Agents are supposed to maintain a good working knowledge of the purchase contract, and every year we go to the C.A.R. review to keep up with the changes. But I don’t remember discussing this paragraph that was added in 2021, and expanded in the most recent version of the contract.
We had an interesting test case on it recently.
The buyer wanted to cancel their purchase, but they knew someone who was also interested in buying the property too. They claimed that Paragraph 23 gives them permission to plug in the new buyer, and the seller can’t ‘unreasonably’ withhold consent.
The way that paragrah reads, they might have a case. If they were able to provide a pre-qual letter and properly notify the seller and listing agent, it looks like they would have complied with the criteria expressed in this paragraph.
Do I want to get into a battle over it?
Luckily, they did not produce the documentation, and instead bowed out gracefully. But for a minute, I thought we might be stuck with the assignee, who had said that he flipped homes in the past. I cringed at the thought of the usual discount that flippers demand after their home inspection.
From now on, we’re going to counter out #23 before we enter into an agreement.
What’s the diff who buys the house at the price terms etc the seller has agreed too ?
It has to do with the general paranoia that agents have about screwing up, combined with the control issues – and both are festered by all of us being connected by the MLS, which unconsciously breeds mistrust and contempt.
Agents worry that someone is always trying to get over on them.
But once you have enough experience, you realize that the contract is the bible, and will have an answer for most every concern. This one in paragraph #23 is just vague enough that it could be interpreted either way.
Let’s cover a few examples where homebuyers might need to make adjustments:
1. Change from individuals to a trust. No problem.
2. Add other buyers to cosign in order to qualify. Understandable.
3. Others added later who want to get in on the action. Hmmm….ok.
4. Buyer cancels, and assigns to a third-party?
I was going to live with it because I didn’t want them to file a lis pendens against the property and halt any sale. Anybody can sue anybody for anything, and I wanted to avoid putting my seller through that.
My only concern whas what the new buyer would do later. The house was in disrepair, and if they came back later and wanted a $50,000 or $100,000 price reduction, I would regret it.
My biggest fear is having to go back on the market a week or two later after the urgency of a new listing is gone. We saw what happened in October when we did mold repairs and went back on the market three weeks later. Even though I had dozens of lookers come by again, I only received one offer and it was under list price – when I had a handful of offers initially and was 10% over list.
The big variable then was the Padres vs Dodgers playoffs that weekend. Did that distract potential bidders? I’ll know more next October!
This language is part of an evolution that tightens up the ability of a buyer to assign a purchase contract under CAR forms. Under the older versions of the RPA, the assignment language was pretty broad and defaulted to automatically permitting assignments of any kind:
From the 2018 CAR RPA: ” 25. SUCCESSORS AND ASSIGNS: This Agreement will be binding upon, and inure to the benefit of, Buyer and Seller and their respective successors and assigns, except as provided herein.”
Back then, Wholesalers did not need to add the telltale “or assignee” language when naming the purchaser in the contract. Now it is not so easy for them.