The lawyers and powers that be at the California Association of Realtors rolled out a new Residential Purchase Agreement (RPA) a few weeks ago. If you're buying a home, your Realtor should have you sign the new RPA, which reflects a revision date of April 2010 (it will look like 4/10 on the purchase agreement).
Why should you care? What gives?
The new RPA is loaded with changes, some great, some just ok, that seem to me, to be added protection in what is surely a very litigious state – California. The RPA hasn't been over-hauled like this since 2007. Fortunately for all of us involved in the real estate business, what was an 8 page contract, is still an 8 page contract. It's just better!
Some of the new changes include:
- Agency Disclosure Moved – The location of the Agency Disclosure is no longer found, and buried, on page 7 of 8. It's now prominently on page 1, before the buyer and their agent note what price is being offered for the home. It's important that the buyer understand the agency relationship their broker has, between themselves and the seller. This is now taken care of at the outset of the transaction's creation.
- Buyer's Initial Deposit – Now the language is provided for, that the buyer may hold onto their deposit, and within three days of their offer being accepted, they may deposit that initial deposit, at escrow. This differs from the prior Residential Purchase Contract, in that previously the buyer generally left with their agent/broker a deposit check, even though they did not know whether or not their offer would be accepted. Furthermore, the broker and real estate company no longer has to worry about the accounting of Trust books, which can get quite tedious when taking in so many initial deposit checks for different buyers.
- Buyers Be Exercised In Good Faith – We're talking about a buyers home inspection, investigation, and loan approval. The buyer must do their due-diligence with their inspections and must in good faith do their best to obtain a loan for which they have indicated they need on page 1 of their offer. This sounds like a no-brainer, but there have obviously been instances when one party tries to use the other, and essentially jerks the other party around for their own gain. Now, if a buyer is choosing to NOT remove their contingencies for items such as home inspections, loan contingencies, etc, they must make sure that they at least tried to complete the before mentioned items, in good faith. The burden to prove such a vague standard however, likely falls on the seller. The goal though is to improve the performance of the contract by both principals involved.
- Table of Contents – While it's only 8 pages to fill out in order to get your offer accepted…it can still be tricky to navigate. There will now be a Table of Contents at the beginning of the RPA, to help make it all a bit more clear, for you, the homebuyer, as well as the seller when reviewing your offer.
- FHA/VA Buyer Addendum – When using an FHA or VA loan, it's not too uncommon for your lender to require certain repairs, and or require that the seller pay for certain closing costs that the homebuyer is not allowed to pay for. This addendum will now be filled out along with a normal repair request, as an addendum to it, in order to detail whatever it is that your lender is requiring the seller to do, in order for you to get your FHA or VA home loan. Previously important language was absent in any contract generally being used. With the prominence of FHA and VA loans, especially amongst first-time homebuyers, it's fantastic that this issue gets brought out into the light and is made, a bit more clear.
Here is a Sample of the new California Association of Realtors – Residential Purchase Contract 4/2010
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