COMPARING THE PRDS AND CAR® PURCHASE AGREEMENTS
Simon Offord, Esq., of Brewer Offord & Pedersen LLP
In California, a number of forms are used in real estate transactions. These forms cover a range of issues – from important conditions that must be met before the deal can close to specifics about which party pays which fees. Standardized forms are most frequently used for these transactions. Two of the most widely used standardized purchase contracts are the PRDS (Peninsula Regional Data Service) purchase agreement and the CAR (California of Realtors®) purchase agreement. While the objective of these two forms is the same – selling a home – there are distinct differences between the two forms that are important to understand. Certain default terms differ between the contracts. Certain clauses that are present in one form are absent in the other. Knowing the differences between the forms – what is included and what is not – is essential before using either one of the forms.
REAL ESTATE ATTORNEY
CHOOSE A TOPIC
The CAR form has an option for the deposit to be held by the agent (Section 3(a)). The PRDS form does not have an option for an agent-held deposit.
SPECIAL LOANS & FINANCING
The CAR form has more room to discuss specific loans, such as FHA & VA loans. The PRDS form does not have this section, but it does have a separate line item for seller financing.
The default PRDS form default is that the buyer’s pre-approval is included with the offer (2(h)). The default for the CAR form is the pre-approval is received within 3 days of acceptance.
Both contracts have a separate appraisal contingency, however the CAR contract explicitly provides that if there is no appraisal contingency, or the appraisal contingency has been removed, the failure of the property to appraise does not allow cancellation under the financing contingency (3(J)(2)).
ITEMS INCLUDED IN SALE
The PRDS purchase agreement generally has a more robust section for selecting specific items to be included in the sale, which makes it easier to follow and track.
The CAR purchase agreement automatically excludes TV/audio equipment. The CAR form also has a default option stating that TV brackets will remain, with an alternative option of removing and patching (but not painting).
The PRDS form leaves TV & audio equipment to be selected in check boxes, but if brackets are excluded, the seller is supposed to bring surfaces “as close to original condition as is reasonable and practical”.
The CAR purchase agreement has a default of 7 days as part of other disclosures.
The PRDS form has a default of 5 days to provide leases.
Click through the following sliding panels to see the many differences between how the PRDS and CAR purchase contracts deal with disclosures.
In the CAR contract, section 14(c) allows the buyer to indicate that he or she is removing contingencies concurrent with the offer and as specified in an attached Contingency Removal form.
PRDS CHECK BOXES
The PRDS form has specific check boxes for indicating that the buyer has already signed and returned the TDS, SSC, NHDS, and Lead Disclosures
Transfer Disclosure Statement (TDS) Exemptions
The PRDS purchase agreement has more robust language about the disclosures that a seller must make even if exempt from TDS requirements (section 10).
Whereas, the CAR purchase contract requires sellers to fill in a separate document regarding the exemption from the TDS (paragraph 10(a)4)
The PRDS default time frame for a seller to submit Foreign Investment in Real Property Tax Act (FIRPTA) papers is 5 days, whereas the CAR purchase contract default is 7 days. 7 days is the time frame that generally applies as the default for all seller documents in both contracts.
MANDATED REPORTS & STATEMENTS
The PRDS form makes all government-mandated reports, retrofit requirements, and compliance statements the seller’s responsibility/expense. The CAR form leaves this as a negotiable item.
The PRDS form explicitly references the buyer’s legal duty to exercise reasonable care to protect themselves. The CAR purchase contract does not contain such a warning.
Both the PRDS and CAR forms have increased language about the buyer’s potential risks for failing to inspect the property. Previous versions of the CAR form did not address these risks as comprehensively as now.
The CAR purchase contract has specific language in 10(a)(6) that requires the seller to provide an amended disclosure if new material facts are learned (unless the buyer is otherwise already aware). The PRDS form does not address new material facts.
The PRDS purchase contract includes specific language stating that there is no agreement between the parties as to the allocation of costs for Structural Pest Control issues. The CAR form does not have this language.
The CAR purchase contract includes condominium disclosures within the contract requirements in Paragraph 10(F). The PRDS form leaves condominium disclosures to a separate addenda.
The CAR purchase contract deals with the close of escrow in the very first paragraph, and the default close date is a specific date.
The CAR form does not discuss what happens if close occurs on a non-business day.
The CAR agreement states that possession is to be delivered at 6pm.
CAR has a separate Demand to Close Escrow form, referenced in 14(g).
The CAR purchase agreement has a more robust advisory within the contract about the specifics of seller occupancy post-close (9).
The PRDS agreement default for closing specifies a date for the “recordation and delivery of keys”.
The PRDS contract states that, if closing occurs on a non-business day, the close will occur on the next business day.
PRDS has possession to be delivered at 5pm.
PRDS does not have a Demand to Close Escrow form, and explicitly states that a Notice to Perform is not required to enforce close of escrow (21(a)).
The PRDS form deals with post-closing seller occupancy in a separate Occupancy Agreement.
TITLE & ESCROW
The PRDS form requires that the same party pay for both the escrow fees and the owner’s policy of title insurance (17). CAR allows the parties to separate out payment of escrow fees vs. title policy costs.
PRDS allows for a separate title contingency period (83). The CAR default is that the title contingency period is the same as other inspection contingencies.
DEFAULT VS. OPTIONAL
The As-Is Provision in the PRDS form is optional, and allows for exceptions to be added. The CAR contract makes the As-Is Provision the default.
PEST CONTROL & REPAIRS
If the As-Is Provision is selected in the PRDS contract, the Pest Control & Obligation to Repair paragraphs are automatically deleted. Since the As-Is Provision is automatic in the CAR form, the CAR contract does not do this.
Under the PRDS contract, the seller has an obligation to repair or correct all known deficiencies prior to the close of escrow, and requires no roof leaks and all appliances, plumbing, and HVAC to be operable. The CAR contract does not have this presumed in the As Is Provision.
The PRDS contract lists many of the contingencies in one place, with blanks to be filled to indicate the number of days for each contingency.
The CAR contingencies are spread out in the agreement and are dealt with in the section relevant to each contingency.
NOTICE TO PERFORM
Both contracts have the Notice to Perform requirement, but the PRDS specifically states that, if the last day to perform falls on a non-business day, then the recipient shall have until the next business day.
The CAR form does not allow a Notice to Perform to be delivered more than 2 days prior to the expiration of the time to remove the contingency. PRDS allows the Notice to Perform to be sent earlier.
The PRDS purchase agreement specifies that repair work needs to be done by a licensed contractor.
The CAR agreement does not explicitly require a licensed contractor, but does require more paperwork.
CANCELLATION & DEPOSITS
The CAR purchase agreement has a specific form that allows either part to send a written demand to the escrow holder to deliver the deposit to them. If the other side does not object to the demand within 10 days, then the escrow holder can disperse the funds.
The PRDS form has no such provision.
The PRDS contract has a separate paragraph dedicated to the seller’s obligation to maintain and deliver the property – “broom clean”. The form also recommends an insurance policy.
The CAR agreement offers a much more limited explanation of maintenance, basically stating the property shall be maintained in substantially the same condition.
HOME PROTECTION PLAN
Both contracts allow for the parties to negotiate as to who pays for the Home Protection plan. However, only the PRDS form has an option to select who specifically orders the plan.
PROPERTY TAXES/HOA FEES
The CAR agreement is negotiable as to who pays which taxes and HOA fees.
The PRDS purchase contract has set requirements as to who pays what fees.
The PRDS contract expressly prohibits assignment, absent written consent from the seller, and provides a timeline for addressing the assignment.
The most updated CAR form now also requires seller consent for assignment.
RISK OF LOSS
The PRDS purchase contract states that if the property is “materially damaged” prior to close, then the buyer has the right to cancel the contract.
The CAR agreement does not include any such language, instead apparently relying on Civil Code § 1662.
PRDS requires a date to be filled in (30).
CAR’s default is that the offer is revoked after 3 days, but allows a specific date to be inserted instead (31).