RPA-CA

Unlocking the Mystery of The Newly Revised Residential Purchase Agreement (“RPA-CA”)“Released on April 28, 2010” : 

Unlocking the Mystery of The Newly Revised Residential Purchase Agreement (“RPA-CA”)“Released on April 28, 2010” Kathy Mehringer, CRB, SFR Broker Associate C.A.R. & N.A.R. Director Risk Management / Short Sale Advisor Coldwell Banker Residential Brokerage NRT Southwest Region

Slide 2: 

Change happens and you can’t cry about it!

Table of Contents : 

Table of Contents This form is optional nevertheless it can be a very useful tool as it lists the number, title and page of each paragraph. It is not automatically attached to the purchase agreement but can be accessed and used as a reference to readily direct clients and real estate licensees to applicable paragraphs at a glance. It is not necessary to obtain client signatures on this page.

Paragraph by Paragraph : 

Paragraph by Paragraph Top of page: The date line has been relocated to the right side of the page. The “At”, or location was deleted because it is unnecessary. Bottom of each page: Buyer and Seller initials have been separated so they are easier to locate. Buyers on bottom left. Sellers on bottom right. All C.A.R. forms will be conformed as they are revised . Paragraph 2, Page 1, A,B, &C, Agency : This paragraph was relocated from page 7 in order for agency to be addressed at the commencement of the purchase discussions, rather than the end. Paragraph 2, Page 1, A & B**: Disclosure Regarding Real Estate Agency Relationships (CAR Form AD) & Disclosure and Consent for Representation of More Than One Buyer or Seller, (C.A.R. Form DA) Are referenced in this paragraph. **Both forms are to be provided to Buyer prior to the preparation of the Offer.

Paragraph by Paragraph : 

Paragraph by Paragraph Paragraph 3, Page 1, Finance Terms: This paragraph was reorganized and reformatted, as explained below: Paragraph 3A, Page 1, A1 & A2, Initial Deposit : There are two options for handling the deposit. A1, the default method now requires Buyer to make deposit directly to escrow by personal check; or, if the box is checked [] electronic transfer. A2 of the same paragraph includes an optional method, which was the only method provided in the previous RPA, if checked [] the deposit is given to agent presenting the offer. In either case the deposit is to be placed in escrow within the specified time frame (3 business days) unless otherwise agreed.

Paragraph by Paragraph : 

Paragraph by Paragraph Paragraph 3B, Page 1, Increased Deposit: Language was added to the end of paragraph vis-à-vis the need to sign a Receipt for Increased Deposit if applicable, at the time it is deposited if the liquidated damages paragraph is initialed by all parties or incorporated into the agreement by way of counter offer or addendum. Paragraph 3C, 1,2, &3 , Page 1, Loans: There are separate paragraphs for senior and junior loans. The preprinted language defaults to conventional financing. There are options for FHA, VA, Seller, Assumed or “Other” financing. Loan terms default to fixed rate with a option for adjustable, with interest ceiling for both. There is no longer a field for amortization period or length of loan. Buyer may still specify the maximum points to be paid. For FHA or VA loans, Seller does not agree in advance to any lender fees or terms, rather Buyer shall submit a form (C.A.R. Form FVA) specifying such repairs, costs, or requests to the Seller within 17 days. New FVA provides for the request, the Seller’s response and the Buyer’s reply (much like the request for repair form).

Paragraph by Paragraph : 

Paragraph by Paragraph Paragraph 3E, Page 1, Balance: The words, “down payment” were added after the words: Balance of Purchase Price. For clarification! Paragraph 3G, Page 2, Verification of Down Payment and Closing Costs: An optional check box [], in parenthetical, is added to the end of the paragraph if the verification is to be attached to the offer. Paragraph 3H 1,2,3, Page 2, Loan Terms: These four subparagraphs are grouped together: Loan applications, Loan Contingency, Loan Contingency Removal and No Loan Contingency. Loan Application paragraph has optional sentence to indicate by check box [] whether or not lender pre-qualification or pre-approval letter is attached. As before, Loan Contingency paragraph specifies Buyer will act in good faith and still specifies that deposit, down payment and closing costs are not part of the loan contingency. Note: Loan Contingency Removal paragraph (H3(ii)) is now a separate paragraph making it easier to locate the option to keep loan contingency active until funding.

Paragraph by Paragraph : 

Paragraph by Paragraph Paragraph 3I, Page 2, Appraisal Contingency and Removal: Appraisal must be written and performed by a certified or licensed appraiser. If there is a loan contingency, removal of the contingency automatically removes appraisal contingency OR if checked [] there is an option to negotiate a separate contingency period. Default is 17 days. Paragraph 3J, Page 2, All Cash Offer: Within 7 days or as specified Buyer shall Deliver to Seller written verification of funds or if checked [], verification is attached.

Paragraph by Paragraph : 

Paragraph by Paragraph Paragraph 3K, Page 2, Buyer Stated Financing: This paragraph specifies that Seller has relied on the type of financing (whether cash or loan) Buyer indicated would be pursued to purchase the property. If Buyer seeks alternate financing but cannot close escrow, Buyer is not excused from the obligation to close escrow and Seller has no obligation to cooperate with Buyer’s efforts. If Buyer cannot obtain alternate financing, then original financing specified in the Agreement is operative.

Paragraph by Paragraph : 

Paragraph by Paragraph Paragraph 4, Page 2, Allocation of Costs: The prologue to this paragraph has bold language that states: “…this paragraph does not determine who is to pay for any work recommended or identified in the Report unless otherwise specified in writing. ” Paragraph 4D6, Page 2, Other Costs; Home Warranty Plan: Additional language was added to identify certain types of optional coverage (a/c, pool/spa, code and permit upgrade) that may be added to the basic plan. A disclosure advising the Buyer to investigate the availability of other optional home warranty coverage is included.

Paragraph by Paragraph : 

Paragraph by Paragraph Paragraph 5B, Page 3, Closing and Possession: Title changed from occupancy to possession. A default is established for delivery of possession, which is to be At 5:00 p.m. on the date of the Close of Escrow. There are options to select other dates and/or times. OR “Upon confirmation of recordation.” Discussion opportunity!

Paragraph by Paragraph : 

Paragraph by Paragraph Paragraph 6A(3), Page 3: Modifies language to add more specificity with respect to when an amended Real Estate Transfer Disclosure Statement shall not be required. For example: “If Buyer is otherwise aware of the condition or material inaccuracies, or if the information was disclosed in reports provided to or obtained by Buyer or in reports ordered and paid for by Buyer.” Paragraph 6C, Page 3, Withholding: Moved from a later location in previous RPA, this paragraph now provides that the Seller shall Deliver the necessary affidavit (FIRPTA) within the time specified in paragraph 14A to either Buyer or qualified substitute.

Paragraph by Paragraph : 

Paragraph by Paragraph Paragraph 8, B2,C, Page 3, Items Included In And Excluded From Purchase Price: 8B provides an option to specifically include stove(s) or refrigerator(s) in the sale. Best practice: Specify: How many? Location? 8C provides that audio and video components (flat screen TVs and speakers) are specifically excluded from the purchase price if the item is not itself attached to the property even if a bracket or other mechanism attached to the component is attached to the Property. Best practice: Manage Buyer and Seller expectations “talk it over – include specific requests in contract” Paragraph 9, Page 4, Condition of Property: A parenthetical, (“as-is”) was added to define “present physical condition.”

Paragraph by Paragraph : 

Paragraph by Paragraph Paragraph 10, B,C & D, Page 4, Buyer’s Investigation: Language added to end of 10B to clarify that Buyer remains obligated to turn over reports to the Seller even after termination of the agreement. The language in 10C regarding utilities remaining on for inspections and through the date of possession was separated from the rest of the paragraph for visibility. Note: Language is not new simply relocated for ease of reference! Buyer indemnity language relocated and inserted into paragraph 10D as it relates to Buyer entry on the property for Buyer investigations or any other purpose. The language is the same. Paragraph 11, A,B,C & D Page 4, Seller Disclosures, Addenda, Advisories, Other Terms : This paragraph was moved from near the end of the contract. It is now separated into sections, for: Addenda, Disclosures, and Advisories, & Other Terms. Preprinted options can be checked for commonly-used Addenda, Disclosures and Advisories. (ADM #1)

Paragraph by Paragraph : 

Paragraph by Paragraph Paragraph 12 A, Page 4, Title and Vesting: New language in 12A, second line, requires the preliminary report to include a search of the general index, which requires the seller to provide a Statement of Information/Identification (“SI”) or similar form to title at the commencement of the transaction rather than the end. Within 7 days after acceptance. Best practice: SI at time of listing because nobody likes surprises. Can be held by Seller until provided to the escrow holder. The escrow holder should not delay ordering the preliminary title report. In the event Seller fails to deliver the SI, a Notice to Seller to Perform may be issued by Buyer.

Paragraph by Paragraph : 

Paragraph by Paragraph Paragraph 14, Page 5, Time Periods, Contingencies and Cancellation Rights: Opening caption now specifies that both Buyer and Seller rights under this paragraph must be exercised in good faith. This was hotly debated topic at the C.A.R. Legal Affairs Forum.

Paragraph by Paragraph : 

Paragraph by Paragraph Paragraph 14, A, Page 5: Language added at end of paragraph to inform Buyer of right to give Seller a Notice to Seller to Perform (“NSP”) if Seller has not delivered items to Buyer on time. The NSP can be used to remind the Seller to complete an obligation or to document the Seller’s failure and thereby prevent a Seller for issuing a NBP based on something the Seller failed to provide. Prior versions of RPA-CA did not include reference to this form. Using a Notice to Perform creates a business record. Note: The Buyer is not required to wait for any specified period of time after issuing the NSP in order to exercise their right to cancel. However, good faith may be considered.

Paragraph by Paragraph : 

Paragraph by Paragraph Paragraph 14, B3, Page 5: Within the time specified in 14B(1), or as otherwise agreed, Buyer shall Deliver to Seller either (i) a removal of the applicable contingency (CAR Form CR) or (ii) a cancellation (CAR Form CC) based upon a remaining contingency or Seller’s failure to provide specified items. However, if Seller fails to Delivers any required item to the Buyer within the time period set forth in 14A, Buyer then has 5 days (or as specified) to decide whether to remove the applicable contingency or cancel the Agreement. Previous RPA specifically provided this right for government inspections or Common Interest Disclosures that were delivered after the time period in 14A expired.

Paragraph by Paragraph : 

Paragraph by Paragraph Paragraph 14, B4, Page 5: The language that specifies that; “Buyer’s contingency period continues even if the time period in 14B (1) has lapsed, unless Seller has, after issuing a NBP, cancelled the Agreement” was relocated from 14C to 14B. Additional language added to include Buyer right to cancel if Seller fails to Deliver specified items. Paragraph 14, C1, Page 5: In the last sentence language was changed to clarify: “Seller shall return Buyer’s deposit if Seller cancels after first delivering to the Buyer a Notice to Perform regarding removal of contingencies.” Prior version of contract specified that; “Seller may cancel and authorize return of Buyer’s deposit.”

Paragraph by Paragraph : 

Paragraph by Paragraph Paragraph 14, C2, Page 5: In this paragraph you will find a list of contractual obligations which, if not performed by Buyer, are reasons for a Seller to give Buyer a Notice to Perform; this includes among others, the FVA regarding FHA or VA required terms. In the last sentence language was added which states; “Seller shall return Buyer’s deposit if Seller cancels after first delivering to Buyer a NBP regarding contract obligations.” Paragraph 14, C3, Page 5: The timing to respond to a Notice to Buyer to Perform has been changed from 24 hours to 2 days (or # of Days specified). Paragraph 14, E, Page 5: There is now a requirement that compels the delivery of a Demand to Close Escrow be given to the other party before either party may cancel for failure of the other to close.

Paragraph by Paragraph : 

Paragraph by Paragraph Paragraph 16, Page 5: A reference was added to the Verification of Property Condition. (C.A.R. Form VP) Paragraph 17, Page 5: A reference is made to the C.A.R. forms that contain the statutory language regarding supplemental property tax. Paragraph 19, Page 6: Language was added specifying that Seller specifically authorizes the reporting of the sales price and other terms to the MLS.

Paragraph by Paragraph : 

Paragraph by Paragraph Paragraph 22, Page 6, Définitions: Paragraph 22E, Page 6, Days: The last Day for performance of any act, including Close of Escrow, may not fall on a Saturday, Sunday or legal holiday (not to be confused with the first day) and shall instead be the next Day. Paragraph 22H, Page 6, Deliver: Clarifies that Delivery is only effective upon personal receipt by Buyer, Seller or the individual Real Estate Licensee for that principal as specified in the agreement on page 8 in the paragraph titled Real Estate Brokers. Regardless of method, whether the document is sent by messenger, mail, email, fax or carrier pigeon. An option may be checked whereby the personal receipt rule can be changed using the C.A.R. form RDN. Acceptance, as was the case previously, is still defined to occur only on personal receipt.

Paragraph by Paragraph : 

Paragraph by Paragraph Paragraph 22, Notice to Perform: This paragraph was removed since both Notice to Buyer to Perform and Notice to Seller to Perform are addressed in paragraph 14. Paragraph 23, Page 6, Broker Compensation: Buyer and Seller compensation paragraphs have been combined. A separate compensation agreement is required and must be signed by the respective principals. Paragraph 24B, Page 6, Joint Escrow Instructions: Escrow holder shall provide Seller’s statement of information (“SI”) to title company when received Paragraph 24C, Page 6, Joint Escrow Instructions: Language added to the middle of the paragraph releasing and holding escrow harmless from liability if escrow pays out compensation as otherwise specified in separate written agreement.

Paragraph by Paragraph : 

Paragraph by Paragraph Paragraph 25, Page 7, Liquidated Damages: Language added to the capitalized sentence at the end of the paragraph clarifying that a receipt for increased deposit (C.A.R. Form RID) shall be signed at the time the increased deposit is made. Paragraph 26A&B&C, Page 7, Dispute Resolution: The right of brokers to opt-in to mediation or arbitration has been inserted into the substantive mediation and arbitration paragraphs separately (starting with the 2nd line in 26A, Mediation, and 3rd line in 26 B Arbitration). In the previous RPA this language was below the arbitration paragraph. Language has been added to the first sentence of 26 C (2), EXCLUSIONS: specifying that Brokers cannot be compelled to arbitrate unless they have agreed to do so in writing. Deleted language that stated an arbitrator’s award needs to follow substantive California law.

Paragraph by Paragraph : 

Paragraph by Paragraph Paragraph 27, Page 7, Terms and Conditions: Second sentence clarifies that liquidated damage and arbitration clauses may be incorporated if separately initialed by both Buyer and Seller or incorporated by counter offer or addendum. If at least one but not all parties initial such paragraph(s) a counter offer is required until agreement is reached. Paragraph 28, Page 7, Time of Essence; Entire Contract; Changes: Language added: “Except as otherwise specified, this Agreement shall be interpreted and disputes shall be resolved in accordance with the laws of the State of California.”

Paragraph by Paragraph : 

Paragraph by Paragraph Paragraph 29, Expiration of Offer, Page 8: Language added: “Buyer has read and acknowledges receipt of a Copy of the offer and agrees to the above confirmation of agency relationships.” Page 8, Additional Signature Addendum (C.A.R. Form ASA): is referenced and if checked [] may be used to allow for multiple Buyers and/or Sellers. Confirmation of Acceptance, Page 8: As in the previous RPA initials and date are not required of form a binding agreement. Rather, a binding Agreement is created when a copy of signed acceptance is personally received by Buyer or Buyer’s authorized representative. But certainly can be useful as “evidence” of personal receipt.

Paragraph by Paragraph : 

Paragraph by Paragraph Real Estate Broker Box, D, Page 8, Cooperating Broker Compensation: The last sentence was added to this paragraph to indicate that tax status and or exemption from withholding may be documented on C.A.R. form DLT. Escrow Holder Acknowledgement, Page 8: Check box added to indicate escrow holder’s receipt of SI. Presentation and/or Rejection of Offer Box, Page 8: Slight reformatting to allow for a “presentation of offer box:” Listing agent may, but is not required to, date and initial. AND Seller may, but is not required to, date and initial “rejection of offer.” There you have it! Let’s review three additional addenda and we’ll be done!

Knowledge Is Power / Flex! : 

Knowledge Is Power / Flex!

FHA OR VA Notice Addendum : 

FHA OR VA Notice Addendum FHA or VA Notice and Addendum (C.A.R. Form FVA) This new form was created in response to the fresh approach to FHA/VA financing in paragraph 3C3 of the RPA. The form provides for a mechanism similar to the Request for Repairs form. If the Buyer’s lender requires fees to be paid, repairs made or take any other action, the Buyer may present such requests to the Seller. The Seller may agree to all requests, some requests or none of the requests. The Buyer may then decide whether to proceed with the transaction or not. Sellers are advised in paragraph 2 that if the Buyer’s FHA or VA lenders’ requests are not satisfied, the Buyer may not be able purchase. Buyers are advised in paragraph 3 of the FVA that if the financing contingency is removed, Buyer may be in breach of contract if the lender denies funding because seller has refused all of the FHA or VA requests.

Wood Pest Addendum (“WPA”) : 

Wood Pest Addendum (“WPA”) The use of the WPA is optional See paragraph 11 of the RPA-CA Pre-allocation of Section 1 and Section 2 responsibility is not required The rights of the respective parties to opt for their preferred strategy should be explained to both Buyer and Seller Client’s option to: Pre-negotiate both Section 1 and Section 2 at time of offer OR Pre-negotiate one only OR Negotiate after all inspections Lender requirements With the exception of some government loans most lenders do not require clearance unless the WPA is included in the transaction as a condition of sale

Wood Pest Addendum : 

Wood Pest Addendum Wood Destroying Pest Inspection and Allocation of Cost Addendum (C.A.R. Form WPA) The first substantive paragraph is educational. It spells out the right of the Buyer to conduct inspections for wood destroying pests and organisms as well as the right of the Buyer to ask the Seller to make repairs or escape from their obligations under the contract even if the WPA is not used. The second paragraph separates and reorganizes language in the previous version of the WPA. • 2A determines who pays for and what structural pest control company prepares the Wood Pest Report, just as before and defaults to whatever is specified in the RPA if left blank. (if both are left Blank further negotiations are required) • 2B determines the scope of the Wood Pest Report, such as detached garages/carports and/or decks just as before.

Wood Pest Addendum : 

Wood Pest Addendum • 2C instructs the Report to be separated into Section 1 and Section 2 recommendations, just as before. The parties can determine who is to pay for each section’s recommendations. • 2D addresses inaccessible areas. Mainly , the person identified in C(1) “Section 1” shall pay for cost of entry, inspection and closing of only areas where infestation is found . Buyer shall pay for the cost of entry, inspection and closing of all other inaccessible areas. • 2E states that a Certification is required on completion of the corrective work, just as before. The second sentence in 2E states if paragraph 2A does not refer to a specific registered Structural Pest Control company and if Seller obtains more than one report, Seller may choose which report to use. However, Seller must give buyer copies of all reports obtained.

Receipt and Delivery of Notices : 

Receipt and Delivery of Notices This form can be used to create an agreement between Buyer and Seller with respect to Delivery and Receipt of notices and other documents. A. Personal Receipt to Buyer / Seller or (if checked) other named party (i.e. real estate licensee) B. (if checked) Notice by Facsimile (FAX) Receipt: Notice deemed received upon the generation of a transmittal record by the outgoing fax machine 1. To Buyer or if checked [] to ________at fax #(s)__________________ and ___________ between 9:00 AM to 5:00PM Monday through Friday or if checked []________________________ 2. To Seller or if checked [] to ________at fax #(s)____________ and___________________ between 9:00 AM to 5:00PM Monday through Friday or if checked []__________________________ C. (if checked) []E-mail Receipt: Notice shall be deemed received upon generation of a transmittal record by the outgoing email address indicating a completed transaction 1. To Buyer or if checked [] _____________________ at e-mail address(es)__________________ and______________ between 9:00 AM to 5:00PM Monday through Friday or if checked [] ________________ 2. . To Seller or if checked _______________ at e-mail address(es)______________________ and______________ between 9:00 AM to 5:00PM Monday through Friday or if checked [] ________________ Terms: “Notice” – any notice, disclosure, information or other item that Buyer or Seller may or is required to give, fax or e-mail is deemed received at the first applicable time and day specified above following completed transmittal. This Addendum must be signed by and is an Agreement between Buyer and Seller

In Review : 

In Review

Most Significant RPA-CA Revisions : 

Most Significant RPA-CA Revisions Agency moved to paragraph 2 on page 1 from paragraph 27 on page 7. Buyer and Seller initials separated on all pages. Initial Deposit – two options; Buyer direct deposit to escrow or given to agent. Financing – Separate paragraphs for first and second loan; Default to fixed term, optional check box for adjustable. FHA/VA buyer to notify seller of lender required costs. Seller may not approve. Appraisal contingency – Based on preparation by a licensed or certified appraiser. Default to appraisal contingency removed automatically when loan contingency removed.

Wood Pest Addendum : 

Wood Pest Addendum Wood pest inspection – Allocation paragraph, inspection only. Reference to WPA in paragraph 11. WPA requires repairs and separate section 1 and section 2, just as before. WPA requires Certification, just as before. Home warranty coverage includes option to check for upgrade for pool/spa, air conditioning, and code/permit upgrade.

Most Significant RPA-CA Revisions : 

Most Significant RPA-CA Revisions Possession – default to 5 pm on close of escrow. TVs and speakers excluded from sale. Can check box to include stove or refrigerators. Additional terms – Moved to paragraph 11 on page 4 from paragraph 25 on page 6. Contains pre-printed list of commonly-used addendum, Seller disclosures and advisories, including WPA, ADM, PAA, SSA, SWPI, SPQ, SBSA, BIA, PAK, TA, and REO. Present condition is parenthetically defined as being “as is”. Preliminary report – include General Index search for certain liens against seller.

Most Significant RPA-CA Revisions : 

Most Significant RPA-CA Revisions Contingencies and Cancellations – Requires good faith. 5 days for Buyer response if Seller delivers late. Last date not to fall on Saturday, Sunday or legal holiday. Demand to Close escrow required before cancellation for failure to close. Notice to Perform – 2 days instead of 24 hours. Defines delivery to mean personal receipt by principal or agent, whether sent by messenger, mail fax, email or other. Use the RDN to negotiate option. Presentation of offer box added so listing agent can show that offer given to Seller.

Questions or comments email kathy.mehringer@nrtsouthwest.com www.realestateriskmgt.blogspot.com : 

Questions or comments email kathy.mehringer@nrtsouthwest.com www.realestateriskmgt.blogspot.com kmehringer@coldwellbanker.com That’s it for now! Be Careful Out There