Updated Residential Purchase Agreement
It doesn’t happen frequently—the last time was over 4 years ago—but from time to time, the California Association of Realtors (“CAR”) updates its Residential Purchase Agreement (“RPA”) to reflect new developments in real estate law. The CAR has made a number of changes to the RPA for 2015—the document is now two full pages longer—and here are but a few to be aware of:
Seller must deposit funds into escrow
The new RPA contractually obligates the seller to place money into escrow to pay for costs that are seller’s responsibility, e.g., homeowner association documents that must be delivered by law to a buyer. Previously, these expenses, although the responsibility of the seller, could end up being paid out of the buyer’s deposit, being the only cash available in escrow to do so, with the burden then being placed on the buyer to collect reimbursement of these costs from the seller. But this new contractual language explicitly requires the seller to pay for these types of costs directly by depositing funds into escrow.
Disclosure and limitation of buyers’ credits
On occasion, sellers and brokers may offer credits to buyers to cover closing expenses or other costs associated with finalizing the sale. Lenders frequently place limits on the amount of such credits because of their impact on qualifying for a loan. The new RPA now requires that any credit received by the buyer must be disclosed to the lender. This new provision also states that, if the credit exceeds the amount allowed by the lender, the excess credit will be disallowed by the contract. Sellers can thus be confident that such credits will not prejudice buyers’ ability to qualify for a loan or allow buyers to terminate the contract freely without penalty.
Disclosure of leased or liened property
From time to time, a seller may include as part of the sale of real property to the buyer certain personal property or fixtures that the seller does not own, because they are either leased or financed subject to liens, such as solar electric systems (see my prior blog article about these issues here http://tinyurl.com/olmjcox), water conditioning equipment, alarm systems or the like. The new RPA now requires not only that the seller disclose these leases or liens, but that all documents related to these leases or liens be delivered to the buyer. More importantly, the new RPA provides that the sale is now contingent on the buyer’s acceptance or assumption of these leases or liens.
Commission sharing agreements must be in writing
New language in the RPA requires that agreements between brokers to share a sales commission must be in writing to be enforceable. Oral agreements are no longer sufficient.
This is not a comprehensive list. For further changes, see http://tinyurl.com/muwnzx9