What if you are in the middle of selling your home and the coronavirus shuts down your title company? What if you are buying a home and your inspector is diagnosed with COVID-19? What if the perfect home hits the market, but you aren’t sure if it is safe to view it? Can you get your earnest money back? Is there anything you can do?
Before March 2020, the standard purchase and sale agreements in Idaho did not have an act of God clause. Thus, despite the current pandemic, current purchase and sale agreements remain in effect as is. All contracts are still in existence.
*The fine print: I am not an attorney. You will want to consult with your own legal professional before taking any action.
The New Addendum
The new RE-19 in Idaho can fix this. It is a contract addendum created in March 2020 in response to the worldwide pandemic. All Idaho real estate agents have access to it. It can be added when both the buyer and seller agree to use it. It can also be added from the beginning of new contracts.
The purpose of the RE-19 is to pause a contract when a COVID-19 related event prevents the execution of the contract.
Despite the current health concerns going on, real estate transactions are still happening. This is one way that the buyer and seller can protect themselves from forces outside their control.
The RE-19 is not an open-ended clause. The events must be COVID-19 related. Things like hurricanes, tornadoes or other “acts of God” would not invoke this clause.
How does an event qualify? It must meet these five criteria:
- It must relate to the pandemic
- It must be out of the control of both the buyer and the seller
- Foreseeability is not a factor
- Objectively prevents timely performance
- Both parties are unable to overcome
If an event qualifies, the buyer or seller can notify the other party and the contract will immediately pause (aka stay). The stay lasts as long as the event that causes the problem plus an additional amount of time that you can select.
The stay is not everlasting. If it goes longer than a set period of time, the contract will become voidable by either party. It doesn’t mean that it automatically voids. But the option to void is now on the table.
If the contract is terminated, the RE-19 also lays out what happens to the buyer’s earnest money.
What to do next?
If you are currently under contract as a buyer or seller, you should consult with your real estate agent. Discuss whether you should add the RE-19 addendum to your current purchase and sale agreement.
If you are writing a new contract, you should consider adding the RE-19 addendum to the purchase and sale agreement. There is a lot of uncertainty right now and the RE-19 can provide structure and peace of mind.
If you have any questions about this new addendum, please let me know. I’m here to help.
NOTE: moving forward, all buyer and seller representation agreements now have language added to protect the real estate agent from liability in case something happens while they represent you. While this should not fundamentally change the agent/client relationship, buyers and sellers should be aware.