“We’ve had some last-minute changes and we want to ensure the form is legally compliant and meets the needs of our members,” said Mike Barth, PAR’s standard forms specialist.

Electronic vendors have started to post the e-forms and all vendors are expected to have the new form online by March 1. The previous ASR is still acceptable to use for transactions.

A sample of the new form and the Guidelines for Preparation and Use (PAR login required) are available on PAR’s web site.

The revised Agreement of Sale incorporates some major changes: an expanded broker box; updated mortgage contingency paragraph and a new format for handling inspections. It also has a reduced default time for inspections of 10 days. In response to the new Real Estate Licensing Registration Act (RELRA) changes, the form incorporates a change in language to dictate what will happen to escrow monies in the event of a dispute.

The Lead-Based Paint Disclosure Form (PAR Form LPD) is being released with the Agreement of Sale and replaces the previous Lead Paint Addendum. The Oil, Gas and Mineral Rights Addendum (PAR Form OGM), which was developed to explain what surface and subsurface rights are included in the sale, is available now.

The new Agreement of Sale

The new PAR Standard Agreement for the Sale of Real Estate (ASR) is set for release in mid-to-late January. Print forms are now available for preorder and the electronic version will be available from the electronic form vendors around January 15.

The revised Agreement of Sale incorporates some major changes and REALTORS® who have reviewed the new form are ultimately giving it the thumbs up, according to Mike Barth, PAR’s standard forms specialist.

REALTOR® offices can continue to use the 2005 version of the  Agreement of Sale; it is still legally compliant. That version will also be available for REALTORS® who may be in the middle of a transaction and want to be consistent with the form. Electronic forms vendors will have both versions available for several weeks to assist in the transition.

Barth says one of the most substantive changes in the new Agreement of Sale is an expanded broker box. The front page of the form outlines the relationship between the broker, the agent, the buyer and the seller.

The form includes an updated mortgage contingency paragraph to include an appraisal contingency clause. The form has a new format for handling inspections to include more inspection contingencies and allow for a variety of circumstances. It also has reduced the default time for inspections to 10 days.

In response to the new Real Estate Licensing Registration Act (RELRA) changes, the form incorporates a change in language to dictate what will happen to escrow monies in the event of a dispute.

The Agreement of Sale also now has mandatory buyer/seller mediation as compared to the previous agreement where the buyer/seller can waive mediation.

Guidelines for the new Agreement of Sale, which explain how to use the ASR form, will be available at parealtor.org by January 15.

Barth has also been speaking at local association meetings to explain the changes and what they mean to REALTORS®.

Last updated in 2005, the new Agreement of Sale includes:

• Expanded and reorganized broker blocks which have been changed for clarity and ease of use
• Updated mortgage contingency paragraph to include an appraisal contingency clause
• Changed format for handling inspections to include more inspection contingencies and allow for a variety of circumstance
• Reduced default time for inspections to 10 days
• Change in language to dictate what will happen to escrow monies in response to the new Real Estate Licensing Registration Act (RELRA) changes
• Mandatory buyer/seller mediation as compared to the current agreement where the buyer/seller can waive mediation.

The revised form was recently approved by the PA Association of REALTORS®’s Standard Forms Oversight Committee and will require final changes prior to its publication.

As in the past, Guidelines for the Agreement of Sale, which explains how to use the ASR form, will be available when the form is published.

Do you check to see if your potential buyers are actually motivated to buy and that they’re qualified to purchase the homes they’re looking at? Or do you just sign a buyer agency contract (you do sign one, right?), load them in the car and hope they eventually purchase something?

Or to put it differently: are you chicken?

PAR publishes a form called the Non-Exclusive Buyer Agency contract Form NBA. The basic purpose of Form NBA is to help brokers and consumers “get their feet wet” with each other on a non-exclusive basis while ensuring that the broker is entitled to payment if he/she is the procuring cause of a purchase.

Many brokers object to the use of Form NBA because they believe it provides too much of an opportunity for a consumer to walk away from the brokerage. And it does. What many brokers and agents don’t always see, though, is that it also provides an opportunity for a broker to walk away from a consumer.

So maybe if you’re too “chicken” (hey…not my words, OK?) to aggressively qualify a buyer from the moment he walks into your office you might prefer to work with that person for a few weeks under a non-exclusive buyer agency contract instead. Then if it turns out that maybe he isn’t that motivated, or he’s not able to qualify for a loan, or he’s just somebody you dread spending time with, it is much easier to end that professional relationship and move on rather than being locked into a long term exclusive agency agreement.

Just a thought.

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The first change allows licensees to be paid through “qualified associations” that are established by one or more licensees affiliated with the same broker. Up until this change, the law required that brokers pay licensees directly and not through any sort of a corporate entity. Now, brokers can pay to (and licensees can be paid as) certain entities as laid out in the law.

There are a number of issues to be considered when deciding whether or not to establish a qualified association. These include:

The second change clarifies a number of issues relating to escrow requirements. The biggest change to the escrow rules now permits brokers to release escrow where there is a dispute between the parties if the parties agreed in advance how the money should be distributed in the event of an unresolved dispute. The PAR Standard Forms Oversight Committee will be working on appropriate forms language to assist members in handling this issue.

Read detailed FAQs and review the full text of the changes in the Issues Resource Center of the PAR Web site

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Yay.

But on the plus side, that bill reminded me of one of my all time most favorite topics of conversation – proration of property taxes!

For REALTORS®, it is important to know the tax year when you’re pro-rating taxes for settlement. If your buyer is closing at the end of March it will matter quite a bit if they’re going to be expected to reimburse for three months of taxes on a fiscal year basis (April – June) or nine months on a calendar year (April – December).

Municipal taxes are all done on a calendar year basis – that’s easy. School taxes are a bit harder. As the PAR Agreement of Sale reminds you: “For all school districts, other than the Philadelphia, Pittsburgh and Scranton school districts, the period covered by the tax bill is July 1 to June 30. For the Philadelphia, Pittsburgh and Scranton school districts, tax bills are for the period January 1 to December 31.”   

Every couple of years we’re contacted by a few people who insist that THEIR school district taxes on a calendar year rather than a fiscal year and that we need to change the Agreement to reflect that fact. It’s usually an agent looking for clarification, but we’ve also been contacted by attorneys representing school districts. Only problem is…well…they’ve all been wrong so far – at least as far as the law is concerned.

Pennsylvania state law says that school districts classified as First Class (Philadelphia) and First Class A (Pittsburgh) are automatically on a calendar year basis. All other classes of school districts (Second through Fourth) are automatically on a fiscal year for taxes, except that a Second Class district is permitted to change to a calendar year if an appropriate resolution is adopted by the local school board – which appears to be why Scranton taxes on a calendar year. No other districts are permitted to tax on a calendar year basis.

To put it in perspective, there are 501 school districts in Pennsylvania (maybe 500 by the time you read this). Of the other 498 not listed above, only 93 are Second Class districts. So if you’re calling me from one of those 93 there’s a possibility that the district is using a calendar year. Send a copy of the school board’s enabling resolution and we’ll be happy to change the form. But if you’re calling from any of the other 405 school districts, the law (24 P.S. §6-671, for those who are interested) requires that the district tax on a fiscal year basis. If they’re not doing it that way…well…um…they should probably fix it.

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Thus begins the 2009 edition of the NAR Legal Scan (password required), a survey done by the NAR legal department every two years to identify legal trends in real estate. For property managers there’s also a separate Legal Scan sponsored by IREM.

If you haven’t seen the Legal Scan before it’s worth taking a quick read to see what’s going on at the national level. While this is very helpful in identifying what issues are causing problems (anyone surprised to hear that dual agency and seller disclosure are near the top of the list?), what it can’t do is provide the resources to help keep yourself and your colleagues in line every day.  For that you can rely on certain PAR resources, including but not limited to:

• PAR Standard Forms: As one member says, “we have a form for that!”  Most common transactional issues are dealt with in our major forms or addenda. Always try looking for a PAR form before trying to write something yourself. And don’t forget about the detailed Guidelines for Preparation and Use that explain how to use the most popular forms. Get them. Read them. Keep them.

• Issues Resource Center: When you need information on advertising rules, CMA’s, mold, fair housing and bunches of other topics, look for these resource pages with tons of links.

• Legal and Regulatory Links: Ever had someone say “you can’t do that, it isn’t legal!” Ask them to give you the section of the law/regulation that says so…then double check here. This page has most of the relevant PA laws and regulations you’ll run into everyday.

• Legal Hotline: When all else fails, call the Hotline.  This FREE member service connects you with attorneys in the office of PAR’s outside legal counsel. They’re not ‘your lawyer’ in a dispute, but they can often help guide you so a small dispute doesn’t blow up into something bigger. (This is ONLY for members, not for clients.)

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For those of you who aren’t quite ready, however, the Commission has just announced an official “delay of game” for mandatory implementation of the new form. According to communications received from the Commission on Thursday, June 11:

“…the Commission has extended the implementation time for an additional three months. As such, licensees must begin using the new short-form Consumer Notice as of SEPTEMBER 15, 2009. Licensees may use either the new short-form Consumer Notice or the long-form Consumer Notice until September 15, 2009 SO LONG AS one of the forms are used whenever there is an initial interview.”

** NOTE:  PAR has been informed that this statement will be on the Commission Web site, but it was not yet published at the time of this post.

To put it another way, if you’re already using the new form, keep using it and don’t do anything differently. You’re completely in compliance and the world is a wonderful place.  If you hadn’t quite updated your e-forms, or if you forgot to order your new printed forms, you have some breathing room. But don’t wait too long – September will be here before you know it.

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The agency types have been moved to the beginning of the form and are now in a paragraph format to improve the readability of the form. A space to fill in the license number has been added to clearly identify the licensee. There has been no change to the Oral Consumer Notice or the Consumer Notice for Tenants.

A full description of the changes to the Consumer Notice is available on the Standard Forms page of the PAR web site. The new version of the Consumer Notice is available through PAR’s electronic forms vendors, by calling 800-555-3390 or at bsre.biz.

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Lately we have been seeing bidding wars for real estate.  Some have fetched more than 25 percent over the asking price.

No, I’m not lost in some sort of 2006 time warp. The reality is that, with so many REO or short sale properties on the market, prices are being set extremely low to entice buyers…and it seems to have worked. So how do you handle all of these offers?

About eight months ago, PAR released a standard form to handle bidding wars, called the Price Escalation Addendum (PEA). It had been created in reaction to hot market bidding wars and many laughed at the timing of its release last fall. We told them it could also be used in a down market. I guess we were right.

Essentially, the form allows buyers to show that they are willing to beat any other offer on the property by a certain number of dollars, up to a stated purchase price cap.

For example, Buyer #1 might make an original offer of $200,000 for a property, but would be willing to beat any offer by $1,000 up to a cap of $220,000.  In this case, if Buyer #2 has offered $215,000, Buyer #1 will buy the property for $216,000.

The PEA also allows buyers to state whether they are willing to waive the mortgage contingency to make their offer more competitive and where any additional money will come from if the purchase price is increased through a bidding war. If buyers want to have an appraisal if the purchase price is increased, they can ask for that too.

For some of you, a bidding war won’t happen until the market heats up again. Others will find themselves reaching for this form tomorrow. Either way, isn’t it nice to know it’s there?

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