forms that me, not me or we, but the forms committee recommended something very similar to this and elimination of what was box B and what still is as of today, right? In the inspections addendum. And there was a lot of pushback and that changed actually got published. I dunno, if you remember this, Tom, we actually published on October 1st, a new, a new addendum without box B and a new contract that was completely as is contract. And within a month we had to resend out a new one and, and restore all of those provisions. So I don't expect that to be the same. I think people are in a different place than they were that many years we've been through another, you know, market and a half. And so I think people were gonna be more receptive to this and there's gonna be some, maybe some pushback, but I not, not a lot. I, I don't think so. James explained to us how the new inspections addendum, the inspections part of the, of, of the contract, the inspections, addendum, and the additional as is addendum or provision as is provisions, addendum, how are they all gonna work? Those are all pieces of the same puzzle. So how does, how do all those pieces fit together? If, if you want to, you know, just give people a little insight into how that's gonna work.
Speaker 3:Absolutely. So as Tom said, we pulled out the termite inspection provisions from the body of the contract of sale to make the contract more in line with the true as is contract. So if a buyer wants to conduct inspections, of course you include the property inspections addendum, which is I would call a brand new form created by the task force. That's form number two, this property inspections, addendum, I think addresses one of the, uh, Cardinal sins of the as is addendum that, that Tom touched on briefly in that it, it wasn't used correctly. So the as is addendum, as it exists now provided by with the ability to terminate the contract of sale within a certain timeframe, as long as they conducted at least one inspection. Again, within that same timeframe, buyers would attempt to request repairs or seller credits based on those inspections, even though the, as is addendum, did not give them the contractual ability to do that. And where that fell in terms of legal hotline calls was our members trying to figure out where they stood from a contractual perspective in trying to negotiate repairs outside of a contractual framework that just doesn't exist in the assets of Deni, simply not the intent of the form as we both laid out. So, so aptly, it was meant for sellers who want to convey a property as is without providing any seller credits or doing any repairs. Right? So in order to address that the task force built in the ability to terminate the contract a buyer's ability to terminate the contract based off of an inspection into the property inspections addendum. And I think that that is incredibly wise and I, I hope that it is well received because we see so frequently at least through legal hotline calls. And I will tell you of the over 2,500 hotline calls we've answered in the last year, in the last 12 months. Well, over a third of those calls and bear in mind, we address issues ranging from fair housing to zoning, to brokerage agreements. Well, over a third of those calls pertain to our contracts or earnest money deposit disputes, right? But frequently we see, uh, difficulties and transactions arise. When a buyer, like I said, attempts to negotiate seller credits or repairs based off of an as is addendum, or when using a property inspections addendum after conducting an inspection encounter an issue that they simply want to wash their hands of. They no longer want the property yet have no ability to terminate the contract. They instead are required to request repairs for credit if they, uh, even want the chance to potentially terminate the contract. So what the task force recommended and what the statewide forms committee agreed with was building in that buyer's ability to terminate the contract in a property inspections of debt or, and where I think many buyers will likely go if they're actually seeking to purchase a home is request repairs and the task force built in a very similar repair request process to what we had in our previous property inspections. Addendum. What we've done though, is rather than end the process with the buyer, having to accept the sellers, perhaps counter offer to conduct repairs. If they're not willing to do everything that the buyer's requesting, we've built in the ability for the parties to negotiate a little bit more. That was something that that's come through the hotline, uh, that desire for members to have a little bit more negotiation, flexibility built into the forms. And our members will see that in the property inspections, addendum, as well as in a revised property inspections notice.
Speaker 1:Yeah. One thing, an overriding concern that I always appreciated, I always had my kind of antenna out and never really well, not never, but almost never had to pull, uh, was to remind the members that what, what, what we're doing with these forms needs to survive all markets. So we don't wanna make changes for this market. Like no, the same way we didn't wanna make changes too many changes during the, the, during the recession that the great recession. Yes. And you know, when it was a completely different market with, as Tom mentioned, all the bank owned and short sale, we had obviously short sale addend we had other things and then we had a somewhat normal market and then it overheated. And now we have, you know, all of these when as an, as is sale, not an as is sale, right? Cause it replete with contracts supposedly as is, and yet buyers still requesting repairs and seller still doing that. Yes. Even though my daughter, she entered into it as is sale with a, with a flipper, it was a Reno. And, uh, her inspections found out some things and the seller actually made some repairs that they weren't required to make. So that, that was not uncommon in this market. Now we seem to be entering, uh, maybe another type of market, you know, we don't know yet how, what the increasing rates are. So I, I congratulate everybody's work the, the task force that forms committee and YouTube, especially if we're recognizing that this has to survive, uh, the market, whatever it turns as it's the seller's market, it's a buyer's market. If it's overheated and we have too much inventory, not enough, where are we going? And we do have to, we obviously have to adjust for market conditions, but we don't have to make wild swings. Right. Does that make sense? Absolutely. Yeah.
Speaker 2:If I could, yeah. If I could join in here just for a moment, cuz I wanna talk about some of the things on the property inspections addend mm-hmm<affirmative> and maybe just talk about some of the conversations that we as a task force had. Sure. So yeah, I think that the second major change is that we created a property inspection agenda that gives the buyer a window of time to do inspections. And if those inspections reveal unsatisfactory conditions, to the extent that the buyer doesn't want to buy the property, they can leave the contract by submitting a release of the contract. Now, the way we currently have it structured is the buyer who does inspections and decides they no longer want the property. They're forced to make a request for repairs, which involves producing a copy of a report and a request for repairs. So I think the committee, when we had discussions and I had discussions with a lot of really big listing agents who say, who said to me, Tom, if a buyer wants out, they're gonna find a way out, right? We shouldn't, you know, length in the process and the pain of, of, and force them to go through this process that they want out, they want out. Uh, so that was really weighed heavily on the task force. And I think we thought that at the time has come to really just give the buyer a window, leave the contract. If you don't want it. There was some discussion about whether that was too pro buyer, but I kind of think that if you look at it another way, it's really pro seller. Cause keep in mind the effect. If the buyer decides to leave the contract currently as drafted using the current version, they're required to give that listing agent a copy of the home inspection report. So we had, we had listing agents making collections of, uh, of reports that they didn't necessarily wanna have. They would've just rather have left the buyer, let the buyer get outta the contract. The seller would too. But now we have, the seller has amassed. These, uh, the seller listing agent is amassed, uh, a number of reports. And that ups the level Chuck, we talked about our disclosure class. Exactly. And we have a good, a good half hour devoted to what happens when you get
Speaker 1:What's a inspection, right? Yeah.
Speaker 2:So, so I think this could really be viewed as very much favoring the seller in that number one, the seller gets the property back on the market. If buyer wants to leave, let'em leave. We'll get the property back on the market. We're not gonna have all these extra reports that we don't need to have in our file. So I think it's a win-win to really structure it this way. I do feel the training issue is just to figure out
Speaker 1:100%
Speaker 2:How, how short to make that timeframe, because we don't want to give the buyer a month to do the, do their, uh, inspections. We wanna make it a reasonable timeframe, let them complete it. If they wanna move forward, let's move forward with negotiations if they want out, they want out. So I think it's gonna favor both buyers and sellers.
Speaker 1:Yeah. I, I, I agree. And I, and I, I, I believe our members will come to see that two things. James one was I'm, I'm glad that we kept in the inspections that is, are not for the purpose of requesting items of a purely, uh, routine maintenance or cosmetic nature that we had. That problem that's been, that was inserted a few years ago. And the other one that had come up over time, I'm curious about the discussion either in the task force or the committee about that additional inspections, because there was a kind of a relatively recent development where, you know, you go through, so you have, you know, seven different inspections, including wood, destroying insects, et cetera. And then you have additional. And a lot of people were saying, well, anything as recommended by the home inspector, who would a lot of times on there say, well, and chimney's on here, but you know, when chimney wasn't its own standalone inspection for a while, it wasn't, they'd say, well, you need a chimney inspection that would come under additional. And then that got made everything more complicated. Right? So what kind of conversations, uh, were had around that provision? I thought, I think a lot of our members are still dealing with that.
Speaker 3:So as you said, Chuck, that was something that came from the, the current property inspections addendum that we have. And, and one thing that Tom referenced that I appreciated about the task force was again, they were not looking to necessarily start completely from scratch. There were a lot of things that, that have worked and indeed inserting a phrase like you, like you described, you know, could be considered a vague or, or undefined term, even anything else, uh, you know, very broad. Um, and I would, you know, caution our members, you know, to an extent against something like that. Uh, but for example, we don't have, every property is different. Like Tom said, our forms are designed to address as many transactions as possible. One thing that I'm hoping to, to, to bring to the statewide forums committee attention next year is pools. We could have a line for pool inspections. That's a, a more increasingly common that's good example, but even then we're not going to be able to encompass every single type of inspection that could be conducted at every property. So I think the intent of the additional inspections line is to define a specific type of inspection that is necessary for that type of property, not to give carp blanche, to, to buyers, to do anything and everything that they want at the whim of, of a, a home inspector. But, but Tom, certainly if you have additional insight on, on the task forces discussion surrounding that,
Speaker 2:No, I think that we did have a discussion about the list. We certainly did have a discussion about additional inspections, um, and how it's used today, which many people put additional inspections as suggested by right. The home inspector. Exactly. I can just say personally, I think if it's already on the list, I don't think it should be allowed to be put in there. So in other words, if the place has a chimney, you should be asking for a Chiney inspection, not wait until your home inspector says, you should have that Chiney inspector<laugh>. But, but that's just me personally, good point. I tend to be really conservative about contract interpretation. Um, so I would think additional inspections would be something not on the list, but that's not what the document says. So I think that, you know, a broker may, if they wanna guide their agents into putting that in there, that's fine. Um, but yeah, I mean, I, I think that, I agree with James, the, the point of it is, is, and I think a great example is the pull inspection, cuz it's not on the list, you know, but if the home inspector comes and says, Hey, this doesn't sound right or this doesn't look right, you should have it inspected. But yeah, I mean, I think we've kind of given them the list and, and right now the way additional inspections is used, I can't say it's per se wrong. I think it's probably okay to do it that way.
Speaker 1:So, um, for the takeaway here, of course, is that that's really the biggest change. I think substantive, I think we can agree on that. And so people, you know, pay attention to that, uh, when, especially when you, when you take them new classes or, or some training, that's where you're gonna be spending a significant amount of the time, but there's a few other things. I think James mentioned that, you know, pulling the wood, destroying insect provision out, uh, and, but, but you're retaining it in the new, in the VA addendum was extremely important. So anybody doing a VA deal, uh, obviously you were always going to include the VA addendum, but now there's the specific VA, uh, we're destroying insect language in the contract is anything you wanna say on that? James?
Speaker 3:Well, a new development from the VA just the other month and I'm sure Tom is aware of this, but we received notice from the VA that while wood destroying insect inspection, say that five times fast<laugh> we still are still required for VA transactions. VA buyers now may pay for the cost of those inspections and the cost of repairs that is new fresh
Speaker 1:Guys. Oh know, oh my gosh.
Speaker 3:Yeah. The fresh guidance that we got from the VA in June. So we're talking less than two months ago. So we are,
Speaker 1:Oh, that's in here and that's in here in the new addendum. I see. And
Speaker 3:We'll be updating. And so, so, so the key thing to pull away from this is we are going to have language in our VA financing addendum that regardless of whether a property inspections, addendum is included, and I imagine for most VA transactions, it's going to be included. Yeah. But the buyer will still have that right. To conduct the, uh, wood destroying insect inspection pursuant to the VA financing addendum. It's just now based on this new guidance that we have from the VA, the, the VA buyer may pay for the cost of the inspection and those repairs. So that's, that's good point a critical, a critical new point there as well. Yeah,
Speaker 1:Yeah. Yeah. Tell me what's new about the, uh, disclosure of, uh, onsite to it disposal systems.
Speaker 3:So this is something that was brought to our attention by our members as are all of our proposed revisions and new forms. One thing, one thing that I really appreciate about staffing the statewide forms committee is that not only do I get to speak with and work with three dozen of our most engaged, you know, most spirited members on a bimonthly basis, but we get to consider proposals from our members across the state, thanks for, and transacting their business things they'd like to see improved in our
Speaker 1:Email, James, all your great ideas, both, please
Speaker 3:Do. I love communicating and engaging with our members. It's my favorite part of this job, but so advanced treatment unit also referred to as best available technology septic systems are relatively new type of onsite sewage disposal system. They employ as the name implies the best available technology. And, and certainly one, you know, as an environmental studies major, one plug I'll make here. If you have the ability to connect to public sewer, consider connecting to public sewer, it's better for the environment, but if you don't have that ability to do so state regulations, if you have one of these newer septic systems, these a U or B a T septic systems, they require annual inspections by licensed contractors. There is the ability to become certified yourself as a homeowner to conduct those inspections. But if you have one of those systems on the property, there's certain documentation that accompanies that system and you have certain regulatory requirements to maintain the system. And so using this disclosure as a seller puts buyers on notice of that, right. And make sure they have that information in hand so that they can continue to maintain their onsite sew disposal system in good working order.
Speaker 1:Yeah. And those maintenance easements, if you will, I think they're actual easements, aren't they? And they're recorded in the line records. Right. So, um, you would know that as well. Right. Are they that you find those in your searches?
Speaker 2:Uh, I don't. So I'm gonna be just deferring James on this one.
Speaker 3:<laugh>
Speaker 1:Okay. I could be wrong on the, but I know there's something recorded and I think it's a maintenance agreement of some kind.
Speaker 3:So my, my understanding of, of whether it's recorded or not is, is somewhat
Speaker 1:Limited that's.
Speaker 3:But again, if you, if you do have this type of system, there is a body of regulation now contained in the code of Maryland regulation, um, that sets forth, uh, what you're required to do as a homeowner. And we wanted to ensure that prospective purchasers of homes with these types of systems were
Speaker 1:Aware of what yeah, that's the bottom line is that's transferred to the, the ma the OB, the maintenance obligation, the inspection and maintenance obligation transfer to the new owner. That's the bottom line, whether it's recorded, not, I, I, I take that back.<laugh> with my, my there long set. So, but it is, it is an actual agreement and it does transfer kind of like solar, but not, but, but it, in other words, something, the buyer needs to be aware of what they're actually purchasing. That's the bottom line, right?
Speaker 3:Absolutely.
Speaker 1:Okay. Um, last we'll talk about the post settlement occupancy agreement, real quick,
Speaker 3:Very hot request.
Speaker 1:<laugh>
Speaker 3:All of, um, and, you know, recognizing that many of our wonderful local boards and associations of realtors across the state, uh, have their own, we wanted to get in on the party, if you will. Um, though I will say post settlement occupancy, please use with restraint, please use sparingly. Um, it is, it is a hotbed of, of, of hotline calls. Um, and what I did attempt to do, uh, with creating this post settlement occupancy agreement was, uh, consider all of the issues that have been raised over the hotline, especially over the last two to three years when this type of agreement, uh, which is separate and apart from the contract of sale, bear in mind, this is not an addend contract of sale, correct.
Speaker 1:This is
Speaker 3:Point separate contractual agreement. Um, and that, like I said, has become much more used. Yeah,
Speaker 1:Mm-hmm,
Speaker 3:<affirmative> given the, given the market conditions we've faced, right. Incorporating solutions to some of the issues, frameworks for resolving dispute resolution, incorporating a place for the escrow agent who may be holding the security deposit to actually agree to hold the security deposit. I noticed a lot of post settlement occupancy agreements, reference escrow agents. As we know, you cannot bind a third party to a contract, uh, by way of just signing the contract between the, the two original parties. So in some creating the best possible post settlement occupancy agreement that we, that we can for our members to use, if that is something that their seller clients are, are looking to incorporate into a transaction.
Speaker 1:So, so key wonky point to ensure this is a, basically a license instead of a lease under the landlord tenant law. What did we do to make sure that you don't become a landlord under these circumstances?
Speaker 3:So, so Maryland law, Absolutely. So Maryland law, and a nutshell says if it looks like a, a lease looks, if it smells like a lease, if it tastes like least and is a lease. So this is, uh, an effect, a license, a license, uh, to occupy the property. Now one critical key to bear in mind, you do not want. And, and it, it says, so right at the top agreement 60 day, mark, uh, you do not wanna pass that because then you're essentially as a, another title attorney, I recently had lunch with said, you're committing mortgage fraud because you're not occupying the property as your primary residents, if it is indeed
Speaker 1:That your primary resides, I was thinking that more like landlord tenant law, but oh gosh. Yeah, that's right. You're still paying mortgage. Oh my
Speaker 3:Gosh. Yeah. So, so absolutely so good point. Um, and that is built right into the form. So post settlement occupancy a three months form of five, no, you, you are then in, in, in landlord tenant land, uh, definitively, and you would need to, to be, uh, entering into a lease agreement, but, but that's, even again, you're not gonna get around the fact that let's say you, this is going meant to be your primary residence. Yeah. You're gonna have issues from the financing perspective. Yeah. With, with that degree of rent back,
Speaker 1:Tom, you look like you're ready to say
Speaker 2:Something. Well, yeah. And, you know, I think a lot of people don't think through the insurance issues as well. Um, and, and I think that that's a big deal, but I just wanna just confirm one of the things that James said, we get a ton of rent back agreements. Um, what we're, I mean, obviously there are nonstandard form up to this point. Many brokerages have their own form, and they're certainly local boards that have a form as well. And so what we do is when I review them, I see that there's great swings between what one says. And another says, some of them are very poorly drafted and I just really applaud the committee for recognizing that a, this is a common issue, especially in this market and B bringing in some standardization to the form. So, you know, our members aren't faced with looking at maybe five or six different forms, depending upon the brokerage, that's submitting the contract. So, uh, great work on that one. I really think it's been a long time coming and I'm glad, uh, by October, we're gonna have that form available.
Speaker 1:Great. Well, that's all the time we have Tom. Thank you so much, James, as always pleasure. My pleasure. Thanks really, really do appreciate your commitment, Tom, especially James gets paid for it. You don't, um, we appreciate, and our volunteers, again, cannot tell you the deep respect that I've always had and continue to have for volunteers who give up of their time, which is all they have. Unlike us, we get paid for showing up. They don't, uh, they have earn it. And I haven't worked on commission in a really long time, uh, or contingency or, or whatever, fly, whatever name. Um, and it's a hard, it's a hard gig. And so the fact that we have so many dedicated, talented people willing to share their time and expertise with us is, is, is just a Testament to, uh, to them. And, uh, we hope that they also get something out of it. So again, uh, thank you guys and to our listeners. Thank you for the privilege of your time. This is get real estate, the Maryland realtors podcast. Again, I'm Chuck Caskey, Maryland realtors, CEO, thanks as always to our esteemed producer, Joshua Woodson, please subscribe wherever you get your podcasts like us. Share us, give us five stars if we've earned them. And please give us feedback, including guests you'd like us to invite or topics to explore, be kind, stay safe. Hello, Ello, author of the Alchemist among other books said, if you're brave enough to say goodbye, life will reward you with a new hello. So goodbye for now.
