C.A.R. stands for California Association of Realtors. Most, but certainly not all, agents and brokers belong to this association that are licensed in the state of California. Agents and brokers pay dues to belong to this association. C.A.R provides many resources to agents and brokers. One very important benefit is providing contract forms to its members. Undoubtedly if you have purchased or sold a home in the state of California, you have become familiar with these contracts. There are many different contracts depending on the situation. For example there is the listing contract and there is the purchase offer contract. Most sellers and buyers may look at these contracts as, well, just contracts, but they are very important. These contracts are reviewed by C.A.R. real estate attorneys 4 times a year. Changes are constantly being made, all for the benefit of sellers and buyers. New contracts are also created. Just a few years ago there weren’t too many contracts devoted to Short Sales and Real Estate Owned properties. Now there are many. It is important to note that these contracts protect sellers and buyers. Badly worded contracts are the cause of lawsuits. Every once in a while agents and brokers find clients that want to change some of the language of these contracts. Not saying it can’t be done, because it can, but caution is advised. Agents and Brokers are taught from the beginning of their careers, not to ever act as an attorney or give legal advice. Making requested changes to contracts can force agents and brokers to do just that. It is dangerous not only for them, but also heir clients. If a seller or buyer wants to make changes to preexisting C.A.R. real estate contracts they should seek the advice of a real estate attorney. These C.A.R. contracts are well thought out by C.A.R. attorneys. One of the benefits of sellers and buyers using agents and brokers that are members of C.A.R. is being able to use these contracts. It is a good idea to become familiar with these contracts. Read them and understand them. Use C.A.R. contracts when selling or buying your next home.

See Contracts part 1 here

See Contracts part 2 here

Paragraph 16, Final Verification of Condition (CAR form RPA-CA). This paragraph seems to get lost as far as most buyers are concerned. But it is very important to a buyer. The buyer wants to make certain that the property is in the same condition as of the date of acceptance of the purchase agreement. If the seller has agreed to make repairs at the request of the buyer, those repairs also need to be confirmed. This paragraph gives the buyer usually five days to make a final inspection of the property before the close of escrow. In paragraph 9, Condition of Property (CAR Form RPA-CA) of the purchase agreement, unless otherwise agreed, the property is being sold in its present physical (as-is) condition subject to a physical inspection by the buyer and any agreed to repairs by the seller. Paragraph 15 Repairs (CAR Form RPA-CA) states that any repairs by the seller will be completed prior to the final verification of condition. It also goes on the state that the agreed to repairs may be made by the seller or through others. But any repairs must comply with applicable law. In other words if the repairs require a permit, then a permit must be obtained. Repairs are also to be completed in a good, skillful manner. It can’t be sloppy. The seller also has to supply to the buyer receipts for repairs provided by others and if the seller makes the repairs then receipts for the costs must be provided. So if you are a buyer it just might be advisable that instead of the seller having responsibility for any repairs, you might have the seller issue a credit, to you, through escrow for agreed to repair costs. That way the buyer does not have to worry if the seller made the repairs or made the repairs in the correct way. The buyer can have those repairs completed after escrow closes and can have complete control to make sure they are completely correctly and that should give every buyer a little more peace of mind. It may seem easier to have the seller make those repairs, but you may be sorry you agreed to it.

The statement above is not intended as legal advice. Buyers and Sellers should always consult with real estate attorneys if they have questions about the contents a real estate contract.

California Real Estate Forms

Paragraph H (3) California Residential Purchase Agreement and Joint Escrow Instructions (CAR form (RPA-CA). This paragraph concerns the removal of the loan contingency by the buyer. The buyer can specify how many days after acceptance that it will be when the offer is made to the seller. It can be for a certain amount of days such as 17 or the buyer can specify that the loan contingency will remain in effect until the loan funds. This mean the buyer will never remove all contingencies in the transaction. There is always a difference of opinion between the seller and the buyer on this subject. From the seller’s stand point, they want to know at a specified date before the close of escrow that the loan contingency has been removed. By the buyer removing the loan contingency before the close of escrow, it gives the seller more confidence that the sale will close and that they have not wasted a lot of time. Whether the loan contingency is removed or it remains in effect until it funds depends on how much the seller wants to sell and how badly the buyer wants the property. But the buyer should be will aware that the lenders today are, shall we say, a lot more fickle than before. Before loan documents are prepared there is always a second review by the lender of loan documents and what may be missing. The person making the second review may also have a different view of the buyer’s abilities to support the loan. So a buyer has to be very careful if they release a loan contingency. They need to have a lot of confidence that their lender will come through. If the buyer does release the loan contingency along with all of the other contingencies and the lender creates a problem at the end, then the buyer is subject to loosing their deposit per paragraph 25 of the purchase agreement if both seller and buyer initialed that paragraph.

The statement above is not intended as legal advice. Buyers and Sellers should always consult with real estate attorneys if they have questions about the contents a real estate contract.

California Real Estate Forms

Paragraph 3(c) 1 & 2 California Residential Purchase Agreement and Joint Escrow Instructions (CAR form) RPA-CA). This is one paragraph sellers seem to miss all of the time and they shouldn’t. First of all the loan(s) that the buyer is proposing to complete the sale is a contingency of the purchase agreement (unless they are proposing some other type of financing such as all cash). 3(c) 1 is for a first loan and 3(c) 2 is for a second loan, if necessary. The seller wants to make sure that both of these paragraphs are fully completed. If they are not then the seller should make a counter offer regarding the contents of each paragraph. For example if the buyer is going to apply for a conventional loan, the paragraph should specify if the loan is a fixed rate or an adjustable rate. It should also specify the maximum interest rates for each. It should also state the maximum amount of points the buyer will pay. So if the buyer inserts a maximum fixed rate of 2% in today’s market, then most sellers would probably consider that unrealistic or they should. All the seller has to do is make a counter offer at something like 4.75% maximum fixed rate. If the seller were to miss the 2%, then that gives a buyer an easy out if they so choose. The buyer has until a certain date to remove the loan contingency. The seller could sit there for 17, 20 days (or the amount of days the buyer and seller agree to) and then the buyer tells the seller; hey we can’t find a 2% loan. If the seller didn’t know that a 2% loan was unrealistic, then at least their agent or broker should have known. In the end all the sellers did was waste a lot of time, entered escrow and took the home off the market. Now they have to cancel escrow and probably return the buyer’s entire deposit. Sellers don’t miss this paragraph 3(c) 1&2.

The statement above is not intended as legal advice. Buyers and Sellers should always consult with real estate attorneys if they have questions about the contents a real estate contract.

California Real Estate Forms

If a seller receives more than one offer, the seller can send to the buyers a counter that states the counter offer the buyer is receiving is a multiple counter offer. That puts each buyer on notice that there is more than one buyer for the subject property. It could be that the seller’s counter offer just states, “give us you final and best offer”. The buyer then needs to look at their original offer and decide if it good enough or look for ways to “sweeten it”, make it better. If the buyer thinks their original offer was good enough, then they would make a counter to the seller’s counter and state something like “Our offer dated such and such remains the same”. The seller does run somewhat of a risk by sending out multiple counter offers. Some buyers will immediately get “scared” and drop out. Why would they get “scared”? Because they are afraid this is going to turn into a bidding war. But let’s say there are 3 buyers and one of them drops out. The other two will not know that, so they will not get an advantage of knowing their competition for the property was just reduced by one making them stronger. If you are a buyer and you really believe that you have made the best possible offer you could, then stick with it. You might not get the property, but don’t agree to something you later will regret. As a buyer how do you know there are really other potential buyers for the subject property? You don’t. You hope that the seller and listing agent are dealing with you in good faith, but it is known to have happened. It may be just a coincidence, but offering to purchase a home that has been on the market for 180 days and all of sudden there are multiple buyers? Well, it could happen, but it is something to think about. Again go with you instinct, if you original offer is good or if you think there are not multiple offers, then just go back with the “original offer remains the same”. Another thing for buyers to remember when receiving multiple counter offers is that if there are three buyers, the seller does not have to send multiple counter offers to all three. The seller might not send a counter to buyer #1(does not mean they are of the running), and different terms for buyers 2 and 3. Another important point is that when a seller sends multiple counter offers to a buyer and the buyer accepts the seller’s new terms, it does not become a contract until it is sent back to the seller and seller signs it again. On the other hand in the example above with three buyers and the 1 buyer not receiving a multiple counter, the seller could wait until the other two returned their replies and then decide to take the 1 buyer that did not receive a multiple offer and sign their original offer. Number 1 now has a contract and the other 2 are out.

All of the Real Estate forms discussed on this blog are in reference to California Association of Realtors (C.A.R.) real estate forms that are provided to members.

List of California Real Estate Forms