Here we go with 4.0!

I’ve been to a presentation or two and read some decent reviews of the new Multi-Board Residential Real Estate Contract 4.0 put out by the Illinois Real Estate Lawyers Association. If you’re an IL Bar Association member, take a look at the August 2006 Real Property newsletter from the Real Estate Law Section Council. If you’re a lawyer practicing in the real estate field in the Chicago Area, take a good hard read of the Contract because there are some substantive changes from version 3.0 and you likely need to be changing some of the ways you do things. My thoughts…

Condo/Townhome parking space. Note lines 16-17 of the Contract that allows for the Seller to choose deeded space, limited common element or assigned space. If you’re representing Buyers, be vigilant on this! I’ve heard of pending attorney malpractice cases that have arisen because of Buyer’s lawyers not nailing down the status of parking on a condo unit and getting surprised at a closing where we find out that Seller did not intend to sell his parking place.

Personal Property. Note the all important “Outdoor Playsets” language has been added to the real property list. Also, there’s an Items NOT included space. All joking aside, I had a great playset issue last summer which the Contract was silent on the issue and yet the Buyer wanted it (we represented Sellers). So we took the position quickly that this was personal property and asked the Buyer’s attorney if they wanted to buy the playset because the neighbor was willing to buy it for $500. Buyer ended up paying some $400 to $500 for it. Some of these fixtures vs. personal property issues are great opportunities to make your client some money.

Attorney Review and Professional Inspection. Note on each of these that if there’s no agreement within 10 days the default language says the Contract is null and void. This probably saves a step. Now if there’s not agreement after 10 days the deal’s dead without the need for a termination letter.

Homeowner/Flood Insurance (paragraphs 12, 13). New language allows a Buyer to opt out of the Contract if they can’t get insurance on a place within 10 days of acceptance. I would suggest that in your practice, you need to be telling your Buyers up front now to contact their insurance agent immediately to keep this opt-out viable. The old “bring proof of insurance” to closing won’t give you an out under this contingency because the 10-day window will be gone. A similar 10-day window exists for a Buyer IF flood insurance is required. To clarify, the flood insurance contingency allows a Buyer to get out of the contract if flood insurance is required, period.

Seller representations regarding special assessments & Special Service Areas (paragraph 21). This language I suppose is potentially helpful to a Buyer in that Sellers have a greater responsibility of disclosure. I almost think it goes too far and puts too great of a burden on Sellers. Frankly, unless you’re on your condo board I think most condo owners aren’t going to be too aware of any “proposed/pending” special assessment until the need to pay for it. Re. the Special Service Areas, the language might be helpful. I suppose that too often someone might not see this until they get a title insurance commitment at which time it might be too late to stop the deal.

Closing Cost Credit. Note paragraph 33 allows for this figure to be included clearly in the Contract versus the old policy of scribbling a credit amount on page one of the Contract.

Loan Status Disclosure. This new disclosure requires a Buyer’s lender to report on Buyer’s loan status with different status choices: Prequalification w/o credit review (or with), Pre-Approval, Approval. This is useful, IF USED (Get it from your Buyers!).

Dig through a copy yourselves...the items I've listed are only the changes I find particularly relevant. There are more!!