The California Association of Realtors is a professional entity offering services to California Realtors. Among its most prominent offerings is a library of legally written paperwork to be used in real estate transactions. This contractual library is the same throughout the state although escrow practices can differ from area to area.
The purchase contract is a 10 page document containing a great deal of ‘legal ease.’ It allows space for the Realtor to insert such key variables as property information, price, financing terms, and what is included/excluded with the property.
There are a few key concepts that I make sure every buyer understands in the contract.
First and foremost, the California contract is nice in some ways. It allows the buyer an inspection period within the escrow time frame. The default language calls for a 17 day inspection window, although that may be modified.
It is during this inspection period that the buyer is to obtain the property inspection, order an appraisal from the buyer’s lender, review all disclosure documents, and order any additional inspections the buyer may require. Review of condo and home owner association documents is also included in this review.
If by the end of the inspection period, the California home buyer is not satisfied, there is a provision in the contract where the buyer may cancel and receive their earnest money deposit back. If the buyer has decided to pursue the property, he/she will sign a ‘contingency removal’ form. At this point, the buyer is in a binding legal contract. If the buyer were to cancel the deal, the good faith deposit would be at risk.
Other key points of note in the purchase contract, all property taxes, HOA fees, and insurance are calculated for the day you take ownership. The only exception to that may be if you are buying a distressed home and there are unpaid fees.
The California Purchase contract contains substantial language regarding disputes and how they are resolved. The intent behind these paragraphs is to create a prescribed method for conflict resolution and stay away from attorneys. It prescribes both mediation and binding arbitration as the procedures for mitigating any conflicts.
There is of course more in the contract than these items but my intent here is to offer an overview of the most important clauses. No matter who your Realtor might be, make sure you have obtained a copy of the contract, read it thoroughly, and have had a Realtor review it with you.