Buying and Selling can be a mysterious and sometimes frustrating process. With everything else going on in our busy lives, it can be a challenge to stay informed about changes in the real estate market. In this week’s Listing Lowdown, we break down a few important changes to the California Residential Purchase Agreement which is composed by the California Association of REALTORS®, the state’s preeminent trade organization for realtors.
The California Residential Purchase agreement is the main contract real estate agents use. Next month, a revamped version of the contract is launched and whether or not selling is on your radar, it can be helpful as a homeowner to know what you and your agent can expect. Many of the changes to the new contract are “homeowner friendly”–helping to streamline the selling process.
So, with the help of Bob Hunt, a director of the California Association of Realtors, we’ve picked out the top 5 things homeowners should know to the new contract changes.
Toodles Termites
Termites are the bane of every homeowner. The Wood Pest Addendum detailing who pays for the termite report and repair will no longer be a required element. This doesn’t mean finding out about termites isn’t important–it just means you have to specifically add it to the Purchase Agreement. The onus is on the buyer and their agent to add a request to suss out any potential wood munching critters.
Curbing the Credits
When a buyer requests credit, it is imperative that the lender be involved. A new section to the contract reads: “Any credit to Buyer, from any source, for closing or other costs that is agreed to by the Parties (“Contractual Credit”) shall be disclosed to Buyer’s lender.” It goes on to say: ”there shall be no automatic adjustment to the purchase price to make up for the difference between the Contractual Credit and the Lender Allowable Credit.” What this means, is that the Lender must be an involved party in any credit negotiations between the buyer and the seller; especially as it may have an effect on the buyer’s qualifications. The lender can curb credits allowed.
Words of Appraise
If a home does not appraise for the agreed upon purchase price but the buyer is qualified for the loan and there is no specific contingency or the contigency has been waived or removed, then the Buyer is not entitled “to exercise the cancellation right pursuant to the loan contingency if Buyer is otherwise qualified for the specified loan.” That means a buyer cannot automatically back out if the appraisal is not what they expected.
Expanding Your Solar System
As solar panels and systems are an ever increasing addition to homes, an addition to the contract was added stipulating that if the homeowner has leased a solar system the buyer must be able to assume that lease as a part of the contingency of the purchase.
Representin’
New in the contract is a seller’s right to cancel if the buyer fails to complete an addendum delivered within three days after contract acceptance that specifies “Representative Capacity”. This is for parties who are acting in a representative capacity and not acting as individuals. For example, this would apply for someone signing on behalf of a trust or a company. In this case, both the individual and the company would have to provide proof of representation.
The California Association of Realtors is always looking for new ways to make the buying and selling process easier. A good agent should be happy to break down relevant changes and illuminate contract elements you may not be aware of. And while contracts may never be the most exciting thing on the planet, knowing your obligations can go a long way in keeping the process understandable, efficient…and termite free.
