Does it matter whether your real estate purchase offer is on a PRDS or CAR contract?

Real estate contracts welcomeIf you are home buying or selling in Silicon Valley, the odds are good that your area is one where the contracts and forms could be either the PRDS set or the CAR set.  Does it matter which one is used?

Weary home buyers who’ve written multiple offers on one set of forms would really prefer to not switch and suddenly need to learn a new set of terms, risks, and benefits that come with each.  The majority of Realtors representing sellers, who are listing agents, will accept offers on either one.  Not all will, though, so it’s important for the buyer’s agent to read the MLS instructions and to communicate with the listing agent ahead of time to make sure.

There are many differences between the PRDS and CAR real estate contracts.  The biggest one is that the PRDS contract by default requires that the property be delivered to the buyer in a certain conditon (unless the As Is box is checked) while the CAR contract is by default an As Is agreement. But there are many other issues too.

These contracts also reference other forms from their same set of documents which will be important to the sale.  For instance, the CAR contract requires that the seller fill out a particular disclosure form along with the Transfer Disclosure Statement:

10 A (4)  Within the time specified in paragraph 14A, (i) Seller, unless exempt from the obligation to provide a TDS, shall, complete
and provide Buyer with a Seller Property Questionnaire (C.A.R. Form SPQ)

The PRDS contract, by contrast, requires the PRDS Supplemental Seller’s Checklist.  They are not interchangeable unless all parties agree in writing to the substitution.

If a seller’s disclosures are all on PRDS forms, it’s easy to infer that the seller or listing agent prefers offers on the PRDS contract OR that adjustments may need to be made to keep the seller from having to fill out yet another form after completing the presale disclosure package. Otherwise, giving a CAR offer on a listing where PRDS disclosure forms have been used puts an obligation on the seller to complete another new disclosure.  At best, this may generate a counter offer from the seller. If your offer is neck and neck with another, this could potentially harm your negotiating position in a multiple offer situation.

 

Related reading – older articles (the forms have changed a little since these were written):

Did You Know that You Have a Choice in Which Forms Are Used to Buy & Sell Homes in Silicon Valley? (2009, this blog)

What is the difference between the CAR and PRDS purchase agreements? Does it matter which contract is used? (2011, this blog)

 

Market activity in Santa Clara County:

 

 

 

Change to the financing contingency paragraph in the PRDS contract

In Silicon Valley, there are two real estate purchase agreements, and sets of forms, in use:  the PRDS and the CAR contracts and forms (Peninsula Regional Data Service and California Association of Realtors).  Both of these are updated periodically.  The PRDS contract’s latest revision was in June 2013, so a couple of days ago I attended a training session to go over the new form and to have the highlights pointed out.

To me, one of the most striking changes is found in paragraph 2I on page one of the contract.  Have a look – one of the changes is highlighted in yellow so that it stands out:

PRDS financing contingency changes

In the past, the value and condition of the property were part of separate contingencies, the appraisal and property condition contingencies.  Now, however, if the bank or lender won’t lend (or won’t lend the needed amount) based on either of these issues, the buyer is protected by the loan contingency. That’s huge!

What will be the impact of these modifications to the contract?  In a balanced market, where buyers have their normal contingencies, I suspect there’d be no change at all.  In an overheated seller’s market, though, we may see some listing agents demanding that all offers come in on the CAR form instead, as that purchase agreement does not have such a clause as this.