Editor’s note: PAR is publishing a series of articles on upcoming changes to several PAR standard forms which take effect on July 1, 2022.
You didn’t think we were done, did you? In addition to the appraisal contingency addendum and sales contracts, you’ll also be getting updated listing contracts on July 1. PAR’s three listing agreements – for commercial, residential rental and residential sale – are getting some minor updates.
As with the other forms we’ve reviewed recently, PAR’s Standard Forms Committee wanted to simplify and clarify the terms of the listing contracts without making any sweeping changes. So you’ll see here that, just like the sales agreements, there is some reorganization of some paragraphs that should not impact the way you use the form. In fact, these changes should make it easier for you to provide your clients with explanations about advertising and tax implications.
All three listing contracts will contain revisions to the “marketing of property” paragraph. Again, this is mostly a reorganization meant to simplify the conversation about different marketing methods. Some language has been added to explain to sellers and landlords what a multiple listing service is and how the rules and regulations of the MLS may affect your ability as their Realtor® to market the property. This is largely due to NAR’s clear cooperation policy, which was enacted on Jan. 1, 2020. NAR’s policy for Realtor®-owned MLSs requires that any property which is publicly marketed be submitted to the MLS within one business day. The revised language better explains to sellers and landlords that completely opting out of MLS marketing may mean a restriction of other marketing methods, as well.
One more change has been made to two of the listing contracts (commercial and residential sale) and that is the inclusion of a separate paragraph on Foreign Investment in Real Property Tax Act. FIRPTA is a unique provision of the Internal Revenue Service Code which requires the buyer of certain properties to act as a tax withholding agent. There are qualifications on the property itself and the transaction, but the first question is whether the seller of the property is a foreign person as defined in the IRS code. If all the criteria are met, then the disposition of that property interest by the foreign person is a taxable event and the buyer is responsible for withholding up to 15 percent of the sale price for submission to the IRS. Too often, FIRPTA’s application to the transaction was not discovered until settlement was approaching, surprising the sellers with a reduction in their proceeds and surprising the buyers with a responsibility they didn’t know they had.
The purpose of including the paragraph in the listing contract is to encourage sellers’ agents to have a discussion with their clients prior to the time of listing as to whether FIRPTA may apply to their transaction. This is a conversation that should take place with every seller whose property meets the objective criteria of the code; this is not a conversation you should have only with clients whose name “sounds foreign,” for example. Please take a moment to refamiliarize yourself with the requirements of FIRPTA and the definition of “foreign person.”
View the Legal Corner: Standard Forms Update webinar recording with PAR Attorneys Desiree Brougher and Kacy Clouser and PAR President Christopher Beadling.