Reanna Martinez

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Understanding the California Residential Purchase Agreement & Joint Escrow Instructions

Understanding the CA Residential Purchase Agreement by myCAREexpert
Understanding the CA Residential Purchase Agreement by myCAREexpert

 

Learn how to read and negotiate the terms of the standard California Residential Purchase Agreement when buying or selling real estate.

 

The transfer of real estate is a legal process with loads of paperwork, often written in legalese.  While the interpretation can seem daunting for those new to the marketplace, the standard California Residential Purchase Agreement is not as complicated as it seems.  With built-in safeguards for both the buyer and seller, the standard California Residential Purchase Agreement is written with consumer protection in mind.

Below we explain each section in detail.  Sections where terms can be edited will be highlighted.  All “by default” timelines can be edited in the contract.  Click on the thumbnails below to enlarge the page, or download a full sample copy of the California Residential Purchase Agreement here.

 

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The first page of the CAR California Residential Purchase Agreement is one of the most important.  This page will detail the offer price and type of financing you will bring in for the purchase of the home.

OFFER

1. A. BUYER(s) NAMES: List the buyer(s) full, legal name(s) that will be used for signing all  associated legal documents and that will be recorded on the title deed upon purchase.

1. B. PROPERTY ADDRESS: Fill in the target property address, including street address, city, county, zip code, and assessor’s parcel number (“APN”  The APN number of a property is public record and your real estate agent will have access to the APN number through the MLS on the property listing).

1. C. OFFER AMOUNT: Spell out the purchase price first in writing and then the dollar amount (ex. “one hundred thousand dollars, $100,000)

1. D. CLOSE OF ESCROW: Here is where you need to estimate the time necessary for the close of escrow.  Your real estate agent or lender can help make this estimation.  Generally speaking, cash transactions can close the fastest, sometimes within 10 business days.  Financed transactions (taking out a loan) will take longer as the lender has a lengthy evaluation and underwriting process.  Buying a house with a loan will usually take at least 45 days, assuming you have a clean credit history and there are no disputed items on your financial record.  If you are financing, consult with your lender on the amount of time they recommend for the escrow process.

1. E. PARTIES: This is a disclosure to inform you that the stated buyer and the stated seller are the only parties in the transaction.  While the buyer and seller may have agent representation, the purchase contract is solely between the buyer and seller.

AGENCY

2. A. AGENCY DISCLOSURE: When you enter into a contract with a licensed California real estate agent, they are required to provide the “Disclosure Regarding Real Estate Agency Relationships” which details information regarding the responsibilities of a seller’s agent, a buyer’s agent, or a dual agency.  Ask your real estate agent to review the information with you in detail so you understand what their role is and how you are or are not protected.

2. B. AGENCY CONFIRMATION: This is where the buyer’s agent and/or seller’s agent will be identified.  Input the name of the company/brokerage, not the name of the individual agent.

2. C. POTENTIALLY COMPETING BUYERS AND SELLERS: This is an acknowledgement that you have received the other necessary agent disclosure, the “Possible Representation of More Than One Buyer or Seller.”  In essence, it states that buyer’s agents and seller’s agents are often working with more than one buyer or seller at a time; you may not be your agent’s only contract.  This means, for example, that a buyer’s agent may show another client the same property.  Both clients may even bid on the same property.  This is not unusual, but speak with your real estate agent to fully understand their responsibility to you.

FINANCE TERMS

In this section, you will detail how you will be paying the stated offer price.  Some parts of this section will not apply to your situation.  Fill in the areas that are relevant to your offer.

3. A. INITIAL DEPOSIT:  This section is required for all purchases.  The initial deposit is your earnest money (EMD).  This can be any amount and usually ranges between $3,000-$10,000 for a midlevel home.  This is not your down payment.  An earnest money deposit is more like a token that you are serious about moving forward with the purchase.  The EMD must be cash on hand that you may deliver via wire transfer, cashier’s check, or personal check.  Your EMD will be held in an escrow account and must be delivered to escrow within the stated time limit, which, by default, is 3 business days after acceptance of the offer.

3. B. INCREASED DEPOSIT:  Sometimes, to “sweeten the deal,” a buyer may opt to increase their deposit after a certain number of days or after a specific event has taken place.  An increased deposit is not required.

3. C. ALL CASH OFFER: If you have all the funds in cash to cover the purchase price along with closing costs, you can select an all cash offer and skip all the financing sections.  You will need to provide verification of funds sufficient to close the transaction.

3. D. FINANCING TERMS: Hopefully you have been pre-approved by a lender so you know what type of loan you are working with and a fairly good estimation of the terms of the loan in question.  In this section, you will need to disclose the type of financing you will be receiving in order to close the transaction (FHA, VA, Conventional, Seller Financing, etc.).

3. E. ADDITIONAL FINANCING TERMS: Use this blank space to include any terms that are unique to your financial situation and not listed on the standard purchase agreement.

3. F. BALANCE OF DOWN PAYMENT: Your initial deposit (EMD) will apply toward the down payment of your loan if you are financing, or toward the purchase price if you are paying in cash.  Calculate how much more cash you need to bring in to either meet the down payment or purchase price and fill in that amount in the space provided.

Example 1:  Ms. Homebuyer is making an offer to buy a home for $100,000 in cash.  She put down a $5,000 earnest money deposit (EMD).  The balance of the purchase price is $95,000.

Example 2:  Mr. Homebuyer making an offer to buy a home for $100,000.  He is financing the transaction with a conventional loan that will require a 10% down payment, which is $10,000.  Mr. Homebuyer put down a $5,000 earnest money deposit (EMD).  The balance of the down payment is $5,000.

3. G. PURCHASE PRICE TOTAL: The amounts you put in for the financing terms should all add up to equal the purchase price indicated in 1.C.  Do the math carefully to make sure there are no discrepancies.

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3. H. VERIFICATION OF DOWN PAYMENT AND CLOSING COSTS: When making an offer on a property, it is a good idea to provide verification that you have enough cash in the bank to pay for your stated down payment plus additional closing costs.  This verification is required and by default, a buyer has 3 days of days after acceptance to provide such verification.  In order to present the strongest offer possible, it is best to include your verification with the presentation of the offer.

3. I. APPRAISAL CONTINGENCY AND REMOVAL: If you are working with a lender, an appraisal is most likely required.  You will want to work with your lender to be sure an appraisal is ordered as quickly as possible because you have a limited window for the appraisal contingency.  By default, a buyer has 17 days to remove the appraisal contingency, but those terms can be adjusted.  Keep in mind, a longer appraisal contingency period may seem less favorable to a seller.  While a shorter appraisal contingency is more favorable for the seller, make sure it is a realistic amount of time for the appraisal to be completed.  In most cases, 17 days is a reasonable amount of time to ensure receipt and review of the appraisal.

3. J. LOAN TERMS

The next few sections are related to borrowers financing the purchase of a property.  If you are paying cash for the transaction, you can skip the next few items.

(1) LOAN APPLICATIONS: If you are financing the purchase, you must be able to prove to the seller that a lender is willing to lend you enough money to cover the amount of purchase price, minus your down payment.  By default, a buyer has 3 days to submit a letter of pre-approval from a lender.  Pre-approval for a home loan takes time.  You are required to provide some financial documentation to verify your income and debt-to-income ration (DTI).  It is highly recommended that you get pre-qualified with a lender before making offers on any property primarily to know the price range of homes you can afford.  Furthermore, most sellers will ask for a pre-approval letter to be delivered with your offer.

(2) LOAN CONTINGENCY: Sometimes, even if a borrower has already been pre-approved with a lender, they may be unable to secure a loan at the price they need.  There are many reasons loans fall through, and the best way to avoid that is to be diligent about tracking your financial profile and to be honest with your lender about your financial situation.  Regardless, the loan contingency is a safeguard in case a borrower is unable to secure a sufficient loan in which case escrow will be cancelled and the earnest money deposit returned.

(3) LOAN CONTINGENCY REMOVAL: By default, a borrower has 21-days to secure a loan or cancel the agreement.  Your earnest money deposit may be at jeopardy if you are unable to secure a loan after the expiration of the loan contingency period.

(4) NO LOAN CONTINGENCY: Select this option if you are purchasing the property with cash.  It is not recommended to select this option if you are applying for a loan.

(5) LENDER LIMITS ON BUYER CREDITS: Usually lenders have limits on the amount of money a borrower can receive for the transaction.  This includes any source, such as gifts (Money from your mom to help with the down payment, etc.) or seller credits (Money back from seller to help cover closing costs, etc.).  All monies from all sources must be accounted for and disclosed to your lender.

3. K. BUYER STATED FINANCING: This is simply a disclosure that says the seller is trusting that the information the buyer has presented about the type and amount of financing they will qualify for is accurate.  If the buyer is unable to secure the financing, it is of no fault of the seller, and if the buyer is unable to secure financing after the expiration of the loan contingency period, it would be the buyer’s fault, and subject to the terms of cancellation at fault of the buyer according to the contract.

4. SALE OF BUYER’S PROPERTY: You must let the seller know if you are relying on the funds from the sale of another property to finance the purchase property.  If so, an additional form (“COP”) is required and available through your licensed real estate agent.  By default, the agreement is NOT contingent on the sale of any property.

5. A. ADDENDA: These are usually forms that relate to the purchase property, whether it be the type of sale or the property characteristics.  Your licensed real estate agent will know if any addenda are needed and listing agents will specify any unique addenda requirements.

5. B. ADVISORIES: These are standard state advisories that must accompany certain types of sales.  The Buyer’s Inspection Advisory is required for every sale, recommending that the buyer hire a professional home inspection as part of their due diligence.  Other advisories are related to probate sales, short sales, trust sales, bank-owned sales, etc.

6. OTHER TERMS: This is a field where you can list any additional terms that are not covered anywhere else in the contract.  This can include terms like, “subject to interior inspection,” or “one unit to be delivered vacant,” etc.

7. ALLOCATION OF COSTS

The items in this section allocate the costs for standard inspections, fees, city requirements, and any other cost associated with closing escrow.

7. A. INSPECTIONS, REPORTS, AND CERTIFICATES: Indicate whether the buyer or seller will be paying for the cost of inspections, reports, or certificates.  The only report expressly stated on the standard purchase agreement is the natural hazard zone disclosure report (NHD).  This is a legally required document that the seller must provide to the buyer to disclose if the property being sold lies within one or more state or locally mapped hazard zones, such as a fire, flood, or earthquake zone.  This is usually a third-party report that you can buy online; your licensed real estate agent can help you obtain the NHD.  There are additional line items where you can add in any additional reports you may need, such as a wood destroying pest inspection (termite inspection), foundation inspection, etc.

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7. B. GOVERNMENT REQUIREMENTS AND RETROFIT: California has specific regulations regarding smoke and carbon dioxide detectors as well as water-heater bracing.  Besides the California sate requirements, sometimes there are local regulations that must be verified in order to close escrow.  Check with your local department of building and safety to see what applies to your area.  Indicate which party will pay for any necessary installation or repair to be in compliance with the law if the units do not already meet regulation.

Smoke Detector

Any smoke alarm installed that is solely battery powered MUST contain a non-removable battery that is rated to last 10 years.  One smoke alarm should be placed on each floor in non-sleeping areas. In addition, one smoke alarm must be installed in each room where sleeping occurs and one smoke alarm should be located in each hallway that leads directly to sleeping rooms.

Learn more about smoke alarm requirements

CARBON MONOXIDE DETECTOR

CO devices should be installed outside each sleeping area of the home including the basement. The manufacturer’s installation instruction should also be followed.

Learn more about carbon monoxide detector requirements

Water Heater

New and replacement water heaters are required by law to be anchored or strapped to resist falling during earthquakes. Home sellers must certify to buyers that water heaters are braced.

For more information see the Homeowner's Guide to Earthquake Safety.

7. C. ESCROW AND TITLE

The escrow and title section will name the title and escrow company that will be used in the transaction and who will pay for any associated fees.

(1) ESCROW FEE AND ESCROW HOLDER: Typically in a real estate transaction, a neutral third party, called the “escrow holder,” is the agent and depositary holding possession of the money, written instruments, documents, etc. until all the terms of the contract are met.  An escrow holder must be a licensed escrow agent, and in some cases may be a bank, title insurance company, trust company, attorney, or real estate broker.  An escrow holder/company will charge a fee for their services.  In many cases, the buyer and seller will each pay their own escrow fees, but you can indicate in the contract which party will pay the escrow fees.  The buyer or seller may elect the escrow holder, depending on the terms of the contract.  Ask your licensed real estate agent what is customary in your area and to provide you with a recommendation for an escrow holder.

(2) TITLE INSURANCE: It is recommended that homeowners obtain a title insurance policy when purchasing a new home in order to protect their financial investment against losses that would occur if the title to the property was not clear of defects (ex. Liens or encumbrances that were unknown when the policy title was issued).  The terms of the policy define what risks are covered and what risks are excluded from coverage. The buyer will pay for any title insurance policy issued to the lender, which will be one of the fees for securing a loan.  Title insurance to cover the buyer’s down payment or cash purchase can be paid either by the buyer or seller, and the buyer can indicate a title insurance company or may leave it for the seller to decide.  Ask your licensed real estate agent if you need a referral for a title insurance company.

7. D. OTHER COSTS:  Other fees associated with the transfer of real property may include county and city transfer taxes, home owner’s association (HOA) fees, private transfer fees, etc.  Indicate which party will pay for such fees.

(10) HOME WARRANTY: You may wish to purchase a home warranty plan when purchasing a home.  A home warranty plan is not your homeowner’s insurance policy, but a separate contract covering selected repairs and replacements on systems in your home (ex. appliances), usually for the period of one year.  Make sure you review your contract and coverage to understand what is covered and what is not.  A buyer may specify the home warranty company and indicate which party will pay for the plan.

8. ITEMS INCLUDED OR EXCLUDED FROM SALE:

By default, all existing fixtures and fittings that are attached to the property are part of the sale.  These are the non-personal items that are “permanently” installed on the property, such as wiring, plumbing, installed fixtures (lights, ceiling fans, window coverings, air conditioners, etc.).  Appliances can be included or excluded from the sale.  These terms are all negotiable.  For instance, a seller may wish to take all the chandeliers when they move out, or a buyer may request to keep the patio furniture that compliments the yard space.

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9. CLOSING AND POSSESSION

This section defines what happens at closing: when the buyer will legally take possession, who will occupy the property at the close of escrow, and the terms of any tenant residency.

9. A. OCCUPATION: The buyer must indicate whether or not they intend to live in the property as their primary residence.  By default, the contract states the buyer does intend to occupy the property.  Whether or not you purchase the property as your primary residence can have consequences on your loan and tax situation.

9. C. & D.  POSSESSION: The terms of possession can be negotiated between the buyer and seller and must be indicated in the contract.  Sometimes a property is sold with the existing tenant, or perhaps the tenant is scheduled to move out by a certain date.  Sometimes a seller will request to remain in possession of the property for a few days or weeks after escrow in order to move out.  Possession, particularly at the close of escrow and beyond, should be clearly defined in this section.  Additional forms will be necessary if a tenant or seller will remain in possession after the close of escrow.

9. E. & F. CLOSE OF ESCROW: This language states that the seller will assign any warranties on the property to the buyer, and deliver all keys, passwords, codes, etc., associated with the property at the close of escrow.

10. STATUTORY DISCLOSURES: California has a number of disclosures that are required with the transfer of real property.  These are disclosures that the seller must provide to the buyer as part of the buyer’s due diligence.  These are standard, general disclosures mandated by the state to give the owner information about lead paint, natural hazards, special tax assessment areas, property disclosures, sex offenders, and community or planned developments.

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11. CONDITION OF THE PROPERTY: The seller must disclose to the buyer any known material facts and defects concerning the property within the last 5 years.  The buyer may request repairs or credits in writing, but unless otherwise agreed to in writing, the property is sold in its “as-is” condition.  It is strongly recommended that the buyer hire a licensed home inspector to inspect all visible areas of the property to determine the condition of the property.

12. BUYERS INSPECTION: This section discusses the rights and responsibilities of the buyer and seller for the buyer’s inspection of the property.  The seller agrees to make the property available to the buyer and the professionals the buyer hires to perform property inspections.  The seller must have all utilities on for inspection and through the date of possession.  The buyer agrees to hire any inspector at the buyer’s expense unless otherwise agreed to in writing.  The buyer takes responsibility for any party entering the property on their behalf and will repair any damage resulting from the buyer’s investigation.

13. TITLE AND VESTING: This section provides some information of what the buyer can expect regarding the title or deed of the property.  The seller has a duty to disclose to the buyer any known matter that affects the title of the property, whether the matter has been officially recorded on public record or not, and must provide a completed Statement of Information within 7 days after acceptance.  The buyer will receive a preliminary title report from the title company which will show recorded liens and encumbrances on the property.  The preliminary report may not show all items affecting the title.  The buyer will receive a CLTA/ALTA “Homeowner’s Policy of Title Insurance” (if applicable), to protect against any defects in the title.

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14. TIME PERIODS; REMOVAL OF CONTINGENCIES; CANCELLATION OF RIGHTS: The buyer has a period of time in which to complete all necessary inspections and due diligence on the property.  The number of days can be adjusted in the construction of the contract, but time periods may only be altered or extended by mutual agreement in writing.

14. A. SELLER DISCLOSURES: By default, the seller has 7 days after the date of acceptance to deliver to the buyer any required disclosures, reports and information about the property.  These include the addenda and advisories indicated in sections 5 and 6, the inspections and natural hazard zone disclosure report indicated in section 7, all the statutory disclosures indicated in section 10, the transfer disclosure statement (TDS), seller property questionnaire (SPQ), and any other necessary disclosures.

14. B. BUYER INSPECTION CONTINGENCY: By default, the buyer has 17 days after the date of acceptance to complete any inspections they wish to perform on the property and review all the disclosures and documentation provided by the seller. If the buyer does not receive the necessary documentation from the seller within the contingency period, by default, the buyer will have an additional 5 days to review such materials.   The buyer must make any requests for repairs or concessions before the expiration of the contingency period.  The seller is not obligated to accept any request for repairs.  By the end of the contingency period, the buyer must either deliver a contingency removal in writing or cancel the purchase agreement.  Once the buyer has removed contingencies, the seller cannot cancel the agreement without penalty.

14. C. REMOVAL OF CONTINGENCIES WITH OFFER: Although it is not recommended, a buyer may choose to remove the contingencies without an inspection period.  This is risky if you don’t have a good understanding of the property as you may encounter unknown problems or defects.

14. D. SELLER RIGHT TO CANCEL: The seller must deliver a Notice To Buyer To Perform (NBP) before cancelling the agreement for any reason.  If the buyer does not remove contingencies in writing or deliver all of the required funds and documents into escrow within the contingency period, the seller may cancel the agreement and return the buyer’s earnest money deposit (EMD) minus any expenses incurred by the buyer.

14. E. NOTICE TO BUYER OR SELLER TO PERFORM: The Notice To Buyer To Perform (NBP) or the Notice to Seller to Perform (NSP) can be delivered no earlier the 2 days prior to the expiration of the stated contingency period.  By default, the offending party has 2 days to take applicable action.

14. F. EFFECT OF BUYER’S REMOVAL OF CONTINGENCIES: The buyer must be aware that once the contingencies have been removed in writing, the terms of the agreement are set and any cancellation by the buyer thereafter may be at the buyer’s expense.

14. G. CLOSE OF ESCROW: After contingencies have been removed, hopefully it will be smooth sailing until closing.  If, for some reason, the close of escrow is in jeopardy, the buyer or seller must deliver a Demand To Close Escrow (DCE) in writing before the cancellation of the agreement.  The DCE may be delivered no earlier than 3 days prior to the close of escrow date stated in the purchase contract.  By default, the DCE recipient will have 3 days after receipt to take applicable action and close escrow.

14. H. EFFECT OF CANCELLATION ON DEPOSITS: If the buyer or seller cancels the agreement for any reason within their rights in accordance with terms of the contract, everyone gets their money back minus any fees they might have incurred.  If you went far enough into the escrow process, you probably incurred fees for inspections, appraisal, and maybe title and escrow fees.  Both parties must agree to the cancellation and return of deposit in writing.  If the parties cannot reach an agreement, you can demand the escrow holder for your money back in writing.  The escrow holder will deliver the notice of demand to the other party and if they don’t object to the demand within 10 days, the escrow holder will return your deposit minus any fees.  The escrow holder is not responsible for any dispute and you could be charged up to $1,000 in a civil penalty if you do not comply with cancellation within the terms of the agreement.

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15. FINAL VERIFICATION OF CONDITION: The buyer has the right to do a final walk-through of the property to verify that the condition of the property has not changed.  By default, the buyer can make this verification within 5 days of the close of escrow.  The final verification is not a contingency, but the seller must prove the condition has not changed and any necessary repairs have been completed.

16. REPAIRS: If the seller has agreed to any repairs, they must be completed before the final verification of condition unless otherwise specified in writing.  The seller is able to make repairs his/herself, or hire someone to make the repairs, as long as the repairs meet or exceed local building code.  The repairs must be performed in a “good, skillful manner” with quality materials.  The seller must provide to the buyer a list of the repairs performed and any receipts related to the repairs prior to the final verification of condition.

17. PRORATIONS OF PROPERTY TAXES AND OTHER ITEMS: The purpose of a proration in the sale of real property is to fairly divide property expenses, such as taxes and association dues, between the buyer and seller so that each party is paying only for those days in which they owned the property.  Property taxes, assessments, interest, rent, HOA fees, and any other assessments will be paid current and prorated (based on a 30-day month) between the buyer and seller at the close of escrow.  The buyer will also be subject to a reassessment upon change of ownership and may receive a supplemental tax bill.

18. A. BROKERS COMPENSATION: A listing agent and a buying agent will have a different type of contract with their client can create different terms for payment in both the event of the close of escrow as well as the cancellation of escrow.  It is important to understand the terms of the contract with your agent and when and how they will be paid for their services.  Generally speaking, a seller will contract a commission with a listing agent to be a percentage of the final purchase price.  This commission is usually divided between the listing agent (seller’s agent) and the buyer’s agent at the close of escrow.

18. B. BROKER’S SCOPE OF DUTY: Your licensed California real estate agent is a professional resource to help guide you through the legal process of buying or selling a property.  That being said, the final decision is always in your hands.  Your agent cannot be held responsible for the claims of any other parties relating to the property.

19. REPRESENTATIVE CAPACITY: If you are signing your name to the purchase agreement on behalf of another person or entity, you must deliver a Representative Capacity Signature Disclosure (RCSD) and any other associated documentation into escrow within 3 days after acceptance to prove that you are the lawful signee.

20. JOINT ESCROW INSTRUCTIONS TO ESCROW HOLDER: The standard California residential purchase agreement also doubles as escrow instructions to the escrow holder.  This section details what the escrow holder is responsible for.  By default, both parties have 3 days to deliver a copy of the contract and any signed counter offers or addenda to the escrow holder, although escrow is usually opened only after the signed contract, counter(s), and addenda have been delivered into escrow.  The escrow holder will notify the seller and the seller’s agent upon receipt of the earnest money deposit (EMD) from the buyer, and will provide the seller’s Statement of Information (SI) to the title company to perform the title search.  The buyer and seller also allow the escrow holder to distribute the agreed upon compensation to any brokers involved in the transaction.

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21. REMEDIES FOR BUYER BREACH OF CONTRACT:  If the buyer must cancel the agreement outside the terms of the contract (at the fault of the buyer), the seller has the right to retain the buyer’s earnest money deposit.  If the property is less than 4 units and the buyer intended to occupy the property, the seller cannot retain more than 3% of the purchase price.  Any increased deposit will require a separate liquidated damages provision.

22. DISPUTE RESOLUTION: The dispute resolution is an attempt to re-route potential litigants through a process designed to resolve disputes more quickly and less expensively than fighting it out in court.  Mediation is the first phase between disputing parties.  Mediation is an informal form of dispute resolution overseen by a neutral third person, called the mediator.  The mediator is not empowered to impose decisions on the parties; instead the mediator facilitates discussions and negotiation between the parties with the goal of assisting them in reaching a mutually acceptable settlement of their dispute.  If the parties cannot resolve their dispute through mediation, they may opt-in for arbitration.  Arbitration is similar to litigation where parties rely on a judge or jury to make and impose a binding decision; however, arbitration is usually more private and not conducted under the formal rules and procedures of the court.  Mediation and Arbitration will not apply to foreclosure, unlawful detainer action, or any matter within the jurisdiction of a probate, small claims, or bankruptcy court.

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23. SELECTION OF SERVICE PROVIDERS: Buyers and sellers are free to choose all service providers with relation to the transaction.  The buyer’s and seller’s agents may offer recommendations for service providers, but they are not to be held liable for their work.

24. MULTIPLE LISTING SERVICE (MLS): If applicable under the listing contract, the listing agent is able to market the sale of the property on the multiple listing service (MLS) and track the status of the sale.

25. ATTORNEY FEES: If litigation or arbitration occurs between the parties, the prevailing party will receive compensation to cover attorney’s fees.

26. ASSIGNMENT: Assignment is usually referring to what real estate investors call “wholesaling,” but can occur under other circumstances as well.  An assignment is when a buyer enters into a contract with a seller, but then assigns the contract to another buyer instead, often at a profit to the original buyer.  When using the standard California residential purchase agreement, a buyer would have to obtain permission in writing from the seller in order to assign the property to another party.  Even if both parties agree to the assignment, the original buyer is still responsible for the terms of the agreement unless otherwise agreed to in writing.

27. EQUAL HOUSING OPPORTUNITY: California has strict laws against discrimination.  The Federal Fair Housing act, known as Title VIII of the Civil Rights act of 1968, prohibits discrimination in the sale, rental, or financing of housing units based on race, color, religion, sex, or national origin.  The Fair Housing Amendments Act that became effective in 1989 amended Title VIII to broaden the scope of prohibited discrimination to include disability and familial status.  California championed the Unruh Civil Rights Act in 1959 to provide protection from discrimination by all business establishments in California, including housing and public accommodations, because of age, ancestry, color, disability, national origin, race, religion, sex, or sexual orientation.  The Fair Employment and Housing Act prohibits discrimination in all aspects of housing because of familial status.  Familial status is defined as having one or more individuals under 18 years of age who reside with a parent or with another person with care and legal custody of that individual.

28. TERMS AND CONDITIONS OF OFFER: This is an additional disclosure underscoring that, upon acceptance, both parties must comply with the terms as outlined in the contract, including any counter offers and/or addenda.  The seller can continue to market the property until a final agreement has been reached.  The parties understand the terms of cancelling with out penalty, and cancellation outside of these terms may lead to penalty and/or payment of broker’s compensation.

29. TIME OF ESSENCE  ENTIRE CONTRACT; CHANGES: The phrase, “time is money,” is certainly relevant in the world of real estate.  This section states that both buyer and seller will make an effort to fulfill the terms of the contract in an expedient manner, that the stated terms of the contract are final, that any disputes will be resolved in accordance with California law, and any changes, extensions, modifications, amendments, or alterations must be in writing and signed by both parties.

30. DEFINITIONS: This section defines some of the common terminology that is used throughout the contract.  Review the terms and definitions to have a better understanding of their relevance and impact on the contract.

31. EXPIRATION OF OFFER: If you need a quick response from the seller, you can designate an expiration date for your offer.  This is not required.  You must also indicate if one or more parties is signing the contract on behalf of another person or entity.

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If you have made it to page 10, congratulations!  You are on your way to opening escrow!  Page 10 will include indications for counter offers and signatures of final acceptance.

32. ACCEPTANCE OF OFFER: The seller may elect to counter-offer before acceptance, which will be indicated in this section.  The seller will also verify that s/he is the rightful owner of the property and has legal capacity to transfer said property.  Both the seller’s agent and the buyer’s agent information is listed again for transparency.  Presentation of the offer must be documented by the seller’s agent, and the seller must initial in the section, “Rejection of Offer,” to officially reject an offer.  Once the seller signs the acceptance, the contract is resubmitted to the buyer who will sign again as acknowledgement.  The fully signed, executable contract will be handed over to the escrow agent who will also acknowledge receipt on page 10.

 

Congratulations on successfully navigation the California Residential Purchase Agreement and Joint Escrow Instructions!

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0 Responses

  1. Sounds kind of complicated, but I guess it is just goes to show you how important it is to really think about the whole picture and make sure that you are understanding every step of the process.

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