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Residential
Purchase Agreement
Date _____________, at ____________________,
California, Received From _______________________ ("Buyer"), A Deposit Of
_____________________ Dollars $ ___________, toward the Purchase Price Of
________________________ Dollars $ _______________, For Purchase Of Property
Situated In __________________, County Of __________, California, Described As
________________, ("Property").
1. FINANCING: Obtaining the loans
below is a contingency of this Agreement. Buyer shall act diligently and
in good faith to obtain the designated loans. Obtaining deposit, down payment
and closing costs is not a contingency.
A. BUYER'S DEPOSIT shall be held
uncashed until Acceptance and then deposited within 3 business days after ..
$__________ Acceptance or _____________, with Escrow Holder,
into Broker's trust account, or ____________, by Personal
Check, Cashier's Check, Cash, or _________________
B. INCREASED DEPOSIT shall be deposited with _________ .. $_________
within _______ Days After Acceptance, or _______________
C. FIRST
LOAN IN THE AMOUNT OF ...$__________ NEW First Deed of Trust in favor of
LENDER, encumbering the Property, securing a note payable at maximum interest
of ________% fixed rate, or ________% initial adjustable rate with a maximum
interest rate cap of ________%, balance due in ______ years. Buyer shall pay
loan fees/points not to exceed ___________. FHA VA: Seller shall
pay (i) _% discount points, (ii) other fees not allowed to be paid by Buyer,
not to exceed $__________, and (iii) the cost of lender required repairs not
otherwise provided for in this Agreement, not to exceed $ ___________.
D.
ADDITIONAL FINANCING TERMS: __________ ... $_________ seller
financing, (C.A.R. Form SFA-14); junior or assumed financing, (C.A.R.
Form PAA-14, paragraph 5)
E. BALANCE OF PURCHASE PRICE (not including
costs of obtaining loans and other closing costs) to be deposited ...
$__________ with escrow holder within sufficient time to close escrow.
F.
TOTAL PURCHASE PRICE ... $__________
G. LOAN CONTINGENCY shall
remain in effect until the designated loans are funded (or ______ Days
After Acceptance, by which firne Buyer shall give Seller written notice of
Buyer's election to cancel this Agreement if Buyer is unable to obtain the
designated loans. If Buyer does not give Seller such notice, the contingency of
obtaining the designated loans shall be removed by the method specified in
paragraph 16B.)
H. LOAN APPLICATIONS; PREQUALIFICATION: For NEW
financing, within 5 (or ______) Days After Acceptance, Buyer shall
provide Seller a letter from lender or mortgage loan broker stating that, based
on a review of Buyer's written application and credit report, Buyer is
pre-qualified for the NEW loan indicated above. If Buyer fails to provide such
letter within that time, Seller may cancel this Agreement in writing.
I.
APPRAISAL CONTINGENCY: (If checked) This Agreement is contingent
upon Property appraising at no less than the specified total purchase price. If
there is a loan contingency, the appraisal contingency shall remain in effect
until the loan contingency is removed. If there is no loan contingency, the
appraisal contingency shall be removed within 10 (or ______) Days After
Acceptance.
J. ALL CASH OFFER: If this is an all cash offer, Buyer
shall, within 5 (or ______) Days After Acceptance, provide Seller
written verification of sufficient funds to close this transaction. Seller may
cancel this Agreement in writing within 5 Days After: (i) time to provide
verification expires, if Buyer fails to provide verification; or (ii) receipt
of verification, if Seller reasonably disapproves it.
2. ESCROW: Close Of Escrow shall
occur ____ Days After Acceptance (or on (date)). Buyer and Seller shall
deliver signed escrow instructions consistent with this Agreement within
____ Days After Acceptance, at least ____ Days before Close Of Escrow,
or _______________. Seller shall deliver possession and occupancy of the
Property to Buyer at _____ AM/PM, on the date of Close Of Escrow,
no later than ____ Days After date of Close Of Escrow, or
__________________________. Property shall be vacant, unless otherwise agreed
in writing. If transfer of title and possession do not occur at the same time,
Buyer and Seller are advised to (a) consult with their insurance advisors, and
(b) enter into a written occupancy agreement. The omission from escrow
instructions of any provision in this Agreement shall not constitute a waiver
of that provision.
3. OCCUPANCY: Buyer does,
does not, intend to occupy Property as Buyer's primary
residence.
4. ALLOCATION OF COSTS: (Check boxes
which apply. If needed, insert additional instructions in blank
lines.)
GOVERNMENTAL TRANSFER
FEES:
A. Buyer Seller shall pay County transfer tax
or transfer fee.________________
B. Buyer Seller shall
pay City transfer tax or transfer fee.__________________
TITLE AND ESCROW
COSTS:
C. Buyer Seller shall pay for owner's title
insurance policy, issued by ____________________ company. (Buyer shall pay for
any title insurance policy insuring Buyer's Lender, unless otherwise
agreed.)
D. Buyer Seller shall pay escrow fee.
______________ Escrow holder shall be
_________________.
SEWER/SEPTIC/WELL COSTS:
E. Buyer
Seller shall pay for sewer connection, if connection required by Law prior to
Close Of Escrow. ________________
F. Buyer Seller shall
pay to have septic or private sewage disposal system inspected.
________________________
G. Buyer Seller shall pay to
have domestic wells tested for water potability and productivity.
__________________
OTHER COSTS:
H. Buyer Seller
shall pay Homeowners' Association transfer fees.
______________________
I. Buyer Seller shall pay
Homeowners' Association document preparation fees.
___________________
J. Buyer Seller shall pay for zone
disclosure reports. _____________________
K. Buyer
Seller shall pay for Smoke Detector installation and/or Water Heater bracing.
____________________ Seller, prior to close of escrow, shall provide Buyer a
written statement of compliance in accordance with state and local Law, unless
exempt.
L. Buyer Seller shall pay the cost of
compliance with any other minimum mandatory government retrofit standards and
inspections required as a condition of closing escrow under any Law.
____________________________
M. Buyer Seller shall pay
the cost of a one-year home warranty plan, issued by _______________, with the
following optional coverage: ________________. Policy cost not to exceed
$______.
PEST CONTROL REPORT:
N. Buyer Seller shall
pay for the Pest Control Report ("Report"), which, within the time specified in
paragraph 16, shall be prepared by __________________, a registered structural
pest control company. _____________
O. (1) Buyer shall have the right
to disapprove the Report as specified in paragraph 16, UNLESS any box in 4 O
(2) is checked below
OR (2) (Applies if any box is checked below)
(a) Buyer Seller shall pay for work recommended to correct
conditions described in the Report as "Section 1."
(b) Buyer
Seller shall pay for work recommended to correct conditions described in
the Report as "Section 2," if requested by Buyer.
Buyer and Seller acknowledge receipt of copy
of this page, which constitutes Page 1 of ___ Pages. Buyer's Initials (_____)
(_____) Seller's Initials (_____) (_____)
THIS FORM HAS BEEN APPROVED BY THE
CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.). NO REPRESENTATION IS MADE AS
TO THE LEGAL VALIDITY OR ADEQUACY OF ANY PROVISION IN ANY SPECIFIC TRANSACTION.
A REAL ESTATE BROKER IS THE PERSON QUALIFIED TO ADVISE ON REAL ESTATE
TRANSACTIONS. IF YOU DESIRE LEGAL OR TAX ADVICE, CONSULT AN APPROPRIATE
PROFESSIONAL.
The copyright laws of the United
States (Title 17 U.S. Code) forbid the unauthorized reproduction of this form,
or any portion thereof, by photocopy machine or any other means, including
facsimile or computerized formats. Copyright © 1991-1999, CALIFORNIA
ASSOCIATION OF REALTORS®, INC. ALL RIGHTS RESERVED.
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Real Estate
Transfer Disclosure Statement
THIS DISCLOSURE STATEMENT CONCERNS THE REAL
PROPERTY SITUATED IN THE CITY OF _________________________, COUNTY OF
____________________, STATE OF CALIFORNIA, DESCRIBED AS
______________________________________. THIS STATEMENT IS A DISCLOSURE OF THE
CONDITION OF THE ABOVE DESCRIBED PROPERTY IN COMPLIANCE WITH SECTION 1102 OF
THE CIVIL CODE AS OF (date) ________________. IT IS NOT A WARRANTY OF ANY KIND
BY THE SELLER(S) OR ANY AGENT(S) REPRESENTING ANY PRINCIPAL(S) IN THIS
TRANSACTION, AND IS NOT A SUBSTITUTE FOR ANY INSPECTIONS OR WARRANTIES THE
PRINCIPAL(S) MAY WISH TO OBTAIN.
I
COORDINATION WITH
OTHER DISCLOSURE FORMS
This Real Estate Transfer Disclosure
Statement is made pursuant to Section 1102 of the Civil Code. Other statutes
require disclosures, depending upon the details of the particular real estate
transaction (for example: special study zone and purchase-money liens on
residential property).
Substituted Disclosures: The following
disclosures have or will be made in connection with this real estate transfer,
and are intended to satisfy the disclosure obligations on this form, where the
subject matter is the same:
Inspection reports completed pursuant to
the contract of sale or receipt for deposit.
Additional inspection
reports or disclosures: ________________________________
II
SELLER'S INFORMATION
The Seller discloses the following
information with the knowledge that even though this is not a warranty,
prospective Buyers may rely on this information in deciding whether and on what
terms to purchase the subject property. Seller hereby authorizes any agent(s)
representing any principal(s) in this transaction to provide a copy of this
statement to any person or entity in connection with any actual or anticipated
sale of the property.
THE FOLLOWING ARE REPRESENTATIONS
MADE BY THE SELLER(S) AND ARE NOT THE REPRESENTATIONS OF THE AGENT(S), IF ANY.
THIS INFORMATION IS A DISCLOSURE AND IS NOT INTENDED TO BE PART OF ANY CONTRACT
BETWEEN THE BUYER AND SELLER.
Seller is is not occupying the
property.
A. The subject property has the items checked below (read
across):
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Range
Dishwasher
Washer/Dryer Hookups
Burglar Alarms
TV. Antenna
Central Heating
Wall/Window Air
Conditioning
Septic Tank
Patio/Decking
Sauna
Hot Tub
Locking Safety Cover*
Security
Gate(s)Garage: Attached
Pool/Spa Heater: Gas
Water Heater:
Gas
Water Supply: City
Gas Supply: Utility
Window Screens |
Oven
Trash
Compactor
Smoke Detector(s)
Satellite Dish
Central Air Conditioning
Sprinklers
Sump Pump
Built-in Barbecue
Pool Child Resistant Barrier*
Automatic Garage Door Opener(s)*
Not Attached
Solar
Water Heater Anchored, Braced, or Strapped*
Well
Bottled
Window Security Bars
Quick Release
Mechanism on Bedroom Windows* |
Microwave
Garbage
Disposal
Rain Gutters
Fire Alarm
Intercom
Evaporator Cooler(s)
Public Sewer System
Water Softener
Gazebo
Spa Locking Safety
Cover*
Number Remote Controls____
Carport
Electric
Private Utility or Other_______ |
THIS FORM HAS BEEN APPROVED BY THE
CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.). NO REPRESENTATION IS MADE AS
TO THE LEGAL VALIDITY OR ADEQUACY OF ANY PROVISION IN ANY SPECIFIC TRANSACTION.
A REAL ESTATE BROKER IS THE PERSON QUALIFIED TO ADVISE ON REAL ESTATE
TRANSACTIONS. IF YOU DESIRE LEGAL OR TAX ADVICE, CONSULT AN APPROPRIATE
PROFESSIONAL.
The copyright laws of the United States
(Title 17 U.S. Code) forbid the unauthorized reproduction of this form, or any
portion thereof, by photocopy machine or any other means, including facsimile
or computerized formats. Copyright © 1990-1999, CALIFORNIA ASSOCIATION OF
REALTORS®, INC. ALL RIGHTS RESERVED.
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Disclosure
Regarding Real Estate Agency Relationships
As required by Civil Law
When you enter into a discussion with a real
estate agent regarding a real estate transaction, you should from the outset
understand what type of agency relationship or representation you wish to have
with the agent in the transaction.
SELLER'S AGENT
A Seller's agent
under a listing agreement with the Seller acts as the agent for the Seller
only. A Seller's agent or a subagent of that agent has the following
affirmative obligations:
To the Seller:
A Fiduciary duty of utmost care,
integrity, honesty, and loyalty in dealings with the Seller. To the Buyer and
the Seller:
(a) Diligent exercise of reasonable skill and care in
performance of the agent's duties.
(b) A duty of honest and fair dealing and
good faith.
(c) A duty to disclose all facts known to the agent materially
affecting the value or desirability of the property that are not known to, or
within the diligent attention and observation of, the parties.
An agent is not obligated to reveal to
either party any confidential information obtained from the other party that
does not involve the affirmative duties set forth above.
BUYER'S AGENT
A selling agent can,
with a Buyer's consent, agree to act as agent for the Buyer only. In these
situations, the agent is not the Seller's agent, even if by agreement the agent
may receive compensation for services rendered, either in full or in part from
the Seller. An agent acting only for a Buyer has the following affirmative
obligations:
To the Buyer:
A fiduciary duty of utmost care, integrity,
honesty, and loyalty in dealings with the Buyer. To the Buyer and the
Seller:
(a) Diligent exercise of reasonable skill and care in performance of
the agent's duties.
(b) A duty of honest and fair dealing and good
faith.
(c) A duty to disclose all facts known to the agent materially
affecting the value or desirability of the property that are not known to, or
within the diligent attention and observation of, the parties.
An agent is not obligated to reveal to
either party any confidential information obtained from the other party that
does not involve the affirmative duties set forth above.
AGENT REPRESENTING BOTH SELLER &
BUYER
A real estate agent, either acting directly or through one or more
associate licensees, can legally be the agent of both the Seller and the Buyer
in a transaction, but only with the knowledge and consent of both the Seller
and the Buyer.
In a dual agency situation, the agent has
the following affirmative obligations to both the Seller and the Buyer:
(a)
A fiduciary duty of utmost care, integrity, honesty and loyalty in the dealings
with either Seller or the Buyer.
(b) Other duties to the Seller and the
Buyer as stated above in their respective sections.
In representing both Seller and Buyer, the
agent may not, without the express permission of the respective party, disclose
to the other party that the Seller will accept a price less than the listing
price or that the Buyer will pay a price greater than the price
offered.
The above duties of the agent in a real
estate transaction do not relieve a Seller or Buyer from the responsibility to
protect his or her own interests. You should carefully read all agreements to
assure that they adequately express your understanding of the transaction. A
real estate agent is a person qualified to advise about real estate. If legal
or tax advice is desired, consult a competent professional.
Throughout your real property transaction
you may receive more than one disclosure form, depending upon the number of
agents assisting in the transaction. The law requires each agent with whom you
have more than a casual relationship to present you with this disclosure form.
You should read its contents each time it is presented to you, considering the
relationship between you and the real estate agent in your specific
transaction.
This disclosure form includes the provisions
of Sections 2079.13 to 2079.24, inclusive, of the Civil Code set forth on the
hereof. Read it carefully.
THIS FORM HAS BEEN APPROVED BY THE
CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.). NO REPRESENTATION IS MADE AS
TO THE LEGAL VALIDITY OR ADEQUACY OF ANY PROVISION IN ANY SPECIFIC TRANSACTION.
A REAL ESTATE BROKER IS THE PERSON QUALIFIED TO ADVISE ON REAL ESTATE
TRANSACTIONS. IF YOU DESIRE LEGAL OR TAX ADVICE, CONSULT AN APPROPRIATE
PROFESSIONAL.
This form is available for use by the entire
real estate industry. It is not intended to identify the user as a
REALTOR®. REALTOR® is a registered collective membership mark which may
be used only by members of the NATIONAL ASSOCIATION OF REALTORS® who
subscribe to its Code of Ethics.
The copyright laws of the United States
(Title 17 U.S. Code) forbid the unauthorized reproduction of this form, or any
portion thereof, by photocopy machine or any other means, including facsimile
or computerized formats. Copyright © 1987-1999, CALIFORNIA ASSOCIATION OF
REALTORS®, INC. ALL RIGHTS RESERVED.
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Property
Transaction Questions and Answers
The purchase of property is a very
significant act for many people. You have taken an important step by contacting
a real estate professional to assist you with your transaction. Agency
relationships are more satisfying to both principal and agent if all parties
understand the scope of the responsibilities of each in the
transaction.
Your real estate professional will be
assisting you in many ways during the course of your real estate transaction.
However, there are many other professionals who are better equipped to answer
certain questions, perform certain tasks or handle certain aspects of the
transaction. Some issues are also the buyer's or seller's responsibility. To
avoid misunderstandings, and to make sure you have adequate information so that
you know what to expect, these questions and answers cover some common issues
regarding the responsibilities of the seller, the buyer, the real estate
professional and other appropriate professionals.
DISCLOSURE
RESPONSIBILITIES
Every property has defects; some small and
some large. Some sellers have lived with a defect that they view as unimportant
but which may be important to a buyer. Of course, sellers, buyers and agents
have an obligation to deal honestly with each other. This section deals with
what must be disclosed and the format in which it must be disclosed.
Question 1: What must a seller
disclose about the condition of the property?
Answer: A seller must disclose known
material defects about the property. Typically, a seller would make these
disclosures on a Real Estate Transfer Disclosure Statement (TDS). However, if
an item is not covered on a TDS, a seller must still make these disclosures
about known material defects. In virtually all cases, a buyer will discover any
problems once the buyer occupies the property. By disclosing all problems up
front, the seller can avoid the surprise that many times provokes a lawsuit.
Even if a matter has been repaired, the seller should disclose the previous
defect and the repairs completed.
Question 2: What is the
Transfer
Disclosure Statement (TDS)?
Answer: The Transfer Disclosure
Statement is a form required by state law which the seller completes (unless
exempt) and delivers to a buyer. Among other things, it asks the seller to list
the various features of the property and disclose whether or not any of those
features are in operating condition. It also allows a seller to state whether
the seller is aware of a variety of common issues such as environmental
hazards, permits, homeowners' associations and other matters that might affect
the property. Some areas have additional local disclosures required by the
county or city.
Question 3: What are the seller's
obligations regarding the TDS?
Answer: Generally, the seller must
complete the TDS and deliver it to the buyer as soon as practicable before the
transfer of title. Sellers should thoughtfully and carefully consider each
question and answer it accurately, erring on the side of more, rather than less
disclosure. Some transactions are exempt from this requirement. Agents do not
have the obligation to verify statements made by the seller on this
form.
Question 4: Does the seller have
these same disclosure obligations in an "AS
IS" sale?
Answer: Yes. The terminology "AS IS"
simply means that the seller will normally not be paying for any repairs to the
property. An "AS IS" sale does not exempt a seller from disclosing material
information about the property. The seller must still accurately complete a TDS
and deliver it to the buyer, unless otherwise exempt, and must still disclose
other material facts affecting the value or desirability of the
property.
Copyright 1997 California
Association of REALTORS®. All Rights Reserved.
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Dispute
Resolution Alternatives - Arbitration or Litigation
Dear Client or Customer:
The contract you are about to execute
contains a provision for which you may select an alternative method of dispute
resolution. The selection that is agreed to by all parties will dictate the
method of dispute resolution to be used in the event a dispute were to arise as
a result of said contract.
It is important to note that there are
advantages and disadvantages to either method of dispute resolution you may
select. It is, therefore, STRONGLY RECOMMENDED THAT IN THE EVENT YOU HAVE ANY
QUESTIONS, YOU SEEK LEGAL COUNSEL'S ADVICE PRIOR TO MAKING SUCH A
SELECTION.
The following is a brief list of some, but
not all, of the advantages and/or disadvantages, which may be associated with
differing methods of dispute resolution. This is not intended to provide legal
advice or in any way make an affirmative recommendation with regards to which
method of dispute resolution is better.
Arbitration
ADVANTAGES OF ARBITRATION - Parties to an
arbitration are entitled to select, for a fee, legal counsel representation. In
most cases an arbitration is a less formal method of dispute resolution. The
arbitration is typically conducted outside the court system and therefore may
avoid the strict procedural requirements imposed by the court. The
trier-of-fact and law (arbitrator) can be a retired judge, lawyer, or
businessperson. There are many independent providers of this service. Judicial
Arbitration and Mediation Services/Endispute ("JAMS") is one, the American
Arbitration Association ("AAA") is another. The local telephone directory can
provide many others who provide this service as well.
The disputed issues can be brought before
the trier-of-fact and law, in most cases, in less time than could be expected
in the court system. The cost in terms of time, legal fees and legal costs can
be less than directing a dispute through the court system. An arbitrated award
is as enforceable as an award issued by the court.
DISADVANTAGES OF ARBITRATION - The greatest
disadvantage of arbitration is the award of the arbitrator is final and may not
be appealed except in unusual circumstances. There are some rare and limited
cases when an award of an arbitrator may be set aside. These however, deal
strictly with a party's ability to prove arbitrator bias or that a party did
not receive due process. Legal discovery rights are more limited than in court
proceedings. Arbitrators are not bound by normal rules of evidence or by
specific California law or formal equitable principles, unless the arbitration
provision in the contract requires the arbitrator to be bound by such rules,
laws and principles.
IMPORTANT NOTE - If you wish to elected the
arbitration method of dispute resolution, California Law requires that all
parties to a contract initial the arbitration provision before it will become a
part of the contract.
Litigation Through the Court
System
ADVANTAGES OF LITIGATION THROUGH THE COURT
SYSTEM - Parties to litigation in the court system are entitled to select, for
a fee, legal counsel representation. In most cases litigation through the court
is a more formal method of dispute resolution. These procedures include the
opportunity for significant methods of discovery, including depositions and
written discovery. The trier-of fact and law in the court system may be a
sitting judge or a jury with the judge as the trier-of-law. The court system is
strictly governed by the rules of evidence and procedure under the laws of
California. An unfavorable award of the court may be appealed to a higher
court.
DISADVANTAGES OF LITIGATION THROUGH THE
COURT SYSTEM - Litigation conducted through the court system must follow strict
procedural requirements imposed by the court. These procedures may include
motions, discovery, conferences and appeals, all of which can take significant
time. Due to the congestion in most court systems a dispute may take as long as
from two to four years or longer before getting to trial. These procedures can
be costly in terms of time, legal fees and legal costs. An award in your favor
at a lower court may not be a final resolution of the dispute due to the
opportunity for appeal.
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Dispute
Resolution Alternatives - Mediation
Dear Client or Customer
The Residential Purchase Agreement
("Contract") you are about to execute contains a "Mediation" provision. This
mediation provision imposes a requirement on the buyer and seller to initiate
mediation to resolve a dispute prior to entering into Arbitration or Litigation
through the court system. While mediation is a voluntary process the provision
provides that "If any party commences an action based on a dispute or claim to
which this paragraph applies, without first attempting to resolve the matter
through mediation, then that party shall not be entitled to recover attorney's
fees, even if they would otherwise be available to that party in any
action."
It is important to note that there are
advantages and disadvantages to every method of dispute resolution. It is
therefore, STRONGLY RECOMMENDED THAT YOU SEEK LEGAL COUNSEL'S ADVICE if you
have any questions on this subject matter.
In an effort to assist clients and customers
in understanding the mediation method of dispute resolution,
the following information is being provided. This information is not intended,
however, to provide legal advice and/or in any way make an affirmative
recommendation with regards to the subject matter. Clients, customers are
recommended to obtain legal advice regarding this subject from their legal
counsel.
The following is a brief list of some, but
not all, of the advantages and/or disadvantages, which may be associated with
mediation.
Mediation
ADVANTAGES OF MEDIATION - First and
foremost, mediation is a voluntary process. There is no trier-of-fact or law
who decides which party wins and which party loses, as in an Arbitration or
Litigation through the court system. Instead, there is a facilitator. The
facilitator works with each of the parties in order to get agreement on a joint
resolution of the dispute. In mediation, the parties are in control and no one
imposes an award or judgment on them.
Parties to mediation are entitled to select
legal counsel representation. In most cases mediation is a less formal method
of dispute resolution. The mediation is typically conducted outside the court
system and therefore may avoid the strict procedural requirements imposed by
the court. The facilitator (mediator) can be a retired judge, lawyer, or
businessperson. There are many independent providers of this service. Judicial
Arbitration and Mediation Services/Endispute ("JAMS") is one, the American
Arbitration Association ("AAA") is another. The local telephone directory can
provide many others who provide this service as well.
The disputed issues can be resolved very
early through mediation in most cases, saving significant cost in terms of
time, legal fees and legal costs.
DISADVANTAGES OF MEDIATION - The most
significant disadvantage to mediation is that the resolution is dependent upon
the parties' willingness to resolve the dispute. In most mediations each party
must give a little in their respective positions to reach a compromised middle
ground. If either party is unwilling to be flexible, the mediation in most
cases will fail and the parties will move on to Arbitration or Litigation
through the court system.
IMPORTANT NOTE - Mediation is a provision of
the Contract and does not require an affirmative election.
If the mediation is successful, the parties
typically sign an agreement outlining the points they have agreed on to resolve
the dispute.
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Questions and
Answers related to AS IS Sale vs.Warranted Sale
Dear Client or Customer:
The Residential Purchase Agreement
("Contract") provides for the property you are purchasing or selling to be sold
in "AS IS" condition WITHOUT WARRANTY, in its PRESENT physical condition. The
Contract also provides that a buyer and a seller may agree to a warranty of
specific items and/or systems of the property as defined under the Condition of
Property section of the Contract.
It is important, therefore, to note that
there are advantages and disadvantages to each party as related to warranty
issues. These issues are typically resolved as a result of negotiations between
a buyer and a seller. In an effort to assist clients and customers in understanding the difference between "AS IS" and Warranty, the
following Questions and Answers have been created. This Q & A is not
intended, however, to provide legal advice and/or in any way make an
affirmative recommendation with regards to the subject matter. Clients and
customers are recommended to obtain legal advice regarding this subject from
their legal counsel.
-
Q. In an "AS IS" sale is the
seller obligated to disclose adverse conditions of the
property?
A. The seller is obligated under law to disclose to a
buyer all that they know about any adverse material conditions affecting a
property. This is extremely important as nondisclosure of known defects may
make the seller liable for correcting said defects and for monetary damages for
failing to disclose the information.
-
Q. In a Warranted sale is the
seller obligated to disclose adverse conditions of the
property?
A. Yes, the seller's obligation to disclose the known
condition of the property is governed by law and does not change whether the
sale is an "AS IS" sale or a Warranted sale.
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Q. In an "AS IS" sale is the
seller obligated to correct any defects which are disclosed to the buyer or
discovered during escrow?
A. In an "AS IS" sale a buyer is
purchasing and a seller is delivering the property in its current condition
irrespective of what that condition might be. Therefore, the seller is under no
obligation to correct any adverse condition of the property unless said
correction has been specifically agreed to as a condition of the Contract.
-
Q. Is it important for a buyer to
obtain inspections of the property in an "AS IS" sale?
A. It is
very important for a buyer to have as many inspections of the systems and
components of a property as is appropriate to insure that they have a full and
complete understanding of the property's condition. The buyer is purchasing the
property in whatever condition it is and any defects discovered after close of
escrow will be the obligation of the buyer and not the seller. However,
thorough inspections are important for both an "AS IS" sale and a Warranted
sale.
-
Q. What if a defect is discovered
after close of escrow in an "AS IS" sale?
A. In an "AS IS" sale
if a defect is discovered after the close of escrow the seller has no
obligation to buyer unless the buyer can prove that the seller had actual
knowledge of the condition and failed to disclose it. By way of example, if the
buyer discovers, after close of escrow, that the roof leaks and needs repair,
the seller has no obligation to repair the roof unless upon inspection, buyer
discovers that seller had placed buckets in the attic or can demonstrate other
facts which would indicate knowledge of the adverse condition that the seller
did not disclose to the buyer. The seller is obligated to make the same
disclosure in a Warranted sale.
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Q. What if a defect is discovered
after close of escrow in a Warranted sale?
A. In a Warranted sale
the seller is warranting the condition as of the close of escrow. In the event
the buyer discovers an adverse condition that is covered by a specific warranty
in the contract after close of escrow and it can be proven that the seller knew
about the condition prior to the close of escrow, the seller would be obligated
to correct the adverse condition.
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Q. What if a defect is discovered
after close of escrow in a Warranted sale and it can not be proven that the
seller knew about the condition prior to close of escrow?
A. In a
Warranted sale the seller is only warranting specific condition of certain
systems and components of the property that are known to the seller or
discovered during escrow, as of the close of escrow. If it can not be proven
that the condition was known to the seller or discovered in escrow, the seller
would have no obligation. By way of example, If it was discovered that the
plumbing leaks after the close of escrow but it could not be proven that the
leak was known to the seller or discovered during escrow, the seller would have
no obligation to fix the plumbing even if the plumbing is warranted in the
sale.
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Q. How long is the warranty good
for in a Warranted sale?
A. The warranty survives only until the
close of escrow. It is important to note that the warranty is not warranting
any future conditions, only the condition known as of close of escrow, unless
it is later proven that the seller knew but failed to disclose the true
condition of the property.
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Q. In a Warranted sale are all of
the systems and components of the property covered?
A. No, only
the specific items covered in the language of the warranty arc covered.
However, this does not take the place of the seller's obligation to be honest
and truthful in making disclosures about the property. Even in an "AS IS" sale
the seller can be liable after close of escrow for failing to disclose known
adverse, material conditions that will affect the value and/or desirability of
the property.
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Liquidated
Damages
Dear Client or Customer:
The
Residential
Purchase Agreement ("Contract") you are about to execute contains a
"Liquidated Damages" provision. This provision if initialed by the parties is
an agreement that in the event of a breach of contract by the buyer the amount
of damages the seller will be entitled to receive will be limited to the amount
of the buyer's deposit. It is important to note that there may be advantages
and disadvantages for the parties to a Contract if they elect liquidated
damages. It is, therefore, STRONGLY RECOMMENDED THAT YOU SEEK LEGAL COUNSEL'S
ADVICE if you have any questions on this subject matter.
In an effort to assist clients and customers
in understanding liquidated damages, the following
information is being provided. This information is not intended, however, to be
provide legal advice and/or in any way make an affirmative recommendation with
regards to the subject matter. Clients and customers arc recommended to obtain
legal advice regarding this subject from their legal counsel.
The following is a brief list of some, but
not all, of the advantages and/or disadvantages, which may be associated with
liquidated damages.
ADVANTAGES TO LIQUIDATED DAMAGES - If
initialed, liquidated damages establishes an agreed upon amount of damages in
the event the buyer breaches the Contract. This amount can be any agreed upon
amount but to be presumed valid, it may not exceed 3% of the purchase price for
a transaction, which involves residential property, one to four units, one of
which the buyer plans to occupy. In the event of a breach by the buyer, the
seller does not have to prove that he/she has been damaged, only that a breach
has occurred.
Not all cancellations are a breach of
contract. For example, If the buyer is unable to obtain financing and notifies
the seller during the financing contingency period in the Contract, the buyer's
cancellation is not a breach of contract. Therefore, the seller would not be
entitled to recover damages, either liquidated (if the provision is initialed)
or actual (if the provision is not initialed).
DISADVANTAGES TO LIQUIDATED DAMAGES - In the
event a seller has been damaged for an amount greater than the agreed upon
liquidated damages amount the seller's recovery is limited only to the
liquidated amount. An agreement to liquidated damages does not mean that the
parties will avoid litigation. If the seller believes that the buyer has
breached the Contract the seller will not receive the deposits held in escrow
automatically, nor if the buyer believes that they have not breached the
Contract will the buyer automatically receive the deposit back. The issue of
whether the buyer has breached must still be agreed to between the parties or
by a trier-of-fact and law. This could include Arbitration (if the provision is
applicable) or litigation through a court of law. In most cases the escrow
holder will hold the funds deposited in escrow until such time as the parties
agree to distribution or a trier-of-fact and law orders the release of funds to
either party.
However, all parties are obligated to sign
an instruction to the escrow holder covering how the deposit is to be
distributed if there is no good-faith dispute on this issue. Refusal to sign a
release instruction, if required, could be followed by mediation, arbitration
(if initialed), or litigation in court. If the seller is found to have had no
good-faith claim for withholding the deposit, the seller may be ordered to pay,
in addition to the withheld deposited funds, the prevailing party's attorney's
fees and costs in addition to a penalty for refusing to release the deposit
when no good-faith dispute exists.
Under California Law, Liquidated Damages is
only agreed upon when all parties to die Contract have initialed the
appropriate provision. In addition, only die initial deposit is covered by the
Liquidated Damages provision in the Contract. If additional deposits are to be
covered by the provision, an additional document (Receipt for Increase
Deposit/Liquidated Damages CAR form RID- 11) must be executed by all parties
otherwise additional or increased deposits arc not in most cases considered
liquidated damages and can not be claimed by the seller as such.
IMPORTANT NOTE - The Liquidated Damages
Provision must be initialed by all parties to the Contract for the provision to
become a part of the agreement.
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