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NABOR Sales Contract FL

Understanding Contingencies: Essential Tips for Mastering the NABOR Contract

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When practicing in Collier and surrounding counties, it is imperative that agents know which Contract they will be using and the terms contained within. The two most prevalent contracts used in the area are the FAR/BAR and NABOR Contracts. While the contracts contain many similar terms, there are key distinctions that must be understood in order to be able to represent your clients to the best of your ability. For agents that practice specifically in Naples, it is of paramount importance that they understand the NABOR Contract’s major built-in contingencies but also understand their client’s unique homebuying situation in order to potentially add addenda to create additional contingencies further protecting their interests.

The Financing Contingency:

Section 4, of the NABOR Contract, allows for a buyer to indicate how they plan to pay for the property. If a buyer selects Section 4(b), he or she will have the benefit of a financing contingency. The default timeframe in which a buyer has to obtain financing is 45 days; however, this can be modified by the parties. If the Buyer receives loan approval within the stated period, the Buyer must alert the Seller that they are waiving the contingency. However, if the Buyer is unable to obtain or is denied loan approval within the allowed time, the Buyer may terminate the agreement by delivering evidence of loan denial stating that it was due to either property-related conditions, that the Buyer does not qualify or evidence from the lender that the Buyer has acted in good faith but has not yet received loan approval or denial. Deadlines and procedures must be followed strictly in order to give buyers the full protection of the contingency. If the Buyer fails to waive the contingency, the Seller may terminate the Contract at any time.

Inspection  Periods:

Assuming that an AS IS Contract is utilized, a “Due Diligence” period is created with a default time period being 15 days. If within the Due Diligence period, the “Buyer determines, in Buyer’s sole discretion, that the Property, Systems, and Equipment, or Personal Property is not acceptable to Buyer for any reason, Buyer may terminate the Contract prior to the expiration of the Due Diligence Period.”  The standard NABOR Sales Contract conversely creates an “Inspection Period,” which provides for a list of items that may be inspected and procedures in which repairs and credits can be negotiated.  Previous blogs have delved deeper into the workings of the NABOR Inspection Period. It is imperative that agents discuss with their clients which Contract best suits their needs and understand the rights granted in each Contract. The AS-IS Contract provides the Buyer with an Inspection Contingency that allows the Buyer to walk away at their discretion, while the standard NABOR Sales Contract does not.

Additional Addenda:

NABOR has also drafted numerous addenda suited to fit your clients’ needs in a multitude of scenarios. Many of these forms create additional contingencies to further protect clients.

  • Sale of Buyer’s Existing Property: This states that if the sale of the Buyer’s property does not occur by a specific date, then either the Buyer or Seller may terminate the Contract. The Seller’s right to terminate ceases to exist once the Buyer waives the contingency.
  • Appraisal Contingency: Creates a contingency where if the property does not appraise at or below the inputted price, the Buyer may terminate the Contract by delivering notice to the Seller with a copy of the appraisal within 5 days of receipt of the appraisal. However, the Seller, within 5 days of receipt of notice and appraisal, may notify the Buyer that the purchase price shall be reduced to the appraised value. If this occurs, the Contract remains in place.

It is imperative that agents know and understand the contingencies contained within the contracts they are using in order to provide the best service to their clients. While the above list is not exhaustive, additional contingencies can be created. However, in order to do so, please speak with your local trusted real estate attorney.

Picture of Jacob Van Duren

Jacob Van Duren

Jacob focuses his practice on residential real property transactions.

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