Editor’s note: PAR is publishing a series of articles on upcoming changes to several PAR standard forms which take effect on July 1, 2022.
All five of PAR’s standard sales contracts – commercial, manufactured housing, new construction, residential and vacant land – will be updated as of July 1. The changes you’ll see may look drastic, but in reality, they are not very different from the terms which currently exist in the agreements. Take a minute to get the redline version of your favorite agreement of sale from PARrealtors.org/standard-forms/ right now (I’ll wait) and reference it while we go through this article.
The standard form committee’s main focus was to provide as much clarity as possible to the financing paragraphs of the contracts. In the forms’ current format, the first lines in the paragraphs ask the buyer to indicate whether they are electing or waiving the financing contingency. Having this waiver or election here, at the beginning of the paragraph, led many licensees to believe that if the financing contingency was waived then none of the language in that paragraph was applicable. This is not how the contract was intended to be interpreted as there are many clauses that are still relevant even if the buyer is waiving the contingency.
By the way, this is probably a good time to remind you that just because the financing contingency might be waived, it does not necessarily mean that the buyer is proposing a cash deal. The committee did consider adding a “cash” option, but felt that the changes we’re going to discuss were enough for now.
Back to the forms. You’ll see that rather than start with the buyer’s election or waiver of the contingency, the financing paragraph now starts with reaffirming the buyer’s right to get financing and setting out the rules that apply to all financed transactions. While these rules will be slightly different among the five different sales agreements, the format of each contract is the same. For example, the procedure for lender-or insurer-required repairs that is found in most of the agreements is not in the ASC, but the contractual provisions that do apply to any buyer who wants to get a loan will be set out in the first subparagraph.
You’ll also notice that the clauses on loan-to-value ratio and FHA or VA financing are now moved up to be above the election because, again, these terms apply to any buyer who wants to get financing, not just a buyer who is electing the contingency.
The contingency itself is now separated into its own subparagraph and now, everything that follows the election or waiver of the contingency only applies to the contingency. Details on the type of financing, the commitment date and information on the seller’s right to terminate are all contained in the contingency subparagraph dealing with buyer financing. Yes, you read that correctly; it says “seller’s right to terminate.” This is a second point of clarification that the committee made to this paragraph: the buyer does not have the right to terminate the agreement if their loan application is denied. Again, this is a point of clarification, not a change. The committee has added language to make it clear that a termination by the buyer may show a lack of good faith and result in the loss of their deposit.
Additional information can be found in the Guidelines for Preparation and Use, which is an instructional guide to the form available to PAR members only. If you didn’t know already, PAR also publishes a similar document written for consumers who will be using the ASR. This is also for members only and the instructional booklet will soon be published in Spanish after the board of directors approved funding at its meeting last week. More information about the release of the Consumer’s Guide in Spanish will be available as the project nears completion.
Now that you have reviewed these changes for yourself and read the redline sample of the forms, please share this information with your circle. Forward this article, share the post on social media or tape it to the door of the bathroom stall. After all, the more practitioners who are informed of and understand this update, the easier your job (and mine!) will be.
View the Legal Corner: Standard Forms Update webinar recording with PAR Attorneys Desiree Brougher and Kacy Clouser and PAR President Christopher Beadling.