Question: Cynthia, what do you see as the biggest changes to the purchase agreement, from an escrow perspective?
Answer: I have been following the changes to the RPA (Residential Property Agreement and Joint Escrow Instructions) which is widely used by Realtors, for over a year.
CAR (California Association of Realtors) typically makes changes to their standard forms available to their members on an annual basis, to keep up with changes including confirming to new laws and government regulations that affect the real estate industry. Often these changes do not affect escrow much at all, because the changes are often in the area of disclosure, which is outside the scope of escrow responsibilities.
Occasionally, however, sweeping changes are made where the purchase agreement (RPA) is revamped, and the November 2014 edition of the RPA is one of those occasions.
First of all, it is important to keep in mind that the RPA is in fact, our Escrow Instructions. The form is designed to be not only the terms of the agreement for the purchase and sale of real estate, but also, to establish the duties and responsibilities of the escrow holder. Escrow Companies are giving the right, under the terms of the RPA, to issue “supplemental escrow instructions” for the purpose of establishing their own general provisions into the agreement, and not to change or modify the terms themselves. This was also true for the previous edition of the RPA, but was not always true, and sometimes there is a bit of confusion about what escrow instructions really are.
There are many things I think I am going to like about working with the new RPA. To begin with, I think they have improved the format by keeping financing terms all on the first page. I think some of the prompts for dates (such as the fact that an agent must now choose between a particular day, and a number of days for closing) are improvements as well.
In terms of some of the items that initially appear to have the biggest impact on escrow, I would include the following:
- Item 3 A (1), buyer’s earnest money deposit defaults to wire to escrow, and if a buyer intends to bring in a check, that has to be selected.
- Item 7 (A) makes no specific mention of the Wood Destroying Pest Inspection, and the WPA (Wood Destroying Pest Addendum) which was a frequently utilized addendum, has been eliminated. It will remain to be seen how this ultimately impacts escrow, but the change has been designed to remove the presumption that a seller is responsible to pay for a termite report, and to agree to make certain corrective repairs, before such a report is obtained. The intent is for the “termite report” and any recommended repairs to be addressed in a “Request for Repairs”, which has been used for other inspection results in the past, such as a home inspection or roof inspection.
- Item 7 C (1) (c), the parties must return escrow instructions with in five (or some other designated timeframe) from receipt. This is new, and this is good for escrow . Sometimes parties drag their feet a bit when it comes to returning escrow instructions, which makes it difficult for escrow to process the file.
- Item 10 A (7) provides for the buyer to have the right to cancel within 3 days (for personal delivery) or 5 days (for delivery by mail) of specified disclosures from the seller. Although these disclosures are outside of escrow duties, this has the potential to affect our processing, and extend buyer’s contingency periods, if a seller delays delivery of such disclosures. It will be interesting to see how this plays out. I believe it will mean that agents will have to keep much closer tabs on the delivery to buyer of seller’s disclosures, to avoid giving the buyer unintended extensions to their right to cancel under the terms of the agreement.
- 10 F (2) specifies that the party responsible for paying for HOA documents must deposit funds in escrow to pay for such documents. This is not really a change in the way HOA documents are typically handled, but this was not addressed in previous RPA editions.
These are only some of the items that represent changes to the RPA. There may be changes that will have more of an impact on escrow, but only time will tell as agents begin to use the purchase agreement for their clients, and, inevitably, conflicts arise. That is the nature of the beast!
Cynthia Moller
661.362.0400
cmoller@glenoaksescrow.com
