The California Residential Purchase Agreement Has Significant Improvements

Residential Purchase AgreementQ: I have not purchased a home for many years and my agent mentioned that the California Association of Realtors has revised the standard residential purchase agreement. Is this true and how has the agreement been changed?

A: The California Residential Purchase Agreement and Joint Escrow Instructions (“RPA”) has not been changed for many years, but a new version has been issued by the CAR effective April 2010 that makes several significant improvements that should help to make the agreement easier to use and understand. Some of the improvements are to the order of the paragraphs and others are to the content of the provisions. The RPA constitutes an offer and if it is accepted without any counter‐offers, it will constitute a binding contract. Therefore, it is the most important document in the transaction that is supplemented by the other forms in the transaction.

The RPA is prepared by the buyer of the residence, usually with the assistance of an agent. The agency relationship paragraphs have been moved from the end of the RPA to the first page, and this is important because the disclosure and confirmation of the real estate agency relationships is one of the more problematic issues in the transaction, especially if a single agent is representing both the seller and buyer. By moving the agency paragraph to the first page, it assists both the seller and buyer to confirm their respective agency relationships prior to completing the other sections of the RPA.

The finance terms being offered have been substantially revised to provide more clarity in the types of loans that the buyer is proposing as conditions to the closing of the transaction. The initial deposit has been revised to provide two options, when in the past the buyer typically provided the deposit check to his agent. Now, the delivery of the deposit check can be made directly to the escrow holder after the offer has been accepted by the seller. If the offer is not accepted, then no deposit check needs to be prepared, and this makes delivery of the deposit to the escrow holder more direct after an agreement has been reached. This will become the norm because it enables the agent to avoid having to handle the deposit check and the responsibility to deposit the check into the broker’s trust account. The option to deliver a deposit check to the buyer’s agent remains in the RPA, but it is unlikely to be used in the future because now the identity of the escrow holder can be agreed upon and the deposit check made payable to escrow.

Added to the paragraph for an increased deposit is a provision that if a liquidated damages clause is incorporated into the RPA, then the buyer and seller will sign a separate liquidated damages clause in C.A.R. Form RID for any increased deposit. This is an example of how the RPA has been changed to include references to the particular C.A.R. form that should be prepared by the agents in the respective paragraphs and helps insure that all of the necessary forms are completed.

Both the first and second loan paragraphs have been changed to provide for specification of whether the financing is conventional or FHA, VA , or by the Seller. A separate subparagraph for FHA or VA financing provides that the buyer must provide the seller with written notice of any such lender required repairs or costs that the buyer is requesting the seller to pay or correct, and enables the seller to refuse to pay or correct such repairs or costs.

The opinions expressed in this article are those of the author, and they do not create an attorney-client relationship or constitute legal advice. Individual circumstances may vary and professional advice is recommended before making any decisions concerning legal matters.

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Forry Law Group: Real Estate and Civil Attorneys

15501 San Fernando Mission Blvd., Suite 309
Mission Hills, CA 91345
Office: (818) 361-1321
Fax: (818) 365-6522


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