A good contract is an essential part of any residential real estate transaction. While in some states agents can draft their own sale agreements, a 1966 Supreme Court case determined that these must be written by an attorney in the state of Illinois. This decision led to a standardized form used in the Chicago area that is intended to streamline the process, protect buyers and ease the legal burden on attorneys. Multi-Board Residential Real Estate Contract 7.0 has evolved over time with input from attorneys and brokers. While it covers the key terms of a home sale, attorneys still play an important role in adapting the form to meet their clients’ needs.
Buying and selling a home can be a long and often complicated process. However, Illinois has designated one specific way to create a legal contract that covers every step of the process: the Multi-Board Residential Real Estate Contract 7.0.
This contract identifies the rights and obligations that both the buyer and the seller have during the process. Many other states have more flexibility in determining exactly what type of contract to use and who can create it. But that can get confusing. The standardized form used in Illinois aims to simplify the process by making each residential sale as similar as possible.
In a recent episode of Contract Teardown, Chicagoland lawyer Jim Lowry explained, “From a consumer standpoint, they really don’t notice the difference of a [Multi-Board Residential Real Estate Contract].” However, as we discuss, the broker’s side of buying and selling a home in Illinois looks quite different from—and more consistent than—in many other states.
What Is a Multi-Board Residential Real Estate Contract?
Buying and selling a home can be a complex process. Real estate professionals must ensure that both the seller and the buyer complete the process as ethically as possible. This requires having a reliable means of attesting that the home is free of any known major issues—especially those that could present a danger or significant undisclosed financial obligation to the buyer.
Verification in writing of what is specifically included in the home purchase also helps prevent misunderstandings. This includes details like:
- Specific fixtures that the seller has the right to choose to keep for themselves
- Specific fixtures the seller can leave in the home for the new owner’s use
- An overview of the specific inspections parties will conduct prior to closing
Different states take different approaches to completing this agreement. Illinois primarily uses the Multi-Board Residential Real Estate Contract 7.0. Rather than creating a contract from scratch or even utilizing an editable template, most real estate agreements in the Chicago area and the rest of Illinois use this specific form.
Why Are Multi-Board Residential Real Estate Contracts Important in the Chicago Area?
Illinois handles many real estate procedures somewhat differently than many other states. One major difference is the fact that Illinois does not allow real estate brokers to draft their own contracts; many other states do. Brokers in Chicago and the rest of the state need to take a different approach to develop fair and transparent residential real estate agreements between buyers and sellers.
The Multi-Board Residential Real Estate Contract 7.0 is the latest version of a document that was developed in response to an Illinois Supreme Court case in the 1960s. Legal teams periodically review and adjust the specific terms of the form to make sure that it accurately represents local trends that are specific to the needs of Illinois buyers, sellers, and real estate brokers.
This preprinted document replaced real estate brokers’ previous ability to start and edit a contract from scratch. This type of contract provides a consistent and in-depth record of the specific terms associated with a particular sale. It describes the responsibilities of the seller, broker, and other parties throughout the sale process.
The theory of a standardized document like this is a good one. …However, with the evolving times, these need to be revised more frequently. Sometimes, they try to come up with every single scenario that’s possible, and I think… Click To Tweet
In an effort to make sure that these agreements are one hundred percent legal, an attorney must handle much of the work involved in finalizing this preformatted contract. A real estate agent can fill out the form, but an attorney must make any changes to the form. These regulations ensure that the contract is handled consistently, regardless of what part of Illinois the home is in or who is managing the sale.
Important Aspects of the Multi-Board Real Estate Contract 7.0
The Multi-Board Real Estate Contract outlines a wide range of specific details that describe precisely how a home sale is to proceed.
Fixtures
The seller of a home may choose to include dozens of fixtures and appliances as part of the sale. Alternatively, they may want to remove them from the home to keep. The buyer and seller must agree to these inclusions or exclusions prior to closing. This ensures there are no surprises or discrepancies, especially if items that will be removed prior to the sale are still in the home when it is toured.
This is especially important if a home will come with little more than the building and the buyers will be expected to supply all of their own fixtures. Some of the fixtures that the contract identifies are:
- The refrigerator, stove, microwave, dishwasher, and garbage disposal
- Any aspects of the HVAC system
- The washer and dryer
- Ceiling fans and light fixtures
- Built-in shelving
- Smoke detectors, carbon monoxide detectors, and security systems
- Sheds, plants, and other outdoor items
|
15 3. FIXTURES AND PERSONAL PROPERTY AT NO ADDED VALUE: All of the fixtures and included Personal Property 16 are owned by Seller and to Seller’s knowledge are in operating condition on Date of Acceptance, unless otherwise 17 stated herein. Seller agrees to transfer to Buyer all fixtures, all heating, electrical, plumbing, and well systems 18 together with the following items at no added value by Bill of Sale at Closing [CHECK OR ENUMERATE APPLICABLE ITEMS]: 19 __ Refrigerator __ Wine/Beverage Refrigerator __ Light Fixtures, as they exist __ Fireplace Gas Log(s) 20 __ Oven/Range/Stove __ Sump Pump(s) __ Built-in or attached shelving __ Smoke Detectors 21 __ Microwave __Water Softener (unless rented) __ All Window Treatments & Hardware __ Carbon Monoxide Detectors 22 __ Dishwasher __Central Air Conditioning __ Satellite Dish __ Invisible Fence System, Collar & Box 23 __ Garbage Disposal __ Central Humidifier __ Wall Mounted Brackets (AV/TV) __ Garage Door Opener(s) with all Transmitters 24 __ Trash Compactor __ Central Vac & Equipment __ Security System(s) (unless rented) 25 __ Washer __ All Tacked Down Carpeting __ Intercom System __ Outdoor Shed 26 __ Dryer __ Existing Storms & Screens __ Electronic or Media Air Filter(s) __ Outdoor Playset(s) 27 __ Attached Gas Grill __ Window Air Conditioner(s) __ Backup Generator System __ Planted Vegetation 28 __ Water Heater __ Ceiling Fan(s) __ Fireplace Screens/Doors/Grates __ Hardscape 29 Other Items Included at No Added Value: 30 Items Not Included: 31 Seller warrants to Buyer that all fixtures, systems and Personal Property included in this Contract shall be in 32 operating condition at Possession except: . 33 A system or item shall be deemed to be in operating condition if it performs the function for which it is intended, 34 regardless of age, and does not constitute a threat to health or safety. 35 If Home Warranty applies, check here ❑ and complete Optional Paragraph 32. |
Purchase Details
Putting specific purchase details in writing is one of the most important aspects of the Multi-Board Residential Real Estate Contract 7.0. These details inform buyers, sellers, real estate brokers, attorneys, and any other involved parties where the home sale stands. They establish what every other party’s rights and obligations are.
This section also identifies the total agreed-upon purchase price. This is particularly important if it is not the same as the seller’s asking price or the buyer’s initial offer. It also includes information about the mortgage, escrow process, specific closing date, statutory disclosures, and other financing details.
|
36 4. PURCHASE PRICE AND PAYMENT: The Purchase Price is $ ________________. After the payment of Earnest |
Home Inspection Details
All home buyers have the right to a professional home inspection for the property prior to closing. But they may waive this inspection if they choose to. The Multi-Board Residential Real Estate Contract 7.0 outlines specific details, such as:
- When a home inspection will occur
- Who will conduct it
- How long the buyer has to make resolution requests for any problems that are identified
- How long the seller has to respond
|
158 12. PROFESSIONAL INSPECTIONS AND INSPECTION NOTICES: [NOT APPLICABLE IF PARAGRAPH 11 IS INITIALED] |
This form also includes a section that the buyer may sign if he or she chooses to waive the inspection. This is the only option for doing so.
|
155 11. WAIVER OF PROFESSIONAL INSPECTIONS: [INITIAL IF APPLICABLE] ____ ____ ____ ____ Buyer acknowledges |
At Law Insider, we recognize the importance of having an in-depth understanding of any contract before signing it, including those that involve the sale of a new home.
Show Notes
In this episode of Contract Teardown, attorney Jim Lowry digs into a Chicago-area residential real estate agreement to ask: what do we gain with standardized contracts? Illinois State law dictates that brokers cannot draft sales agreements, so Multi-Board Contract 7.0 streamlines real estate transactions and ensures they are all subject to the same protections and procedures. Hear what Jim has to say about the document and decide for yourself if a standard form makes things easier on attorneys.
THE CONTRACT: MULTI-BOARD RESIDENTIAL REAL ESTATE CONTRACT 7.0
THE GUEST: Jim Lowry is a Real Estate attorney practicing in the Chicagoland area.
THE HOST: Mike Whelan is the author of Lawyer Forward: Finding Your Place in the Future of Law and host of the Lawyer Forward community. Learn more about his work for attorneys at www.lawyerforward.com.
Interview Transcript
Mike Whelan [00:00:27] Jim, thank you for joining the contract teardown show. How are you today?
Jim Lowry [00:00:31] Doing well, thanks, Mike.
Mike Whelan [00:00:33] We are going to look at a document. Let me share it with the folks at home. It is this Multi Board Residential Real Estate contract 7.0 in Chicago Town. Tell me about this document, Jim. What is it? When are we going to see this kind of thing?
Jim Lowry [00:00:46] Well you’re gonna see it quite often here in the Chicagoland area. The Illinois Supreme Court back in 1966 in a case called Quinlan and Tyson, said that real estate brokers can’t draft contracts in Illinois. So they have these preprinted forms here and brokers are allowed to fill them out, but they can only be changed or edited by attorneys.
Mike Whelan [00:01:08] Oh, awesome. And we’re going to talk about attorney involvement. But before we do that, let’s talk about you, Jim. What’s your background? What brings you to documents like this? Tell us about your practice.
Jim Lowry [00:01:17] Yeah, so I am in the northwest suburbs of Chicago–Des Plaines, Illinois, where I do a lot of real estate transactions, and commercial litigation, estate planning, etc.
Mike Whelan [00:01:27] Perfect. So you got the background we need for this conversation. So what we’re going to do Jim now is–as we do–dig into this thing. To get started, though, I wanted to ask you a little bit about these standard forms. You mentioned that the Supreme Court said you can’t do, you know, brokers can’t write, so let’s create a standard form. I’ve been in states where standard forms became a massive fight, obviously, but real estate seems to generally be okay with these forms existing. Tell us about the use of forms in Illinois and how people have reacted to it.
Jim Lowry [00:01:58] Well, normally–from a normal consumer standpoint, they really don’t notice the difference. However, in the attorney world, this is a multi-board real estate contract. It’s been approved by both attorneys and the brokers, a lot of the managing brokers and big players in the Chicagoland area. So they get together every few years and figure out the trends in what’s going on here in the Chicagoland area and try to meet the concerns that they see on a daily basis.
Mike Whelan [00:02:29] Got it! Okay, so we’ve got the standard form, residential, targeted to consumers. Presumably the commercial side would be more complex than this, but we’re trying to standardize for consumers, and what we’re going to do is jump down to some of the sections that are common in your area and a couple of the, you know, adjustments that they’ve had to make because they’re using a standard form. So let’s start with number nine. We’re jumping down to prorations. We were talking in preparation for this, there’s some tax implications. Talk about section nine, what it’s trying to do, and do you like the way it’s drafted?
Jim Lowry [00:03:01] I like it in some respects. So in Illinois here, they have…taxes are paid in arrears. So you’re 2022, you’re actually paying–the taxes are assessed–they’re paid in arrears, so you pay your 2021 taxes in 2022, and they’re paid twice a year here in Cook County, which is the largest county in Illinois, which most of the, you know, most of the real estate transactions occur here.
Mike Whelan [00:03:31] Right, and so this section is talking about those property taxes. Is that right? And so–
Jim Lowry –That’s correct.
Mike Whelan What’s the solution here? How are they solving this issue of the weird situation with the weird years?
Jim Lowry [00:03:44] Well, presumably your taxes are always going to go up because Uncle Sam and his progeny like their money, so we can’t get a handle–without going the full tax year, say we’re selling a property here in March of 2022, you’re not going to know the taxes this year, so you base–the closest estimate you can get is trying–you’re trying to hit a moving target, so you do a proration. So typically here, it’s a hundred and five to a hundred and ten percent of last year’s ascertainable tax bill.
Mike Whelan [00:04:15] Got it. And it’s saying in here, it’s got in the language, a bit of what’s included, what’s not included. It shows that accumulated reserves of HOA are not a proratable item, but it talks about the tax year of the closing, utilities and water, pre-purchased fuel. So it looks like what they’re trying to do is, you know, because like you said, it’s paid in arrears, just make it so the person who is moving into the house is not responsible for time that they weren’t in the house, which makes sense. Well, let’s talk about 10. This section is interesting. It talks about the attorney review. Again, thinking of the context of this is a standard document that was approved by the Supreme Court, by lawyers, by brokers. Talk to me about Section 10 and what the relationship is with the lawyers for the two sides in this kind of standard document.
Jim Lowry [00:05:02] So typically, what happens after a contract is signed by both parties–you have offer, acceptance–you have five days to write an attorney review period, or during that you have five days, five business days–so essentially a full week–to write a review letter making changes to the contract as it is. Typically, we include–which we’ll get to later–you’ll include your attorney and your inspection issues as well. But we can either– you can either approve the contract as written–nobody does that because we’re lawyers, right? And we need to make our money. Unless it’s like unless it’s like an “as is” deal in a property that is in a less desirable area, that a prospective buyer is gonna either raze the property or they’re gonna make the improvements, bring it up to code and make money–you know, and then flip the property or rent it out.
Mike Whelan [00:05:57] One interesting thing you know, you see, especially in a town like Chicago, the difference between the have neighborhoods and the have not neighborhoods is so vast. And you know, here’s a systemic way that you’ll see different outcomes, presumably for the different neighborhoods. How common is it to have a lawyer involved in those kinds of transactions, but they sign off on, “we’re not going to do much in the way of review.” What typically do you see in transactions of different sizes in terms of attorney involvement in Chicago?
Jim Lowry [00:06:31] I would say ninety five percent of all deals have attorneys, maybe even closer to 100 percent have attorneys representing both sides, just mainly because you’re–the seller attorney will typically take on the role of being a title agent and they’ll actually aid the title company in making sure the title is clear. If there are encumbrances or liens on the property, they will clear that up and those could be anything from building violations to maybe something that got recorded incorrectly with the recorder of deeds.
Mike Whelan [00:07:00] Got it! So it sounds like maybe the difference between the high dollar transactions and the lower dollar transactions is not whether an attorney is there, but just how much they’re allowed to, you know, push back if they’ve got the money around for a lawyer to push back. Talk about, then, the process that’s in section 10 here. Is it realistic? Does it give the attorney the room that they need to push back and make changes? Specifically, we were talking a bit about the timelines. What do you think about the way that structures this sort of pushback period?
Jim Lowry [00:07:30] Well, for us with the–when you coincide this with the inspection period, it can be difficult if you can’t get an inspector out to the property, then you’re constantly going back and forth writing extension letters and hope–especially as a buyer’s attorney–hopefully the seller’s attorney is going to be gracious enough to give you the benefit there and their clients are going to agree to that. But sometimes in a multiple offer situation, they’re not going to be. So I would say when this contract was drafted, five days made a lot of sense, but with the…increased volume in sales now, it can be a little bit more difficult to get that inspector out there. So you are starting to see some buyer’s attorneys push back and say, Hey, we have seven or eight days. And it’s not atypical to see a buyer’s attorney right off the bat shoot an email over to the seller’s attorney saying, Hey, I need X amount of days because I can’t get an inspector out there till next Friday.
Mike Whelan [00:08:33] Mm yeah. It’s almost like creating a…like a speedy trial requirement. I remember being in a city–it was in Houston, when I was in Houston, and they had, you know, a speedy trial kind of requirement, especially for certain kinds of proceedings. And it was so rare that the court could take something within the two weeks that was required for the certain kind of pleading. So they would just automatically, the court would just automatically grant extensions. And so something that was required to be done within two weeks was actually four and five weeks out. And it even says in here in this document, “If notice of disapproval or proposed modifications is not served within the time specified herein, the provisions of this paragraph shall be deemed waived,” which is a big difference and it’ll be in full effect. So you want to make sure that you get that timeline. Well, then it talks about–we talked a bit about 11, the waiver of professional inspections and then also 12, these timelines of the inspections. Talk about the inspection period and to your point before, how it applies to an attorney’s relationship with the document. How does it change how an attorney will deal with this with this process?
Jim Lowry [00:09:36] Well, the attorney’s gonna have…their main thing is coordinating the timeline, making sure everything flows through, and so you’re dealing with two different aspects here. One, you’re dealing with the inspection, which is–we’ll get to a little bit later, the ins and outs of that–but you’re also coordinating the drafting of language: what do you want to include or disinclude in the con–take out of the contract. For instance, paragraph 10D. Most attorneys here, we take it out. We don’t like that language because it’s very confusing when you look at–when you compare it to 10C. 10D requires you to reference that paragraph, and I’ve seen other attorneys that don’t do a lot of real estate law, they forget to include a specific reference to 10B, and then 10C takes over, and now you’re in a situation where it’s deemed a counter offer, which you may not want. So now you’re in an offer/counteroffer situation, and we all know from law school that the counteroffer is deemed as a new offer.
Mike Whelan [00:10:37] Hmm. Yeah, that is clumsy, I’m looking at D, “Offer proposal specifically referring to the subcontract D, which shall not be considered a counteroffer.” Yeah. So it sounds like, you know, if you decide not to do that, to the clause later, it’s deemed as waived. It–12 actually goes into quite a few steps, it looks like, for how to deal with the inspection. Talk to us about how this structures the inspection in terms of the timeline and the response and who’s proposing what and–after an inspection and how that changes the contract.
Jim Lowry [00:11:13] Well, the inspection and the attorney review period are both–they both run together. Like I was saying earlier, it can be very difficult to get an inspector out there. And even if you have a [muffled] out to the property being purchased. However, if you, it still can take a day or two for them to write the report based on how busy they are. So you get that report back and you have to speak to your client, go through it and–as a buyer–and say, Hey, you know, what–what’s a big deal here? And the problem us attorneys have, is that we’re not going out to the property. We’re not real estate agents. So sometimes these photos don’t, you know, don’t do justice as far as you know, is there a heating duct that’s disconnected. Is there–does it look like mold in the attic? Is there a shingle off a roof or something like that?
Mike Whelan [00:12:02] Hmm. Yeah. And to your point, before we move on to some big picture questions, anything else to add about this inspection period and you know, how it changes the contract?
Jim Lowry [00:12:14] Yeah, the one thing about this is that–this is only related to big issues. So it’s your heating, your cooling, your roof, structural issues, foundational issues, things like that. But the minor cosmetic issues aren’t deemed to be material to the contract, which is something worth noting. That can be difficult in a situation where you’re having new development. Like, I’ve done some condo development and you have somebody coming in and saying, Well, that’s not the model washer and dryer I ordered or something like that. So that can be a little bit difficult.
Mike Whelan [00:12:49] Well moving on from 12, in thinking of the big picture, it sounds like this document is old. It’s been revised over and over again. And when I’m thinking about this sort of standardization, there’s the question of does it work? Does it do what it’s supposed to do? Maybe in an all-consumer situation, you know what I mean, this kind of standardized document works, but when there are lawyers on both sides, as a practical matter, it almost sounds like this is a third client. As the two lawyers, you’re looking at what your clients both want. But then also what just this document wants. Talk to me about the efforts of standardization and whether you think documents like this really help in terms of restricting lawyer hours and moving the process along faster.
Jim Lowry [00:14:11] I think the theory of a standardized document like this is a good one. Also, given that court case I spoke about earlier, the Tyson and Quinlan case, the brokers aren’t equipped to generally deal with this, and sometimes they don’t even fill out these completely. So then us as lawyers have to go ahead and fill in the blanks and rewrite the contract anyway, make amendments to our attorney review letters. So I think that the theory behind it is good. However, with evolving times, these need to be revised quickly or more, maybe more frequently. And sometimes they try to come up with every single scenario that’s possible. And I think some of the drafters often go into too much detail.
Mike Whelan [00:15:00] Mm. Yeah, It feels like–
Jim Lowry So–oh go ahead.
Mike Whelan Yeah, it feels like a tradeoff, right? It feels like you can do what the lawyers want you to do and imagine all the parade of horribles. But now you’re at the point where we’re trying to cover every situation. It’s not contextually appropriate and we’ve just added a bunch of time, right? Which is what we were trying to kill in the first place. It’s an interesting struggle with these standardized documents. Well, Jim, I appreciate you bringing this one to us. For people who want to learn more about your practice and what you do in the Chicagoland area, what’s the best way to reach out to you?
Jim Lowry [00:15:31] At email at jlowry at jlowrylegal.com or at (312) 445-9450.
Mike Whelan [00:15:39] Perfect. We’ll include all that information, as well as a link to this document over at Law Insider dot.com slash resources and in the comments below on the video, we will also ask if you want to be on the show. If you want to jump on and tear down a document like this one, just email us. We are at Community at Law Insider dot com. We will see you all next time. Jim, thanks again for joining us.
Jim Lowry [00:16:02] Thank you, Mike.