14 Jul California Residential Purchase Agreement Gets Important Updates
After surviving a period of much turmoil and uncertainty, the California real estate market is ready for a period of stability and rebound. As the California Association of REALTORS® settles into a new era following the housing bubble crisis, the group has been taking stock of the standard Residential Purchase Agreement and have made changes in order to reflect new issues that have come up since the last revision.
While the Residential Purchase Agreement is by no means required under law, it is a significant document as it is the most common contract that is used by California real estate agents and lenders in negotiating transactions. The document last received a revamping at the height of the housing crisis in 2010, and while the changes needed since then might not be earth shattering, CAR is always working to make the document more relevant to agents and most importantly, home buyers and sellers.
Here is a breakdown of the most significant changes to the Residential Purchase Agreement.
Buyer Credits Beware
One of the most important changes to the agreement is the addition of a section to the financing clause called Lender Limits on Buyer Credits. This clause provides that any buyer who offers a big price on a home, but then tries to reduce it by seeking credits, will have to disclose any credits to their lender and must be ready to deal with any consequences deemed by the lender for taking these credits.
Another addition to the agreement is a section on representatives of buyers who may be present at the time of the contract signing. The new provision makes it necessary for buyers to complete a specified addendum three days after the contract is agreed upon by the seller that qualifies the signing party as a proper agent of representative capacity. If the addendum is not completed and submitted, the seller reserves the right to cancel the agreement.
The new version of the RPA also states that loan contingency is not automatically tied to the appraisal of the home. The language of the clause specifically states that the buyer cannot cancel the purchase if the property does not appraise to the loan that the buyer is qualified for.
Brokers’ Scope of Duty
One section of the agreement that has nothing to do with buyer and seller, but is considered largely important for the protection of those working on their behalf is the new Scope of Duty section. This details the many things that brokers and real estate agents are not responsible for and are not required to do. This section was taken from a buyer and seller advisory, which is less commonly used by agents despite the manner of protection provided by the document.
Southern California real estate agents, in particular, will notice the removal of the termite report from the list of inspections. Termite inspection is no longer written into the agreement, and provisions for inspections and their costs will be negotiated along with any other repairs or inspections required by the buyer.