There’s still a bit of confusion over Paragraph 8 of the Florida Realtors/Florida Bar (“FR/Bar”) contracts, which contain several options about the ways a buyer may purchase a property.
This is the part some agents get wrong when considering paragraphs 8(a) and 8(b): Many believe these options give buyers two choices: To pay for the property in cash, 8(a), or obtain a mortgage loan to pay for the property, 8(b). However, this isn’t what the contract actually states.
The distinction between 8(a) and 8(b) is simply whether the buyer’s offer is contingent on the buyers obtaining financing. In other words, 8(a) states that the buyers’ offer is not contingent on obtaining financing, and 8(b) provides that it is contingent.
With 8(a), buyers who cannot close because they’re unable to attain funds (qualify for a mortgage) will likely lose their deposit because there is no financing contingency that allows them to potentially retain their deposit. On the other hand, under 8(b), buyers who cannot close because they’re unable to obtain a loan approval (or in some cases even if they can obtain one but still can’t close) may not lose their deposit, depending on the circumstances.
Florida Realtors Legal Hotline often fields calls from upset members because their contract has 8(a) checked, yet the buyers are still contacting lenders and applying for a loan. But there’s no need to be upset: 8(a) doesn’t prohibit buyers from applying for or borrowing funds. It does is put the buyers deposit at risk if they fail to obtain a mortgage loan and cannot otherwise afford the home.
On the other side of the transaction, buyers need to be aware that selecting option 8(a) – regardless whether they plan to obtain a loan or pay in cash – puts their deposit at risk should they be unable to close because of funding.
Regardless which side you represent in a transaction, it’s important to understand the actual difference between paragraphs 8(a) and 8(b) in the FR/Bar contract.