Regional Sales Contract and Conventional Financing Addendum

Summary of Revisions

Alan Simon, Chair NVAR Standard Forms Committee

A revised Regional Sales Contract (RSC) has been developed and is being released effective January 1st,

2012. There are significant changes in the new version compared to the current version of the RSC, as

well as revisions to related forms like the Jurisdictional Addendum among others. The principal changes

are summarized here. You are encouraged to take advantage of training being offered in the industry

and/or to consult your broker about learning opportunities to help come up to speed on the new

contract prior to the January 1st implementation.

First of all, the length of the Contract has been reduced to 8 pages from its current 10. At the same

time, we are using a little larger font size to improve readability. The reduction in pages is due primarily

to removing CONVENTIONAL FINANCING TERMS, some DEFAULT language, and most of the ADDITIONS

paragraph from the RSC itself. As described herein, some of this language has been moved into the

Jurisdictional Addendum, and some to a new Conventional Financing Addendum. This has helped to

minimize the core portion of the contract, and allows you to include only the additional language that is

necessary as addenda.

JURISDICTIONAL ADDENDUM (Paragraph #2):

This paragraph is in place of the old ‘ADDITIONS’ paragraph (old #32). The placement of the

paragraph was moved up-front to clearly indicate which Jurisdictional Addendum is included in

the contract. Additionally, the list of jurisdiction-specific addenda that could be checked-off was

removed; these are instead contained in the corresponding Jurisdictional Addendum, with only

those forms that are applicable to the jurisdiction. This should improve clarity by eliminating

forms on the list that are not available in a particular area.

PRICE AND FINANCING (Paragraph #3):

The PRICE AND FINANCING paragraph now incorporates language that was formerly contained

in the DEEDS OF TRUST paragraph (old Paragraph #3) for the Purchaser to indicate the loan

type(s) that are applicable.

For consistency, there is a now a Conventional Financing Addendum, in addition to the existing

addendum for FHA/VA financing.

The specific loan terms have been removed from the RSC, and instead are contained in the

corresponding financing addendum. The only characteristics of the loan(s) indicated in the

Contract are the Obtain OR Assume Loan and Fixed OR Adjustable Rate selections.

Also removed from the Contract are the CONVENTIONAL FINANCING TERMS formerly contained

in Paragraph #10. Specifically, the APPRAISAL and FINANCING options, (i.e., whether or not the

contract is contingent on the appraised value, and whether or not there is a contingency on the

Purchaser obtaining loan approval), and the SELLER SUBSIDY language. Similarly, the language

in the REPAIRS paragraph (old Paragraph #17), covering lender required repairs was removed.

All of the above is now contained in the various financing contingencies.

Based on this restructuring, prior Paragraphs #3, #10, #11, and #17 have been deleted from the

Contract and incorporated into other areas.

PROPERTY MAINTENANCE AND CONDITION (Paragraph #7):

The name of this paragraph has been changed from ‘EQUIPMENT, MAINTENANCE AND

CONDITION’ to ‘PROPERTY MAINTENANCE AND CONDITION’ but moreover, there are major

changes in the content of this paragraph that significantly affect the obligations and

expectations of the parties.

The principal change is that the property is to be conveyed in “As –Is” condition, with optional

inspection contingencies available. The Seller is no longer required to provide any warranty as

to the condition of equipment, appliances, or major systems by default. Purchasers are

encouraged to include a home inspection contingency in order to assess the property condition

and to negotiate items to be repaired. But if the Purchaser declines the opportunity for

inspection(s), the Seller’s obligation is simply to deliver the property in substantially the same

condition as of the date specified in the opening sentence of this paragraph.

Why was this change made?

The limited Seller warranties previously contained in Paragraph 7 often led to

disagreements and fostered misunderstandings between the parties from the time of

contract ratification through settlement. The most common problems encountered

were related to:

1) Various interpretations as to whether an item or repair was covered by the

Seller warranty in “Paragraph 7” and therefore whether it had to be

corrected as a “Walk-through” item prior to settlement;

2) A lack of clarity in the meaning of the term “normal working order;” and

3) Two separate sets of requirements for repairs made under the Home

Inspection removal process, and repairs made under the Seller warranty in

Paragraph 7.

Therefore, the former two-stage process of Home Inspection items to be negotiated,

followed by Property Condition (“Paragraph 7”) items to be repaired or replaced, is

eliminated. Instead, there is an inspection period—if applicable—and a single list of

items to be negotiated. The Seller does not warrant the condition of other items—only

that the property is in the same condition as on the date indicated at the top of the

paragraph—which can be the Contract Date, date of home inspection, or other date

specified.

The end result should be that the expectations of the Purchaser and the Seller will be

more consistent throughout the process, which should reduce disputes at settlement.

ACCESS TO PROPERTY (Paragraph #8):

This paragraph was moved to immediately follow PROPERTY MAINTENANCE AND CONDITION,

to provide a more logical flow. Language was added to provide clarity as to the scope of the

inspection in an effort to remind agents accustomed to inspecting for “Walk-through” items at

the final inspection.

PERSONAL PROPERTY AND FIXTURES (Paragraph #10):

Removed the ‘As-Is Items’ list from this paragraph. The need to identify “As-Is” items no longer

applies since the Seller is not warranting the condition of any items unless they come under the

home inspection contingency.

FINANCING APPLICATION (Paragraph #11):

Language was added at the end of the paragraph authorizing the disclosure of the Purchaser’s

credit information to lenders, and for the Seller to comply with reasonable lender requirements.

TERMITE INSPECTION (Paragraph #14):

Deleted the word “structural” from “…visible structural insect damage” so that it now reads

“visible insect damage” because the assessment of structural termite damage is not included in

a typical termite inspection.

TITLE (Paragraph #16):

Deleted the word “requirements” in the last sentence because it was vague and lent itself to an

overly broad interpretation by Purchasers and a very limited interpretation by Sellers.

ATTORNEY’S FEES (Paragraph #21):

This paragraph has been expanded to provide a more comprehensive description of the

conditions under which a party would be entitled to recover legal expenses from another party

that breaches the contract. The term “Legal Expenses” is used in place of “attorney’s fees” and

it is defined in the DEFINITION paragraph (see below).

Additionally, the broker indemnification language has been revised to clarify the reference to

the “responsible party” in the prior version of the contract.

DEFAULT (Paragraph #23):

This paragraph remains largely the unchanged, however the list of examples of Purchaser

default scenarios was removed and incorporated into the Conventional Financing Addendum

since these items are related to financing, appraisal, and lender requirements. This is consistent

with the placement of this list in prior versions of the RSC.

OTHER DISCLOSURES (Paragraph #24):

Added “Defective Chinese Drywall” to the list of items in the PROPERTY CONDITION paragraph

(#24.A).

ELECTRONIC SIGNATURES (Paragraph #32):

Authorization for use of electronic signatures has been added to the Contract, thereby

eliminating the need for a separate addendum or for similar language in the Jurisdictional

Addendum. Initial blocks are provided for each party to authorize the use of electronic

signatures.

General/Housekeeping Items:

All paragraph references throughout the contract are now by name, not number.

DEFINITION (Paragraph #26):

Language was added indicating that all references to time of day refer to Eastern Time.

Added a definition of “Legal Expenses” which is used in the revised ATTORNEY’S FEES

paragraph.

TIME IS OF THE ESSENCE (Paragraph #30): This language has been added to the RSC so that it is

no longer needed in the Jurisdictional Addendum.

OTHER TERMS (old Paragraph #34): Paragraph has been deleted from the RSC; the Jurisdictional

Addendum will now contain space for other contract terms.

Date of Ratification: This information in the signature area has been set off within a box to make

it standout to help ensure that the date is filled in.

Conventional Financing Addendum

The Financing Contingency has been re-written to more closely track with the recently adopted Land

Sales Contract. The most significant changes from the Conventional Financing Contingency in the prior

(2006) RSC are the elimination of Regional Form 100 and the six-point Lender Letter. The Contract is

now contingent upon the Purchaser obtaining and delivering the Seller a “Written Commitment” for the

specified financing. If the Purchaser is unable to produce such a commitment by the deadline the Seller

may declare the contract Void unless the Purchaser can obtain such a commitment or proof of the

ability to close without financing within 3 days. The Purchaser no longer has the option to remove the

contingency without proving their ability to close.