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Forms Focus Archives

Forms Focus is a column that appeared in several issues of Georgia REALTOR® magazine. The mission of Forms Focus was to help our members better understand our Forms. Several Forms were highlighted, and appear below. Forms Focus was written by Greg Dunn, who was a long-standing members of the Forms Committee. While this is no longer a regular column in our magazine, we feel the information these articles contained were worth sharing on our website. 


Pet Disclosure: Not Just for Rentals
Why Buyers and Sellers Need the GAR Pet Exhibit - (Summer 2017)

Many licensees believe the Pet Exhibit (F137) is only used by property managers when writing a lease. The Lease for Residential Property (F40) provides check boxes in paragraph 8 to indicate whether or not the tenant is allowed to have a pet: “Tenant shall or shall not be allowed to keep pets on the premises. If pets are allowed a separate pet exhibit must be attached hereto and is incorporated into this Lease.”

However, some Purchase and Sale Agreements should also include a Pet Exhibit, but many do not. The two most common reasons a sales contract should include a Pet Exhibit are 1) the Seller is remaining in the property after closing, or 2) the Buyer is moving in prior to closing. 

Paragraph 13 of the Temporary Occupancy Agreement for Buyer Prior to Closing Exhibit (F139) states: “No pets shall be allowed unless the exhibit entitled “Pet Exhibit” is attached. If such exhibit is attached hereto, same is incorporated by reference herein. Notwithstanding any provision contained in said Pet Exhibit, if closing does not take place, Buyer agrees to have Property treated for ticks and fleas by a professional exterminator upon moving out.”


Paragraph 8 of the Temporary Occupancy Agreement for Seller After Closing (F140) states: “Seller shall not be permitted to keep pets on or in the Property during the Temporary Occupancy Period unless the exhibit entitled ‘Pet Exhibit’ is attached. If such exhibit is attached hereto, the same is incorporated by reference herein. Notwithstanding any provision contained in said Pet Exhibit, if Buyer will permit pets, then Seller agrees to have the Property treated for ticks and fleas by a professional exterminator during the Temporary Occupancy Period.”


The Pet Exhibit gives us four choices. The choice selected must be initialed by all parties:


1.     This is a refundable Pet Deposit of $_________in addition to the Security Deposit. Resident agrees to have the property cleaned and treated for Fleas and Ticks upon termination of the agreement.


2.     This is a non-refundable Pet Fee of $______________. Resident is responsible for pet damages.


3.     This is a non-refundable Pet Fee of $_____________.  This fee will be used to clean and treat the property. Resident is still responsible for damages.


4.     This section is for Service Animals. We cannot charge a Pet Deposit or Pet Fee for a service animal, comfort animal or emotional support animal as defined by the Americans with Disabilities Act (Sec.504. Title II). However the Resident is responsible for damages caused by the Service Animal.


Each paragraph of the Pet Exhibit outlines the parameters of pet occupancy:


·       Paragraph 1 of the Pet Exhibit gives permission for the pet to live on the property. The Resident agrees that only the pet listed is allowed. The pet will be kept under control of the Resident, Resident will clean up after the pet, and that Resident is responsible for any damages. This paragraph also states that damages will be billed to Resident and should be paid no later than next month’s rent.


·       Paragraph 2 gives the Owner (or Agent) the discretion to declare the pet to be a nuisance to the property and require its removal within five days of notice.


·       Paragraph 3 limits the number of dogs, cats, or birds. It also limits the size and weight of dogs.


·       Paragraph 4 limits the size of fish tanks, requires birds to be caged, and prohibits any other types of animals.


·       Paragraph 5 requires resident to abide by all laws, covenants, and rules and regulations regarding pets.


·       Paragraph 6 provides space for the description of the pet.


As you can see, utilizing the Pet Exhibit is the best option to protect all parties of a contract when non-human residents are a part of the transaction.



Commercial Forms for Residential Agents - (Winter 2016)

Did you know that the GAR Forms package contains 19 commercial forms? If your business is mostly residential, it’s likely that you are not aware of these forms. However, occasionally these forms can be a big asset to your business. There are a number of occasions when licensees struggle to write a residential contract on a small commercial property. The obvious solution is to use the proper commercial form.  

The commercial forms were added to the GAR Forms package specifically for this reason. They were not intended for the full-time commercial practitioner, nor were they meant for selling large 50-story office building or 100-acre malls. The large commercial real estate firms generally have their own commercial contracts, or they use the Atlanta Commercial Board Forms. However, GAR saw the need for a contract that licensees could use to sell a small free-standing commercial building or a small multi-family property.

Recently, an agent selling a quadplex was trying to write a special stipulation to cover due diligence material that the buyer requested. I recommended that he use the Commercial Purchase and Sale Agreement (CF2) and the Commercial Purchase and Sale of a Residential, Office, Retail, or Industrial Building Exhibit (CF4-B2). With these two forms, he could simply check the boxes for the due diligence materials the buyer wanted.

A residential agent using a commercial form will find that in most areas, the commercial forms are the same or similar to the residential forms. However, there are some major differences, so the licensee should review the form(s) thoroughly prior to using the Commercial Listing, Purchase and Sale, or Lease forms.

For instance, when a licensee leases a commercial property, the property may have more than one tenant. The Residential Lease (F40) is intended for one tenant. CF9 is a Commercial Lease Agreement for a single tenant, while the CF10 is a Commercial Lease Agreement for multi-tenant property.

 If you are not comfortable using the Commercial Forms - or if the transaction is very complex - there is another option. Forms CF18 (Sale) and CF19 (Lease) are commercial letters of intent. These forms make it easy for the parties to agree on the major terms of the agreement and then let the attorneys complete the contract. In other words, these forms allow you to do your job, but to leave the legal aspects of the contract to the attorneys, which will ensure a viable contract.


GAR Forms Deal with Confidentiality Issues During a Transaction - (Fall 2016)

Most agents understand that they have a BRRETA* duty to keep confidential any information that their clients request not to be disclosed. Article 1 Standard of Practice 1-9 of the National Association of REALTORS® Code of Ethics also addresses the duty of confidentiality, stating that, “REALTORS® shall not knowingly, during or following the termination of professional relationships with their clients reveal confidential information of clients.”
    Unfortunately, it appears that some agents believe this duty of confidentiality applies to the customers or clients of other agents. Complaints that the other agent in the transaction shopped (revealed the contents) the offer/counteroffer to other buyers/sellers, which caused their client to lose the deal (and of course they did not get a commission), are commonplace. As the agent of a seller/buyer client, you have no duty of confidentiality to the other agent’s buyer/seller. If a client instructs you to shop the offer to try to get a better deal, you must obey the instructions of your client.
    The GAR forms package has two forms that you can use to address this issue:

1.     F142 AGREEMENT TO KEEP OFFERS CONFIDENTIAL (revised for 2016)


    If your buyer client wishes to make a confidential offer on another company’s listing, then you must submit F142 to the listing agent prior to making that offer. If the seller and the listing agent both sign and return F142, then you would submit the offer to the listing agent. In filling out F142, make sure to identify all the parties - buyer, selling agent, seller and listing agent and make sure each has signed the agreement. In Paragraph 1, you must check box (a.) to make the buyer’s offer/counteroffer confidential. The Seller may check box (b.) so that their counteroffers/offers will also be confidential. If you do not fill in a reasonable number of days for the confidential agreement to be in effect in paragraph 2a., then per 2b., the confidential agreement  expires two days after the expiration of the offer/counteroffer.
    In some transactions - especially commercial ones - the buyer may request information (rent rolls, financial statements, etc.) about the property or business from the seller prior to making the offer. The seller may not want to release this information without the buyer agreeing to make the information confidential. Prior to providing the buyer the requested information, the listing agent must have the buyer, selling agent, seller and listing agent sign F148.
    Both F142 and F148 allow Buyers and Sellers to share confidential information with brokers, family members, advisers, attorneys, accountants, etc. The party sharing confidential information is responsible for making sure all parties with whom they share information understand that the information must be kept confidential. All parties that have access to the confidential information (including agents) must understand that disclosing the confidential information may cause significant financial and/or other damage to a party in the transaction.

*Georgia Brokerage Relationships in Real Estate Transactions Act


Protect Your Commission {F38} (Summer 2016)

The Co-Op Commission Agreement Form (F38) is a new form that was created by the forms committee in 2015. Many agents may still be unfamiliar with the form and its proper use, which is to reach an agreement for cooperation and compensation.
    If the brokerage firm that the agent works for is a member of a multiple listing service (MLS) - and today most firms are - then when the agent takes a listing and places it into the MLS, this is an offer of cooperation and compensation to the other members of the MLS. Most agents understand this; however, what they often do not understand is that the offer of cooperation and compensation does not extend to brokers and agents who are not members of that particular MLS. Currently, there are approximately 40 different MLS’s in Georgia.
    As a licensee, your license is valid anywhere in the state of Georgia. While we tend to work within our local market and within our MLS, occasionally we are asked to sell a buyer (such as a family member) a house in another part of Georgia where there is a different MLS. Many agents think that if a house is listed in the local MLS then they can show the house, sell the house, and get paid a commission. Unfortunately, that is not true unless they have used this form. This would also be true for property not listed in your MLS.
     Article 3 of the REALTOR® Code of Ethics requires REALTORS® to “…cooperate with other Brokers except when cooperation is not in the client’s best interest.” If you contact a REALTOR® broker in another town and ask to show their listing to your buyer, they will probably allow you to show the property and produce an offer on their listing. Article 3 of the Code of Ethics goes on to say, “The obligation to cooperate does not include the obligation to share commissions, fees, or to otherwise compensate another broker.”  The act of showing is acceptance of the offer of compensation; therefore if you show the property without any offer of compensation, then you are working for free. In order to avoid this, you must have F38 signed prior to showing.
   To use the F38 properly, you must identify the property, fill in the commission split the listing broker agrees to pay the selling broker (not the agent), and have it signed by the listing broker or their agent. Since the form is property-specific, you will need a different from for each property you intend to show.
   The selling agent who has not used the F38 may try to overcome the problem of cooperation and compensation by inserting a commission special stipulation in the offer. However, this special stipulation probably constitutes a violation of Georgia License Law (43-40-25 b. 35) and the REALTOR® Code of Ethics (Article 16 Standard of Practice 16-16).
   In closing, always remember that anytime you are showing property not listed in your MLS, you need to get F38 signed prior to the showing.


Form F144: Notice to Reject Offer/Counteroffer (Spring 2016)

When the buyer makes an offer on a listing, one of four things can happen. The seller can:

1.     Accept the offer exactly as made by signing and returning the offer within the time limit. No changes to the offer can be made - not even filling in a blank that was not completed by the buyer.

2.     Make a counteroffer by changing anything in the buyer’s original offer.

3.     Reject the buyer’s offer.

4.     Do nothing, which allows the buyer’s offer to expire. (This is actually a form of rejection.)

Please notice that the first three choices above require a written response.

With the first choice, the seller would accept simply by signing the original offer using the offer form on which he or she received the offer. Once the signed acceptance has been delivered back to the buyer, the agreement then becomes binding.

 With the second choice, the seller would use the F22, Counteroffer to or Modification of the Unaccepted Original Offer. When the seller wishes to make any change to the original offer, the seller indicates the changes on the F22 and signs it. If the buyer accepts the change, then she or he signs the F22, and delivers it back to the seller. At that time, the agreement becomes binding. Of course the buyer could counter the counteroffer by indicating changes on, and signing, a new F22.

The third choice requires the use of F144, the Notice to Reject Offer/Counteroffer. Agents must get F144 signed to protect themselves from claims that offers were not presented. Georgia License Law (43-40-25 (b) (19)) and the Rules of the Real Estate Commission (520-1-.10(1)) require that agents promptly tender to any customer or client any signed offer to purchase, sell, lease, or exchange property made to such client or customer. Agents must take care to be able to prove that they presented the offer to their customer or client.

 This becomes particularly important in multiple-offer situations. Suppose you receive three offers on your listing, and you present all three offers to the seller. The seller accepts one and rejects the other two. A year later, the agent representing the buyer of one of the rejected offers informs you that the buyer is filing a complaint with the Real Estate Commission alleging that the offer was never presented to the seller. Can you prove that you presented the offer?

Another instance when proof would be important would be if the agent bought the property after the listing expired. Later, the owner alleges that the agent had better offers that were never presented to the owner. Can you prove that you presented the offers?          

The simple answer is whenever you present an offer (or offers) to a seller, or a counteroffer to a buyer, have available F144 along with F22. Explain to your client that he or she needs to sign something - either acceptance of the original offer, F22 to counter the offer, or F144 to reject the offer.  Whichever one is signed is then communicated back to the other party.


A Closer Look at the Placement and Purpose of the Binding Agreement Date {F124} (May/June 2015)

Because the binding agreement date is important in any purchase and sale contract, agents must take care to insure that we all know when the contract became binding. The binding agreement date is the one blank not found in the Terms and Conditions on the first page of the contract. Where it is placed in the contract is very important. It is below the signature lines for the buyer and seller, therefore it is not a part of the contract. In signing the contract, the buyer and seller have not agreed upon the binding agreement date. It is placed there for information only. Previously, F124 Binding Agreement Date Notification, which was a separate form, was used to give notice to the parties of the binding agreement date. F124 is still in the GAR Forms package and can be still be used to give notice to the parties of the binding agreement date.
      The blank for the Binding Agreement Date is for giving notice. It is not required to be completed. Filling in the binding agreement date does not make the contract binding. Filling in the binding date does not make the date filled in the binding agreement date. In many contracts the binding agreement date is filled in even though the contract is not yet binding. For example, on a Friday, the selling agent delivers the buyer’s offer to the listing agent, who presents the offer to the seller, who in turn accepts the offer. The listing agent then fills in the binding agreement date. The listing agent contacts the selling agent and informs the selling agent that the contract is binding. The listing agent then delivers the accepted offer back to the selling agent the following Monday.
     So when did the contract become binding? If we look in the contract we find the binding agreement date defined.

    C.4.f. Binding Agreement Date: The Binding Agreement Date in this Agreement shall be the date when the party making the last offer, or the Broker (except in a designated agency transaction) the Broker’s employees or affiliated licensee of Broker representing that party as a client, receives notice that the offer has been accepted. This party (or the Broker or affiliated licensee representing this party as a client) shall fill in the Binding Agreement Date below and promptly give notice of this date to the other party. Filling in the Binding Agreement Date shall not be deemed to be a counteroffer.

     Based on this definition the contract became binding when the selling agent received notice of the acceptance. That was on Monday, four days after the date filled in as the binding agreement date. So the date on the contract is incorrect. Since many time periods in the contact, such as due diligence, start from binding date this may cause confusion or even lawsuits.
      In some cases the binding agreement date is filled in even though the agreement is not binding. Again an agent may call to say that a deal has been made and fill in the binding agreement date; however, when we receive the agreement back we find the acceptance is not absolute. Their party has changed something. Even though the item changed is minor, it is still a counteroffer, not an acceptance. So the agreement is not binding even though the binding agreement date has been completed.
Remember that giving notice of acceptance is the same as any other notice and is covered by the notice paragraph (C.1.) in the contract. Phone calls (or text messages) do not count. Notice must be in writing and delivered in accordance with the notice paragraph.
      Because the binding agreement date is important agents must take care to insure that we all know when the contract became binding.


A Closer Look at Due Diligence in the Purchase and Sale Agreement {F20} (March/April 2015)

There have been a lot of questions about new language in the Purchase and Sale Agreement F20. The Due Diligence paragraph has been changed to allow for additional option money. The original Due Diligence language was added to the contract because agents were writing special stipulations to let a buyer out of the contract for any reason. Those stipulations did not call for the payment of any money for the privilege of getting out of the contract so they most likely had no validity.
     The Forms Committee spent a lot of time drafting a Due Diligence clause that created an Option so the contract would be valid. In order to have an Option, there must be the payment of Option money. After reviewing many choices - including a blank that could be filled in with any amount - the committee decided to require the payment of $10.00. To make it easy the committee made the $10 paid and received by written agreement. While it may have been easier to just leave a blank and let the parties negotiate the Option payment, the committee was concerned that zero (0) would end up being filled in, resulting in a contract that would not likely be valid.
     Now, after a number of years, we started seeing contracts calling for the payment of sums greater than the $10.00. Since these stipulations that were being added to the contract were worded in such a way that the validity of the contract was again in question, the Forms Committee decided that a change in the contract was necessary. The ability to negotiate additional Option money was provided as a choice for those who want to use it. The blank can be filled in with zero (0) in which case the $10.00 still provides for Option payment. In a number of other states where contracts have a blank for the Option money, buyers find that the offer of Option money may encourage a seller to agree to terms they otherwise might reject, such as a longer than usual due diligence period or a longer period till closing. Sellers may request Option money to test the seriousness of the buyer’s offer.
     If agreed upon, the additional Option money should be in the form of a check from the buyer to the seller. It should accompany the buyer’s offer or the agreed upon counteroffer. The check would go to the seller once the contract becomes binding. The Option money is non-refundable once the contract becomes binding. Unless a special stipulation is added (see GAR special stipulation 414) the Option money does not apply to the purchase price. Some lenders have said that if the Option money does not apply to the purchase price then it is outside of the loan and of no concern to them.
     As always, when the market evolves the practice of real estate evolves, and the contracts will also evolve.

A Closer Look at F83, Which Essentially Combines Two Forms on One Page (Nov/Dec 2014)

F83 the Unilateral Notice to Terminate Purchase and Sale Agreement and Proposed Disbursement of Earnest Money contains two different forms which are both on the same page.

Part I: Unilateral Notice to Terminate Purchase and Sale
The first form, the Unilateral Notice to Terminate Purchase and Sale, is how the buyer or seller gives NOTICE to terminate the contract. However, the buyer or seller can only give notice to terminate if they have a legal right to do so. Only one party needs to sign the notice.
    A buyer may have the right to terminate if A) they have a Due Diligence period; B) they have a contingency, like finance, that allows them to terminate; C) the Seller defaults; or D) other lawful reason.
    A seller may have the right to terminate if A) they have a contingency, like Short Sale, that allows them to terminate; B) the buyer defaults; or C) other lawful reason.
    Notice to Terminate to be effective must be given in a proper and timely manner. To be proper, notice must be in writing, signed by the party giving notice, and delivered in one of the five manners of delivery (hand, overnight, mail, fax, email) provided for in the Purchase and Sale Agreement . To be timely it must be received by the other party, or the agent representing them, prior to any deadline based upon time in Georgia.

Part II: Proposed Disbursement of Earnest Money
The second form, the Proposed Disbursement of Earnest Money, is a way for the buyer and seller to agree to a disbursement of any Earnest Money. GREC Rule 520-1-.08(3)(b) indicates that the holder of earnest money has properly fulfiled their duty if they secure a written agreement signed by all parties who have an interest in the trust funds, which is separate from the contract. Both buyer and seller must sign this form.
    We would expect the party, giving notice to terminate, to propose a disbursement of the earnest money. The buyer and seller would then negotiate over the disbursal until they reach agreement. Remember, this money originally belonged to the buyer and should go back to the buyer unless there was a default on the part of the buyer. The earnest money could go to the buyer, the seller or a third party (maybe a charity). Buyers and sellers who are not getting the money are often reluctant to sign the form. Skillful agents have practiced language that encourages them to sign the form. The agreement only becomes effective upon being signed by buyer and seller and a fully executed copy being delivered to buyer, seller, and holder.

F1: A Closer Look the GAR Exclusive Right to Sell Listing Agreement (Sept/Oct 2014)

One of our most utilized contract forms is the Exclusive Right to Sell Listing Agreement (F1). This form was designed to protect the broker who has listed property for sale. Once the seller has listed the property and it sells, the listing broker has earned a commission.
    Sellers sometimes think they can sell the property themselves or sell to a relative without being liable for a commission. They are incorrect. Some sellers also think they can terminate the listing at any time - and they are correct. However, terminating the listing may not relieve the seller of the liability for payment of a commission. Listings may be terminated by expiration of the listing agreement, mutual agreement of the seller and broker, or written notice to the other party.
    In addition to the term of the listing, the listing provides for a protection period. The blank for the protection period should be completed with the number of days the parties have agreed upon. Typically the broker wants a longer time frame, while the seller wants less. If the listing is terminated by expiration, the seller is still liable for a commission if a buyer who was exposed to the property during the term of the listing buys the property during the protected period. The exception to this would be if the seller has entered into a new Exclusive Right to Sell Listing with a different broker.
    If the listing is terminated by mutual agreement, the seller is still liable for a commission if a buyer who was exposed to the property before the parties agreed to terminate the listing buys the property during the protected period, unless the seller has entered into a new Exclusive Right to Sell Listing with a different Broker.
    If the listing is terminated by written notice from the seller - in other words, the broker is fired - the seller is still liable for a commission if a buyer who was exposed to the property prior to the seller giving written notice buys the property during the remainder of the listing term or the protection period. So if the agent wishes to protect their right to a commission when a seller calls and requests that the listing be canceled, the agent should insist the Seller send them a letter terminating the listing.
    So how could the seller be liable for two commissions? Here is an example: the seller has listed his house with his favorite agent. What the seller may not realize is that the listing actually belongs to the broker. The seller’s favorite agent decides to change companies. The broker then insists the listing stay with the company. The seller really wants his favorite agent to have the listing, so he terminates the listing in writing. The seller then lists the property with his favorite agent at the new brokerage company. Along comes a buyer who is working with a new buyer’s broker. The buyer first saw the property when it was originally listed with the fired broker, and has now decided to buy the property. The fired broker and the new broker are both entitled to a full commission. Only the new broker owes the buyer’s broker the co-op fee, so the fired broker would get to keep the entire commission. Remember, listings belong to the broker!


A Closer Look at F22 Counteroffer to or Modification of the Unaccepted Original Offer (June/July 2014)

There have been a lot of questions about the new F22 Counteroffer to or Modification of the Unaccepted Original Offer form. The Forms Committee revised this form for 2014 and then made an additional small change to the form in the April revisions. The initial major revision was to add boxes for the major business terms that are regularly negotiated in offers and counteroffers. The small change for the April revisions was to change the word “agreement” in the first sentence of paragraph D to “counteroffer”.
    Let’s take a closer look at the effects of these changes. Prior to the revisions, if a seller wanted to change the buyer’s offer price, a sentence needed to be written in the counteroffer to accomplish this. For example “Purchase Price shall be XXX”. Now, if the seller wishes to change the purchase price, the Purchase Price blank simply needs to be filled in with the new price. If that is the only change the seller is making then all the other blanks in the counteroffer form can be left empty or N/A can be filled in those blanks. A blank not filled in or marked N/A is not a part of the counteroffer, so whatever is in the original offer is not changed.
    As all REALTORS® should be aware, only the original offer set forth in the Purchase and Sale Agreement and the last counteroffer signed by the parties constitutes the contractual agreement of the parties. If in a previous counteroffer the parties agreed that the seller contribution at closing would be XXX, but in the final counteroffer this was left blank, whatever the original offer stipulated for seller contribution would prevail. However, if the last counteroffer signed by the parties increased the seller contribution, the last counteroffer would control. If the parties or the buyer’s lender wants a “clean” or conformed copy of the contract, the parties agree to combine into one clean document the terms of the original offer with the final (and only the final) counteroffer, at any time prior to the closing.
    Another issue in using the counteroffer form is when to change the Time Limit of Offer. If the Counteroffer form is silent about the Time Limit of Offer then a binding agreement must be reached prior to the expiration of the original time limit. If in making a counteroffer more time is needed to negotiate, then “the Time Limit of Offer” section of the counteroffer needs to be changed. 

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