The PRDS or Peninsula Regional Data Service residential real estate contract is in wide use on the San Francisco Peninsula and parts of Silicon Valley and the “South Bay” along the west side, beginning at San Jose’s Almaden Valley and going north west along the coastal hills through Los Gatos, Monte Sereno, Saratoga, Cupertino & west San Jose, Sunnyvale, Los Altos, Los Altos Hills, Palo Alto and on into San Mateo County. Nearby areas such as Campbell and the Cambrian district of San Jose may use it too.
Why does it matter so much for home sellers which purchase agreement form is used? There’s a world of difference between the “AS IS” content of the CAR contract and the “Seller’s Obligation to Repair or Correct” element of the PRDS. Today let’s just focus on the one aspect of the seller’s repair obligations. (For broader info, please see the link at the bottom of this article.)
The singularly most distinct feature of the PRDS contract is that unless the As Is box is checked, it obligates the seller to make sure that the property is in a certain condition by close of escrow.
What the PRDS contract requires of home sellers:
19. SELLER’S OBLIGATION TO REPAIR OR CORRECT: Unless this Contract includes the “AS IS” provision in Paragraph 17, Seller shall make repairs or corrections as set forth in this paragraph. Seller’s repair or correction obligations shall be limited to deficiencies known by Seller or discovered before Close of Escrow. Disclosure of defects and deficiencies made by Seller in the Disclosure Documents or elsewhere do not relieve Seller of any agreed-upon or statutorily required repair obligations.
The first part of paragraph 19 spells out a number of things, including that the sellers are limited to the items here (and of course the pest work in paragraph 18 unless it’s excluded plus whatever is mandated by the state). The house does not have to be perfect. What IS covered? Keep reading for the list:
Seller shall Deliver the Property at Close of Escrow in the following condition (subject to any Risk of Loss as specified in Paragraph 25J): (1) Roof/skylights (not including gutters) shall be free of leaks; (2) Built-in appliances, plumbing, heating, air conditioning, electrical, solar, landscaping sprinklers, sewer/septic, and pool/spa systems, if any, shall be Operable (“Operable” shall mean that the appliance or system meets its basic intended function but may not operate as if new or may not satisfy current building codes); (3) Plumbing systems, shower pans, and shower enclosures shall be free of leaks; (4) Chimneys and fireplaces, including dampers, shall be operative and free of structural defects; (5) All broken or cracked glass (excluding seal-failure of multi-paned windows/skylights) shall be replaced by Seller.
How do we determine what needs repairs or not? Usually it’s by having inspections. Most sellers today will have pre-sale inspections. But if they do not, when the property is in escrow and buyers order their inspections, the sellers will have to do the work as outlined above (plus any pest or termite related work, and that’s covered in paragraph 18). Let’s look at these one by one.
(1) Roof/skylights (not including gutters) shall be free of leaks – a roof inspection by a professional roofing inspector will certify whether the roof is leak free and what work may be required to make it leak free for the next year or so.
(2) Built-in appliances, plumbing, heating, air conditioning, electrical, solar, landscaping sprinklers, sewer/septic, and pool/spa systems, if any, shall be Operable (“Operable” shall mean that the appliance or system meets its basic intended function but may not operate as if new or may not satisfy current building codes) – most home inspections will not include sprinklers, so home buyers should read the disclosures carefully and it would be good to test the sprinklers also. An HVAC inspection will provide a bid for any repairs needed on the heating and AC if they are not working or are unsafe. Likewise with a pool inspection – that will reveal malfunctions but also ways to improve performance.
Long ago, the wording in this paragraph was that all of these elements would be in “good working order”. that language was changed to “operative” in recent years. The difference can be found in a bathroom fan as an example. Many older fans are noisy, but still work. It may be operative but not in “good working order”, which implies a more like new condition.
(3) Plumbing systems, shower pans, and shower enclosures shall be free of leaks – again, a home inspector will check for leaks. Shower enclosures can sometimes be fixed by replacing a rubber seal at the bottom of the door or by improving caulking. Often, though, they simply need to be replaced.
(4) Chimneys and fireplaces, including dampers, shall be operative and free of structural defects – a chimney inspection will provide this information and the cost to remedy any problems. This can be expensive if the chimney is broken, which can happen from an earthquake.
(5) All broken or cracked glass (excluding seal-failure of multi-paned windows/skylights) shall be replaced by Seller – this is usually evident to a buyer without a professional inspection and it includes things like built-in mirrors and glass on lamps.
That’s it for the non-California mandated and non-pest issues. No foundation cracks to repair. No chipped tiles to replace. No stained carpet to clean. Buyers may ask for any repairs, but the above list is what sellers are obligated to do (plus, again, the pest work per paragraph 18 and the items required by the state). Even with As Is agreements, buyers often request repairs, credits or price reductions, but with the PRDS contract the buyers are guaranteed that the sellers will do certain work..
Why pre-sale inspections are so important
Home owners and particularly home sellers may feel like their house “is fine”, nothing to worry about. But often they don’t know, unless they have professionals come to inspect, what is wrong. Chimneys which are broken from an earthquake or other movement may look OK, but if the flue is cracked it may have to come down to the roof line, or maybe lower, and be rebuilt. A furnace or heater may seem to operate well but in fact have a cracked heat exchanger, and that can cause lethal carbon monoxide to go into the air. These things can be expensive, so rather than assume it’s all in good working order, have it checked out. Even if you aren’t selling your house or condo, it’s good to have periodic inspections to make sure that everything is safe and that your home isn’t at risk of being further hurt or hurting you by some undetected condition.
For home sellers in the regions where the PRDS is used, this is extremely important. If you agree to the terms of the contract but don’t truly know the condition of your home, you’re signing a blank contract to provide repairs as outlined above unless you sell As Is. And even if you do sell As Is, if a buyer inspects later and finds big problems, there may be a renegotiation or a cancellation of contract. If the property sells a 2nd time, it’s almost guaranteed to sell for less.
For further reading on contracts, forms and escrows:
Does the contract count calendar days or business days?
What is an “exclusion” in a real estate contract? What is an “inclusion”?
Should you write an offer with no contingencies? What is the risk with a non-contingent offer?
