New Agreement tweaks 10-5-2 formula

I am sure you are excited about the release of the new PAR Standard Agreement for the Sale of Real Estate. Regardless of your excitement, it will be in your hands soon, if not already. None of the changes are dramatic, but as with previous releases, it is an improvement. Better yet, don’t take my word, study the Agreement and reach your own conclusion.

A good place to look for change in any new release is in the inspection contingency and the newest version includes changes that I anticipate you will like. They bring greater certainty to the time within which repairs can be negotiated.

Changes made a number of years ago introduced the 10-5-2 formula. In the current version of the Agreement (published in 2012), the inspection timeline runs as follows:

• “10” refers to the number of days in which Buyer completes inspections and either accepts the property, terminates the Agreement, or submits a corrective proposal.
• “5” is the number of days given to Seller to accept or reject corrective proposals submitted by Buyer. These 5 days run from the end of Buyer’s 10-day inspection period, regardless of when it is that Buyer submits a corrective proposal. Thus, Seller always had up to day 15 to accept or reject Buyer’s proposals. BUT once Seller gives a written response to Buyer, this time period ends. That is, sellers can take 5 days if they want to, but once they put an answer in writing the ball is back in the Buyer’s court.
  
• “2” is the number of days given to the Buyer to either accept the property or terminate the Agreement if the Seller’s response indicates that Seller will not do 100 percent of what Buyer asks.

While the process can take 17 days, there was never any certainty that the parties would have the full 17 days since an early response from Seller would cut the remainder of that middle 5 day period. And since any written response from Seller started the final 2 day period for Buyer, this setup make made it difficult for the parties to effectively negotiate during that middle time period.

The new agreement keeps the 10-5-2 formula, but firmly sets the middle 5 day period to give a full 17 days for negotiations. Here is how:

• Like the old agreement, Buyer is given 10 days to complete inspections and submit a corrective proposal(s).
• When this contingency period concludes, the parties are given a 5-day Negotiation Period within which to negotiate a mutually agreeable resolution to the issues that have arisen via the inspections. This 5-day Negotiation Period is not reduced unless Seller agrees to satisfy all terms of Buyer’s corrective proposal (which then ends the contingency completely).  Even Seller’s prompt response that she will make no repairs or changes will not shorten this 5-day Negotiation Period.
• At the conclusion of the 5-day Negotiation Period, Buyer will have 2 days to terminate the agreement or accept the property in the condition as reported. Of course Buyer can still try to negotiate a written agreement during this time as well, but unless there’s a written agreement of Buyer terminates the Agreement, Buyer will have been deemed to have accepted the Property.

Assuming that negotiations will take the full time allotted, the process will take 17 days. The only possibility of shortening this period is by agreement of the parties, by Seller agreeing to satisfy all of Buyer’s corrective proposal(s) earlier than the end of the 5-day Negotiation Period, or by Buyer terminating the agreement by the conclusion of the contingency period.

Counting the days has always been a problem for some. If, after reading this, you are confused, try rereading, or use any of the other resources provided by PAR including a summary of the major changes to the form or the Guidelines for Preparation and Use.