Significant Differences between the Multi-Board 7.0 Contract And the Chicago Association of Realtor!
Updated: Jun 3, 2019
Besides there being a difference of nine pages, there are other variances between the CAR contract and the 7.0 to consider when choosing which contract to use for making an offer for your client.
One of the most significant distinctions between the contracts is that with the CAR contract the attorney cannot terminate the contract without negotiating AR or IR issues and having them denied or rebuffed. There is no language in the CAR contract that provides for the termination of the contract because the attorney has disapproved the contract. Paragraph 12(b) of the 7.0 provides that an attorney may just disapprove the contract for any reason other than price. I have had a broker call me after a CAR contract was accepted to let me know that our buyer had changed his mind. I looked in vain for language in the CAR contract to allow me to simply terminate the contract. None existed. Accordingly, I needed to find terms in the contract to contest and have them denied by Seller’s attorney so that I could terminate the contract. If I did not, I risked breaching the contract and having my buyer lose their earnest money.
Alternatively, I needed to have my client conduct their inspection (at a cost of $375 – 425) and then determine that the condition of the property was not acceptable. But the termination could only come after the cost of the inspection. If Seller’s attorney agreed with all of my AR requests, I would have had no other alternative – or, again, risk losing earnest money.
While the inspection provisions of the CAR contract are far more favorable to buyers, for instance with regards to components that are at the end of their useful life and allowing for repairs of items under $250, the purpose of the tighter language in the 7.0 is to remove the expectation that buyers will not have costs to deal with when purchasing a house or that they can expect a perfect house. There was a hope amongst the drafters that the tighter language and ability to terminate for requests outside of the terms of paragraph 12 would help move contracts move swiftly out of attorney and inspection review and toward closing.
I recently had a broker call me about a purchase contract she had drafted on the 7.0 version. Having just entered into a contract for the sale of his property using the CAR contract, the Buyer was distraught that he could not hold his seller to the same standards to which he was being held as a seller.
Remember that there is nothing stopping you (other than the requirements of your office) from using the CAR contract or the 7.0 for an offer. However, you should be aware that you might be limiting certain options with the CAR that your buyer may need that the 7.0 affords. For instance, the ability to make the contract contingent on the sale of the buyer’s property exists in the 7.0 but not in the CAR contract. The Seller cannot opt for a cash deal with the right to obtain a mortgage (i.e. there is no contingency for obtaining a mortgage on a cash deal that then obligates the seller to cooperate with any lender requirements to enable closing.) The Seller representations in paragraph 22 of the 7.0, which do not exist in the CAR are much greater protections for buyers.
I am sure every broker has his or her preference for the contract to use for an offer. However, there may be some solid reasons to use one or the other. If you are in the middle of circumstances where you are not sure which one to use, please give me a call. I would be happy to help.