OBTAINING THE OFFER & CREATING THE SALES AGREEMENT CHAPTER 10
CALIFORNIA RESIDENTIAL PURCHASE AGREEMENT AND JOINT ESCROW INSTRUCTIONS RPA–CA This is a ten page form, containing eight pages of an offer and escrow and two pages of Buyer Inspection Advisory. There are also additional addendums, such as: Cooperating Broker Compensation Agreement and Escrow Instruction, and the Wood Destroying Pest Inspection and Allocation of Cost Addendum, and other forms.
The purpose of a sales contract or deposit receipt, “ Residential Purchase Agreement And Joint Escrow Instructions ” RPA–CA for the purchase of residential real estate is to clarify all of the conditions of the offer and to hold the property off the market while three major contingencies are investigated and satisfied: Obtaining satisfactory financing. Acceptable physical condition of the property. Satisfactory condition of title.
1. OFFER The first paragraph is written as an offer. This reflects the fact that the form is primarily a purchase offer and contract and only secondarily a receipt for deposit and escrow instructions. Enter the date the form is being filled out and the location of where it is being filled out.
Identify the buyers by their names, as they wish to have them read on the title of the property. Do not identify the buyers with anything that looks like a manner of taking title, (e.g., husband and wife, and unmarried man, etc.)
Example: William P. Scott and Rebecca Lynn Scott or Bill Scott and Becky Scott or Billy Paul Scott and Lynn Scott
Example: Do NOT write: Ralph P. Scott and Rebecca L. Scott as community property or Ralph P. Scott and Rebecca L. Scott as husband and wife. It looks like you are giving legal advice, this is a No! No!
Enter the location where the property is located, and the city. Then enter the Assessor’s Parcel No. Purchase Price (the offered price). Write it in both words and dollars).
Example: Assume the property is selling for $300,000. Then write: Note: If using winforms enter the purchase amount in numbers and the program will automatically insert the purchase price in words. Three hundred thousand and no/100 dollars and then in numeral form $300,000.00 .
Choose either a specific number of days for the close of escrow (COE) or a date. Make sure the number of days or date chosen does not fall on Saturday, Sunday or a holiday.
2. FINANCING We now need to develop how the property will be financed. Being able to obtain the loans specified is a contingency of the agreement. The buyer is required to make a good faith effort to obtain the specified financing. In this section you will total all down payments plus loans to determine the total purchase price.
A . Initial Deposit B . Increased Deposits C . 1st Trust Deed D . Additional Terms E. Balance Purchase Price F. (A + B + C + D + E) The Total Purchase Price is the total of the following:
G. Loan Application Buyer to apply for financing within 7 days or (_____) H. Verification of Down Payment and Closing Costs within 7 days or (_____) I. Loan Contingency Removal
J. Appraisal Contingency And Removal K. No Loan Contingency L. All Cash Offer
B. Seller Occupancy or vacate property. Delivery to buyer on C.O.E. or ______ days later. 3. CLOSING & POSSESSION A. Buyer Occupancy Whether the buyer intends to occupy the property.
C. Tenant Occupied Property At the close of escrow the property shall remain vacant unless otherwise agreed in writing. D. At the close of escrow Seller assigns to buyer any assignable warranty rights for items included in the sale and shall provide any available copies of such warranties. Brokers cannot and will not determine the assignability of any warranties (such as: new roof warranty).
E. Keys Keys and means of opening all locks are to be delivered to the buyer at the time of possession.
4. ALLOCATION OF COSTS The paragraph also specifies that, if checked, the pest inspection, septic inspection and well inspection are contingencies of the Agreement.
Wood Destroying Pest Inspection Either the buyer or seller may pay for this inspection. See also “Wood Destroying Pest Inspection and allocation of Cost Addendum” C.A.R. form WPA. This should be attached to the RPA–CA..
Sections 4B through 4D check as they apply. 4B(3) Seller shall pay for 4 a natural zone disclosure report prepared by: 4C(1) Seller 4C(2) Seller 4D(1) Seller Buyer shall pay escrow fee
50/50 each to pay their own normal fees escrow holder to be buyers/sellers choice . 4D(2) Seller shall pay for owners title insurance policy specified in paragraph 12 Owners title policy to be issued by buyer’s choice/seller’s choice
4E(1) Seller 4E(2) Seller 4E(3) Seller (if applicable) 4E(4) Seller (if applicable) 4E(5) Seller shall pay the cost, not to exceed $ of a one-year home warranty plan issued by buyer’s choice within the following optional coverage example A/C (Air Conditioner)
5. STATUTORY DISCLOSURE STATEMENT (Including Lead–Based Paint Hazard Disclosure) and Cancellation Rights: A. The seller shall deliver Lead–Based Paint Hazard Disclosure and statutory disclosures of the Transfer Disclosure Statement (TDS) and Natural Hazard Disclosure Statement (NHD) and Mello-Roos disclosure and Improvement Bond Act of 1915.
B. NHD Disclosures: Special Flood Hazard Zone. Very High Fire Hazard Zone. Earthquake Fault Zone. Other zones such as: Seismic Hazard Zones. State Fire Responsibility Areas. Inundation Zones. Nuclear Power Plants.
EARTHQUAKE WEAKNESSES When selling a home built prior to January 1, 1960, the agent must disclose whether the dwelling has earthquake weaknesses. 1. Unbraced Water Heater 2. Foundation Not Anchored 3. Weak Cripple Walls: Exterior Cripple Walls Pier and Post Foundations
4. Uninforced Masonry Foundation 5. Houses on Tall Wall or Posts 6. Uninforced Masonry Walls 7. Room Over Garage
CRIPPLE WALL The center 2x4 is broken where the window goes. This is called a cripple wall. The two outside 2x4s run the length of the wall. WINDOW Cripple Wall
TO WHOM IT MAY CONCERN: I have received a copy of “ The Homeowner’s Guide to Earthquake Safety ”: Date: (Signature) Time: __________________ (Printed Name) Date: __________________ (Printed Name) Time: __________________ (Signature)
C. Database Disclosure. Must notify the buyer of any registered sex offenders in the area.
TO WHOM IT MAY CONCERN: I have received a copy of “ Environmental Hazards: A Guide for Homeowners and Buyers ” from the broker(s) in the transaction. Date: (Signature) Time: __________________ (Printed Name) Date: __________________ (Printed Name) Time: __________________ (Signature)
6. CONDOMINIUM/PLANNED UNIT DEVELOPMENT DISCLOSURE Seller has 7 days or (_____) to disclose wither the property is a condominium, or a planned unit development or other common interest subdivision.
7. CONDITIONS AFFECTING PROPERTY Nothing to fill in here. Paragraph cannot be altered even if agreed.
8. ITEMS INCLUDED AND EXCLUDED The buyer is entitled to receive all existing fixtures and fittings that are attached, free of liens and without seller warranty. Items excluded from the sale of property should be listed in section 8c.
9. BUYER’S INVESTIGATION OF PROPERTY CONDITION Inspections cannot be done without the seller’s prior approval. The seller is entitled to a copy of all reports, at no cost. The sellers have utilities for buyer’s inspection.
10. REPAIRS Repairs shall be made at seller’s expense. 11. BUYER INDEMNITY AND PROTECTION FOR ENTRY UPON PROPERTY The seller is also cautioned that recording certain notices may help protect the seller’s interest.
12. TITLE AND VESTING This paragraph provides that a buyer is to receive a CLTA/ALTA Homeowner’s Policy of Title Insurance, if reasonably available. Vesting shall be designated in the buyer’s escrow instructions. The agent should never advise on how to take title. Who can give this advice? ATTORNEYS!!!
THE TYPES OF TITLES For Single or Unmarried: Single – Never been married Unmarried – Divorced For Married Couples: Joint Tenancy – Right of Survivorship Community Property Joint Tenancy – As community property
Others: Joint Tenancy Tenants in Common Living Trust – Any person or persons can form a Living Trust.
JT – Joint Tenancy CP – Community Property LT – Living Trust MARRIED Full stepped-up basis. Full stepped-up basis. Half of stepped-up basis. Goes to survivor, then to heirs Can will. Can’t will, goes to survivor. LT CP JT
13. SALE OF BUYER’S PROPERTY If the buyer needs to sell his/her property before buying the seller’s property then this section needs to be filled out.
14. TIME PERIODS; REMOVAL OF CONTINGENCIES; CANCELATION RIGHTS Time periods are set up for both the seller and buyer. This can be changed by written mutual consent.
Seller has 7 days or (_____) after acceptance to deliver all reports, disclosure and information for which the seller is responsible. Buyer has 17 days or (_____) after acceptance unless otherwise agreed in writing.
15. FINAL VERIFICATION OF CONDITION The buyer will have the right to make a final inspection of the property within 5 or (_____) day prior to COE.
16. LIQUIDATED DAMAGES Only applies if all principles agree and initial. Buyer’s initials _____/_____ Seller’s initials _____/_____
17. DISPUTE RESOLUTION A. Mediation Arbitration of Dispute Only applies if all principles agree and initial. Buyer’s initials _____/_____ Seller’s initials _____/_____
18. PRORATION OF PROPERTY TAXES 19. WITHHOLDING TAXES 20. MULTIPLE LISTING SERVICE 21. EQUAL HOUSING OPPORTUNITY 22. ATTORNEY FEES 23. SELECTION OF SERVICE PROVIDERS 24. TIME OF ESSENCE; ENTIRE CONTRACT; CHANGES
25. OTHER TERMS AND CONDITIONS Any and all other terms to be made as part of this contract and escrow instructions. If not enough space to address all other items or issues, then use an addendum form as part of the contract and refer to the addendum on line #25.
28. JOINT EXCROW INSTRUCTIONS TO ESCROW HOLDER 29. BROKER COMPENSATION FROM BUYER 30. TERMS AND CONDITIONS OF OFFER
31. EXPIRATION OF OFFER Or by Agent’s name by _____________ Date:_______________ at ________________ am/pm Buyer also dates and signs Prints name and address.
32. BROKER COMPENSATION FROM SELLER Use “Cooperating Broker Compensation Agreement and Escrow Instructions” (CBC form). 33. ACCEPTANCE OF OFFER Signed by seller if offer is accepted and/or countered.
REAL ESTATE BROKERS Listing form to complete their portion. Selling form to complete their portion. ESCROW HOLDER ACKNOWLEDGEMENT To be completed by escrow.
BUYER’S INSPECTION ADVISORY Inspection not required by law but highly recommended. Have buyers sign that they have been advised to have an inspection done.
TWO ADDENDUMS 1. Cooperating Broker’s Compensation Agreement and Escrow Instruction. 2. Wood Destroying Pest Inspection and Allocation of Cost Addendum.
Cooperating Broker Compensation Agreement and Escrow Instruction 1. Enter name of listing broker, address of the property being listed, assessor’s parcel number, the name of the city, the county, and the owners name. 2. Identify the listing broker.
Wood Destroying Pest Inspection and Allocation of Cost Addendum This form establishes who will do the work and how the cost will be split between seller and buyer.
On March 25, 2003, in the city of Dover, Mr. Baker made an offer on a property described as 8241 Elm Street. The Assessor’s Parcel No. is 123-45-6789-0 in the city of Dover. He offered $255,000 on the home that was listed for $250,000. The seller agreed to make $5,000 of repairs to the property prior to the close of escrow. Escrow will open 30 days after the acceptance of the offer. He placed $5,000 as the initial deposit and the check is made out to “Best Homes, Inc.” He is to obtain a first trust deed of $200,000 at 7%, amortized over 30 years with the balance due in 30 days. Don’t forget to determine the balance of the purchase price.
Occupancy shall occur at 3:00 PM or no later than 3 days after the close of escrow. 4A Don’t forget to check the box for the WPA form, in section. 4B The seller shall pay the following: sewage system, to have domestic wells, and natural hazard inspections. This shall be done by any “ reliable, if applicable.”
4C The seller shall pay for: C(1) and C(2). 4D The buyer and seller pay 50/50 of the escrow costs and their own normal fees. 4E The seller shall pay the county and city transfer fees. In section 5 the sellers shall pay the cost not to exceed $300 and a one year warranty shall be issued by Fidelity home Warranty. See section 25. A buyer’s inspection Addendum will be provided. Forms “ WPA and CBC are to be used in this transaction” . The “ seller is to credit the buyer with $6,000 for Closing Costs and Non-Recurring costs” .
27C The sellers will pay the listing agent, Sunshine Realty Inc , as their exclusive agent . The buyer will use Best American Homes Real Estate Company , as the buyer’s exclusive selling agent.
REAL ESTATE BROKERS Best American Homes Real Estate Company 456 Oak St. 987 Greenville, CA 45612 Tel: (123) 045-6789 Fax: (012) 345-6789 E-Mail: firstname.lastname@example.org
Sunshine Realty, Inc. 1234 Elm Avenue Greenville, CA 98765 Tele: (987) 654-3210 Fax: (456) 123-0789 E-Mail: agents@agent .tv
INFO FOR BROKER COMPENSATION Property listed in the So. Cal. MLS, 2.5% commission for the cooperating broker. INFO FOR PEST INSPECTION The termite company is any reliable. Fill out the following blank deposit receipt CBC and WPA.
1. “ Residential Purchase Agreement And Joint Escrow Instructions” RPA–CA is to clarify all of the conditions of the offer and to hold the property off the market while three major contingencies are investigated and satisfied. They are: a. Obtaining satisfactory financing. b. To determine the financing of the property. c. Acceptable physical condition of the property. d. Satisfactory condition of title. B
D 2. Mr. Ralph P. Scott and Rebecca L. Scott make an offer on a home. Which of the following would be a permissible way to enter their names on the RPA–CA a. Mr. Ralph P. Scott and Rebecca L. Scott as community property. b. Mr. Ralph P. Scott and Rebecca L. Scott as husband and wife. c. Mr. Ralph P. Scott and Rebecca L. Scott as a living trust. d. Mr. Ralph P. Scott and Rebecca L. Scott.
A 3. Which of the following would be the proper way to write the Purchase Price on the RPA-CA? a. One Hundred Thousand and no/100, with $100,000. b. $100,000. c. One Hundred Thousand and no/100. d. One Hundred Thousand.
D 4. Mr. & Mrs. Brown make an offer on a home. They give $5,000 initial deposit, plus obtain a $100,000 1st trust deed, plus the balance of the purchase price of $20,000. What is the purchase price of the offer: a. $ 100,000. b. $ 105,000. c. $ 120,000. d. $ 125,000.
A 5. Possession of the “keys” is to be delivered to the buyer usually at: a. the time of possession. b. the close of escrow. c. when the buyer demands them. d. any of the above.
6. Escrow costs are usually paid: a. by the seller. b. by the buyer. c. 50/50 by the seller and buyer d. by the title company. C
7. Which of the following is NOT a statutory disclosure statement: a. Mello-Roos disclosure and Improvement Bond Act of 1915. b. Very High Fire Hazard Zone. c. Earthquake Fault Zone. d. Lead-Base Paints. D
B 8. The picture below is an example of a : a. mudsill. b. cripple wall. c. foundation not anchored. d. pier and post foundation. Window
A 9. The first page of the deposit receipt will contain: a. financing information, b. pest control information. c. disclosure statements. d. all of the above.
B 10. A married couple wants to receive the highest basis in property at the time of death. How should they hold title to the property? a. joint tenants. b. community property. c. as married husband taking title as an unmarried person. d. single.
D 11. A married couple can use which methods of taking title. a. as single person or tenancy in common. b. joint tenancy or the husband hold as a single person. c. tenancy in common or the wife hold as a single person. d. joint tenancy or community property.
C 12. To obtain the full stepped–up basis the property should be held: a. joint tenancy between husband and wife. b. joint tenancy with the approval of a qualified attorney. c. in an irrevocable estate. d. any of the above.
B <ul><li>Mr. & Mrs. Montezumo purchased a home in 1965 for $50,000. They held title to the property as joint tenancy. Mr. Montezumo died last week and the home is valued at $250,000. What is Mrs. Montezumo’s basis in the property today? </li></ul><ul><li>a. $ 50,000 </li></ul><ul><li>b. $ 175,000 </li></ul><ul><li>c. $ 200,000 </li></ul><ul><li>d. $ 250,000 </li></ul>
D <ul><li>Mr. & Mrs. Montezumo purchased a home in 1960 for $30,000. Mr. Montezumo died last week and the home is valued at $300,000. They held title to the property as community property. What is Mrs. Montezumo’s basis in the property today? </li></ul><ul><li>a. $ 30,000 </li></ul><ul><li>b. $ 150,000 </li></ul><ul><li>c. $ 165,000 </li></ul><ul><li>d. $ 300,000 </li></ul>
B 15. In the residential purchase agreement and joint escrow instructions: a. the warranties are listed. b. the buyer must specify them. c. the broker is responsible for all warranties. d. the selling broker is responsible for them.
A 16. If time periods are set up for both the seller and buyer. The periods can be changed by: a. written mutual consent. b. only the seller. c. the escrow officer. d. the title company.
D 17. The buyer will have the right to make a final inspection of the property: a. within 13 days prior to COE. b. 13 days after the COE. c. 5 days after the COE. d. within 5 days prior to COE.
C 18. There are three basic ways to handle disputes over sale of property. Which of the following is not one of them. a. Mediation. b. Arbitration. c. have the realtors comprise the dispute. d. court action.
A 19. Which of the following is a form that does NOT need to accompany the RPA–CA. a. California Residential Listing Agreement. b. Cooperating Broker Compensation Agreement and Escrow Instruction c. California Agency Disclosure d. Wood Destroying Pest Inspection and Allocation of Cost Addendum
D 20. In the RPA–CA which of the following would be the most desirable time for the closing date: a. late afternoon of May 25th 2001. b. May 25th; c. May 25th 2001. d. May 25th 2001 at 9:00 am.
C 21. In a sales dispute which will usually take precedence in a court case? a. an oral agreement. b. a deposit receipt. c. residential purchase agreement and joint escrow instructions. d. an agreement between a listing broker and a selling broker.
B 22. Which of the following is NOT necessary to explain to the buyer or seller when presenting an offer. a. when the keys should be turned over. b. how the commission will be divided. c. name of the escrow company. d. what stays with the house.