Every real estate professional has a contract form they’re most comfortable using. But in today’s market, you don’t always get to choose which contract is presented. Understanding the key differences between the Maryland REALTORS® (MAR) and GCAAR contracts can help you avoid surprises and better guide your clients through the transaction.
Jurisdiction Considerations:
The GCAAR is preferred in Montgomery County as there is a specific “Montgomery County” addendum already available that will include everything that is required to meet all the Montgomery County requirements. Beyond that, the GCARR really can be used in any jurisdiction, but you will need to ensure you include all addendums to meet local requirements. Because the required addendums vary by jurisdiction, working through the GCAAR amendments can become complex. When questions arise, your trusted title professional can help ensure the contract includes the appropriate forms.
The MAR can be used in any jurisdiction, and again, you do need to ensure the proper addendums are included for local compliance. Since the MAR contract was updated in October 2022, it functions as a true “as-is” contract unless additional addendums are included. This means the property is sold in its condition as of the date specified in the contract (typically within five days of closing). The MAR addendums have been streamlined as a result. However, with the inclusion of the revised “Inspection Addendum” the buyer can now unilaterally terminate the contract based on the inspection results. While the GCAAR also contains the language “as is” the body of the contract itself contains the provision related to the date of the inspection, thus arguably inviting grounds for conflict should an inspection yield negative results.
Risk of Loss:
The GCAAR is very clear that the risk of loss (meaning damage to the property by something like a fire or a flood) “remains with the seller until the execution and delivery of the Deed of Conveyance to the Buyer at Settlement.” The MAR specifies that the risk of loss passes to the buyer when legal title passes (which for our purposes is the completion of settlement) or possession is granted to the buyer, whichever occurs first. This can become an issue if settlement is delayed but the buyer is allowed to take early possession of the property.
In that situation, the buyer’s homeowner’s insurance may not yet be in effect because settlement has not occurred. At the same time, the seller’s insurance may no longer provide coverage under the terms of the contract, potentially leaving the property without insurance protection during that period.
Settlement Cost Provisions:
Under the MAR contract, the buyer generally agrees to pay settlement costs and charges, except for expenses related to clearing title and releasing the seller’s liens or other encumbrances. If the seller chooses not to attend settlement, however, they may still be responsible for additional costs such as Remote Online Notarization (RON) or an outside notary. The MAR does allow for the seller to be charged additional fees required should the seller elect not attend settlement as scheduled (such as a RON, outside notary etc.) In contrast, the GCAAR provides that fees for deed preparation, a portion of the settlement fee, releases and title resolution can all be collected from the seller.
Resolution of Disputes:
The MAR requires mandatory mediation as a first step to resolution of any disputes arising thereunder, whereas the GCAAR suggest mediation as a first step, but does not require it. Thus, using the GCAAR leaves the parties open to the extreme costs of defending litigation as opposed to the relatively nominal expense of mediation.
Final Note:
One of the most important things to remember is that neither contract is set in stone. Buyers and sellers can negotiate many of the provisions to better fit the transaction. For example, parties using the GCAAR contract may choose to add a mandatory mediation provision, while those using the MAR contract may wish to modify the risk of loss language. Reviewing these details before the contract is finalized can help avoid misunderstandings later in the transaction.
TOPIC
Best Used
Inspection
Risk of Loss
Settlement Costs
Mediation
MAR
Statewide
As-is unless addendum
Transfers at settlement or possession
Buyer pays most costs
Required
GCAAR
Montgomery County & surrounding areas
Inspection language built into contract
Seller retains risk until deed delivery
Seller pays additional specified costs
Recommended but not required
Editor’s Note: This article was originally published in March 2023. While many of the concepts remain relevant, real estate professionals should always use the most current versions of MAR and GCAAR forms and consult with legal counsel or a trusted title professional regarding contract-specific questions.