The C.A.R does make some minor changes every year to our purchase contract, but according to Gov Hutchinson, the lead attorney for C.A.R., they haven’t made any wholesale changes in 12 years. Gov was in town yesterday to review the latest version.
Here are my notes:
1. The form is written by C.A.R. attorneys and is meant to protect realtors. There are 10x as many lawsuits filed today as there were thirty years ago, yet the State of California’s population hasn’t even doubled in the same time. Home buyers file more than 90% of the lawsuits against realtors.
2. Buyers used to have 17 days to release all contingencies, but now the new boilerplate gives 21 days to release the loan contingency. Most lenders can hit the 17-day mark, but it’s usually tight; so the 21 days is probably more realistic. But it does add a second contingency-release date, and more paperwork. We surmised that in the real world, all contingencies might drag to the 21st day.
3. The separate termite form was deleted, and its contents added to the ‘Request for Repair’ form. Previously it was customary to include the termite costs in the original offer (and assigned to the seller), but now they will be a negotiable item after the inspection, as is the custom in Northern California.
4. You regularly see these remarks, “Seller is exempt from TDS”, which applies if the actual seller is a bank, or a successor trustee who has in effect inherited the house. But they are only exempt from having to use our specific TDS form, they aren’t exempt from disclosing everything they know about the property.
5. There are times when the sellers will occupy the home for days or weeks after closing (a subject to which I will devote a whole post), but it is now stated in paragraph 9F that keys and passwords be delivered to buyer on the day escrow closes, regardless of possession.
6. The big-screen TVs have been excluded for a while, yet their brackets remain with the property. But this version added a second choice, if the box is checked – “[bracket] will be removed and holes or other damage shall be repaired, but not painted.” This is on the purchase offer that the buyer is submitting, so they will be guessing on whether the sellers intend to leave the bracket, or remove it and repair the holes or other damage.
7. If the buyer adds a phrase about intending to occupy the property for 12 months, it will negate the 60-day notice required to give a month-to-month tenant who has been living there more than a year. Instead, only a 30-day notice is required.
8. There are two stigmas that are required to be disclosed – death and meth.
9. Sellers have to disclose any insurance claims over the last five years – whether they owned it or not.
10. This is a first – they added verbiage about what happens when a party won’t sign off to cancel a sale. If either party fails to execute mutual instructions to cancel, the other party can demand that escrow release the deposit. Escrow shall promptly deliver notice of the demand to the other party, and give them 10 days to object. If they don’t object, escrow can unilaterally release the deposit to the other party. The form authors couldn’t resist adding a final paragraph that escrow companies can still require mutual cancellation instructions at their discretion, which we’re guessing that most will do.
11. This rarely comes up, but if a buyer cancels after releasing all contingencies, and the seller gets their deposit – he has to split the deposit with the listing agent.
12. It is in the boilerplate that every dispute goes to mediation. If both parties initial the arbitration agreement, then the dispute goes there instead of going to court. Arbitration is cheaper, quicker, and private, but it is binding – there is no appeals of an arbitration decision. If you don’t like that, then don’t agree to arbitrate. Small-claims court is excluded, so disputes under $10,000 can go there for resolution.
Once a seller has a signed agreement, there are no back doors – if the buyers can perform, then they are buying the house. Once the buyers release all contingencies, they are committed too – and will lose their deposit if they cancel later. There is always joking at these seminars that nobody reads the contract – including the agents. Get Good Help!