Following the housing bubble burst and subsequent crash, many in the real estate business may feel as if they just finished fighting a war. As home prices are rising again and confidence is returning to the housing market, the country is in a recovery period that has made many look back at what could have been different and what could be changed in the future ensure the home buying process runs as smoothly as possible.
In this rebuilding period, the California Association of REALTORS® took a good hard look at the state’s Residential Purchase Agreement (RPA) and amended the agreement for future transactions. Being the cornerstone of nearly every real estate transaction in the state, understanding the recent changes to the RPA are paramount to the continued growth and success of the California housing market.
Here are a few of the biggest changes:
Lender Limits on Buyer Credits Section
A paragraph was added to the Lender Limits on Buyer Credits section that makes provisions for home buyers looking for credits after offering a big price. The provision 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. If the total credit allowed by Buyer’s lender (“Lender Allowable Credit”) is less than the Contractual Credit, then (i) the Contractual Credit shall be reduced to the Lender Allowable Credit, and (ii) in the absence of a separate written agreement between the Parties, 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.”
Simply stated, buyers looking for credits should be prepared to deal with any disallowances by the lender of those credits.
Another clause that has been added to the RPA is a section that deals with those who are acting on behalf of the buying party in the signing process. The addition states that these parties must now complete a specified addendum and deliver to the seller’s agents a minimum of three days prior to closing. This addendum attests to the authority of the buying party’s representative to sign on their behalf.
Scope of Duty
This section has been added to the RPA as a measure to further outline the duties of acting real estate agents as a means to protect them from clients who may take advantage of their services. The particulars of the section deal more with what agents are not responsible for as opposed to what they are required to do as taken from an existing buyer seller advisory that clients rarely even look at.
An omission from the RPA is the termite report from the list of inspections, the cost of which is contractually allocated to either buyer or seller. This omission essentially lumps termite reports in with the other inspections requested by the buyer, keeping it from no longer being enshrined in the contract.