BUYING A HOME-CALIFORNIA STYLE!
HOME INSPECTIONS, REAL ESTATE PRACTICE, SHASTA COUNTY, TIPS FOR BUYERS
August 7th, 2008
Whether buying your first home, or selling a home you’ve owned for a decade or more, most clients are unfamiliar with today’s contracts used by REALTORS. I would like to point out several important changes that significantly changed the process for buyers and sellers utilizing a standard California Association or Realtors’ (C.A.R.) purchase agreement.
Years ago sellers warranted most aspects of the property including the roof, appliances, electrical and mechanical, even the structural integrity of the chimney! However, the California State Constitution clearly states all real property sales are without warranty from the seller. “As is” is the phraseology commonly used. The Residential Purchase Agreement (RPA) used by most REALTORS, uses the term “present physical condition” to describe the property condition to be transferred. The seller is obligated to remove all personal property and dispose of any debris. Cleaning and carpet shampooing are not standard provisions in the RPA but sellers typically deliver the resale home to the buyer in good overall condition.
Since the buyer is required to buy the property “as is”, the buyer is given an opportunity to investigate all aspects of the property during the due diligence period. Five contingencies are standard in the RPA to protect the buyer. The sale is conditioned upon the buyer’s approval of the following:
- Financing-The buyer and property must qualify and be approved for a loan of the buyer’s choice.
- Appraisal-The property must appraise for at least the purchase price or the buyer does not have to purchase the property. Cash buyers can waive these first two contingencies, if desired.
- Title-The buyer is allowed an opportunity to review the Preliminary Title Report including C,C,&R’s, if any. Buyers are well advised to review the report with the title officer that prepared the report and their real estate professional.
- Inspections-The buyer can investigate any aspect of the property, at their own expense, and cancel the contract if anything is found to be unacceptable. Most buyers will negotiate with the seller in good faith to resolve any deficiencies before deciding to cancel the transaction.
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Disclosures-There are many statutorily required disclosures the seller must complete and provide to the buyer, as well as several optional ones. One additional contingency may be added to the contract by the buyer if the sale is to be conditioned upon the sale of the buyer’s property. This is a major one, so sellers should discuss and consider this contingency carefully with their agent before signing on the dotted line.
The RPA requires these contingencies be removed in writing, by the buyer, within a specified time period, usually 17 days from date the contract is accepted. Older contracts specified these contingencies would automatically vanish once the specified time period had lapsed, even if the buyer was not ready. This “passive method” of contingency removal has been replaced by the “active method” meaning the specific contingencies must be removed in writing. If the buyers refuse to remove the contingencies in a timely fashion, they continue until either the escrow closes or the sellers demand the buyer sign a form specifying all contingencies to be removed. The buyers’ deposit is fully refundable unless all contingencies have been removed in writing.
It is important that the agent you hire to represent you in a real estate transaction knows the mechanics of the real estate contract in order to protect your rights and explain your obligations. Please don’t hesitate to contact me if you have questions regarding this or any real estate matter.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER
REAL ESTATE PROFESSIONALS GMAC
TWENTY FIVE YEARS LOCAL EXPERIENCE
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