Changes to the Pennsylvania Association of Realtors'
Standard Form of Agreement of Sale
The Pennsylvania Association of Realtors ("PAR") creates Standard Agreements of Sale which are often used by buyers purchasing a home. The latest version of the Standard Agreement of Sale for residential property was released on March 1, 2010, which updated the previous version released in 2005. Several revisions can be found in this new form when compared to the 2005 version, including:
- The 2010 PAR Form expands the description of the relationship between the real estate broker, real estate agent, seller and buyer. This is important as it defines the rights and obligations each party has to the other parties.
- The mortgage contingency provisions were revised in the new Form. The change affects how a seller's assist, if included in the Agreement of Sale, would be applied. On the 2010 PAR form, the maximum seller's assist is indicated; however, if the buyer's lender does not approve all or a portion of the seller's assist, the seller may not be obligated to pay the full amount of the seller's assist.
- The revised mortgage contingency clause now includes an appraisal contingency. Under this appraisal contingency, the buyer can require that the total amount of the buyer's loan will not exceed a certain percentage of the appraised value of the real estate. In the event that the fair market value of the property as determined by the appraisal is less than anticipated, the buyer may be able to terminate the Agreement of Sale based on this appraisal contingency.
- The revised Agreement of Sale expands the fixtures and personal property that would be included upon the sale of the real estate. Some examples of fixtures which would now be included in the sale of the real estate would include pool and spa equipment, electric animal fences, smoke and carbon monoxide detectors and various other items. However, the seller should take note of this and list items on the Agreement of Sale which should not be included because they are not owned by
- The inspections provisions have been expanded allowing the buyer to request additional inspections of the property.
- The new Agreement of Sale also makes mediation mandatory.
If you have any questions regarding the new forms, you should contact your attorney to discuss and review the documents with you before they are executed.
Changes to the Real Estate Settlement Protection Act Good Faith Estimate and Settlement Sheet
The Real Estate Settlement Protection Act ("RESPA") was passed by Congress in late 1974 to regulate closing costs and settlement procedures for an individual borrowing money to purchase real estate or to refinance an existing mortgage. RESPA applies to loans on family residential properties; however, it does not apply to cash deals, private loans and commercial properties.
Generally, RESPA requires that borrowers receive disclosure of settlement costs, and prohibits any referral fees that would increase settlement costs. The Housing and Urban Development Agency ("HUD") is charged with enforcing this consumer protection statute.
Borrowers, under RESPA, have the right to shop for the best loan, compare charges of different mortgage lenders, to be informed of all costs via good faith estimate before committing to a loan, to know which fees are nonrefundable if the borrower cancels the loan after the application but before it closes, and to know how much a mortgage broker is getting paid from the loan.
RESPA has been updated with regard to the good faith estimates and settlement sheets, with these new rules being effective January 16, 2010. Under these new rules, a mortgage lender must provide the buyer with a good faith estimate within three (3) days of receiving the buyer's information. Further, this preliminary good faith estimate is no longer just an "estimate" of costs of the loan, but rather, is a binding forecast as the mortgage lender must not increase the charges between
the application date and closing.
The new Settlement Sheet will have a summary of the key loan terms, which should make it easier for borrowers to understand those terms. The new Settlement Sheet will also include a chart to compare the actual final settlement charges to those stated on the preliminary good faith estimate.
An additional change to the good faith estimate is that mortgage lenders must present all of their fees as one origination fee on the good faith estimate. This should aid individuals who wish to compare the cost of one loan to that of another, as all of the fees will be included in this one origination fee, rather than being presented as several smaller fees on the good faith estimate.
If you have any questions regarding the new form, you should contact your attorney to discuss and review the documents with you before they are executed.
O'Donnell, Weiss & Mattei, P.C., has been proudly been serving as an agent of Fidelity National Title Insurance Company for over 20 years and can offer title insurance to our clients.
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