In this article I will walk you through the standard contract for sale and purchase approved by both the Florida Association of Realtors and the Florida Bar, simply referred to as the “FAR/BAR contract.”
This contract was recently completely overhauled and contains many changes from earlier versions.
This by no means should be construed as a complete contract or explanation of it, nor is this legal advice. What I want to do is highlight the major sections of the contract so that when you find your dream home and this contract is placed in front of you, you will hopefully feel a little more comfortable with it.
Please note that this contract will not always be the contract used. For example, new home builders typically have their own contracts. If you buy a new home from directly from a builder they will use their own contract. What follows below is, however, the contract most commonly used in Florida today, especially for resale transactions. As always, consult an attorney if you have any questions.
Sections 1 through 3
These have blanks to be filled in with the seller’s name(s) and buyer’s name(s), the legal description and address of the property, and items of personal property that are included and excluded from the sale. This section also has legal verbiage stating that the “seller shall sell” and the “buyer shall buy” the property in question.
This section also covers the purchase price, how much deposit is given (including where the deposit is to be held, which is usually a brokerage escrow account, title company, or attorney’s escrow or trust account), how much financing the buyer is going for, and how much money will be required at closing.
Also includes the time for acceptance of the contract as well as the effective date (the date when both parties came to an agreement and entered into a bilateral agreement). The buyer will typically make an offer, and the seller will have a certain amount of time to agree to the terms or make a counteroffer. If the seller fails to respond in the allotted time frame, the offer can be withdrawn and the deposit returned if the buyer so desires.
Sections 4 through 7
These sections outline the closing date, occupancy and possession, and assignability of the contract.
The closing date is a date mutually agreed upon and negotiated between the seller and the buyer. Something that comes up from time to time during hurricane season is that an insurance company might not write an insurance policy on a home you are buying if there is a hurricane, tropical depression, or tropical storm within so many miles of Florida. In the case of this, the closing may be legally delayed for up to 5 days after the coverage becomes available again.
Section 8
This section covers financing. If the buyer is paying cash, there are no contingencies for financing. If you are getting a mortgage to pay for part of the purchase, you should make the contract contingent upon you applying for and receiving this mortgage.
Section 9
This section covers closing costs, and other fees and charges and spells out who will be responsible for each. It include when you will receive the title insurance policy and who will pay for it. Customarily the seller pays, but this is a negotiable point and the buyer is sometimes asked to pay. Other charges or fees may be for a survey, home warranty, and any special assessments (if any of these are applicable).
Section 10
This section covers disclosures. Many of these were previously separate forms and were easily missed completely by buyers, lost between time of signing and closing, etc. Now they are included right in the contract.
These disclosures include Radon Gas, Permits Disclosure, Mold, Flood Zone/Elevation Certificate, Energy Rating Brochure, Lead Based Paint, Property Tax Disclosure, Tax Withholding (if foreign seller), and Seller Disclosure.
Sections 11 and 12
These sections cover property maintenance and property inspection and repairs. It is very important that you understand this standard of the contract. It says that the seller, unless otherwise specified in the Seller’s Disclosure, states that all components of the home are in working order (definition of “working order” is contained within the paragraph). Note that cosmetic flaws (definition of “cosmetic” is also in the paragraph) are not covered here.
The buyer is allowed to inspect the home or pay someone with proper credentials, such as a state certified contractor or someone from a firm specializing in home inspections (my suggestion) to inspect the house and report any substandard findings to the seller in writing within 15 days of the effective date of the contract. If you fail to do this, you waive your right to the seller’s warranties of unreported defects. So, bottom line, get an inspection done, and do it in a timely fashion.
These sections also cover Wood Destroying Organism (WDO) (Termites) inspection and repairs.
Sections 13 and 14
These sections describe how funds that are held in escrow should be handled and disbursed. They also speak to the topic of professional advice and broker liability.
Sections 15 through 17
These sections cover what happens if the buyers defaults, what happens if the seller defaults, various options for settling disputes that may arise, as well as who will be responsible for attorney’s fees and costs.
Section 18
This section lists 20 “Standards for Real Estate Transactions”, lettered “a” through “t”. Once again, you should have an attorney explain to you anything that you do not understand or do not feel comfortable with. Here’s a list of these standards for your reference:
(a) Title
(b) Survey
(c) Ingress and Egress
(d) Liens
(e) Time (Time is of the essence)
(f) Force Majeure
(g) Conveyance
(h) Closing Location; Documents; Procedures
(i) Escrow Closing Procedure
(j) Prorations; Credits
(k) Access to Property to Conduct Appraisals, Inspections, and Walk-Through
(l) Risk of Loss
(m) 1031 Exchange
(n) Contract Not Recordable; Persons Bound; Notice; Copies
(o) Integration; Modification
(p) Waiver
(q) Riders; Addenda; Typewritten or Handwritten Provisions
(r) Collection or Collected
(s) Loan Commitment
(t) Applicable Law and Venue
Section 19
This section covers possible addenda that could be included and made part of the contract. Examples include (but are not limited to) condominium and homeowner’s association disclosures, “As-Is”, Sale of Buyer’s Property (common in the last few years as many people struggle to sell their homes before being able to close on a new purchase), and more.
Section 20
This section offers space to list additional terms of the contract, and below that gives options for counter-offers and rejection.
The rest of the contract offers space for signatures by both parties as well as mailing addresses of each, and space to list any brokers or sales agents involved in the transaction.
Click here to read about the common Florida real estate contract disclosures.
