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Don't Be Afraid of All the Paperwork in a Home Sale

The paperwork is meant to protect you.

Last week,: escrow, title, inspections, and so on. This time, I’d like to focus on taking the mystery out of some of the mountain of paperwork involved in making a residential purchase. Much of it is meant to protect the buyer or seller from inadvertently making a mistake, such as non-disclosure of something that otherwise the buyer would walk away from. Say, a burial site under the home. Or, the presence of mold. The following is meant to be an interpretive, conversational explanation, rather than the detailed definition you can find on the link to forms.

Each year, local real estate regulators C.A.R. (California Association of Realtors) re-evaluate the existing forms, and the need for new forms. Here are some of the common forms you may encounter as a buyer or seller for a standard residential, (not commercial) purchase. There are some additional or modified forms for probate, short sales, foreclosures, etc. You can find a list of all available forms here.

BBA (Buyer/Broker Agreement): Some agents require prospective buyers to sign an agreement before they start working with them. This is a contract to use the agent's services in purchasing a home. The agreement spells out the duties of the buyer and the agent. That is, the buyer will honor the work the agent does to help them find a home and write an offer, in exchange for a commission, usually paid by the seller.

RPA (Residential Purchase Agreement) commonly called an Offer: Once signed and accepted by all parties, accompanied by an earnest money deposit check and other forms, this becomes the contract to purchase a home. It includes the site location, the price offered, amount of money being deposited and financed. The contract includes terms that are standardized by C.A.R. including inspections, repairs, escrow and title, all of the details of the sale. Prospective buyers will sign or initial each page, the seller will do the same, and the agents have some pages they must sign. Other forms are a necessary part of this contract, such as the WPA.

WPA (Wood Destroying Pest Inspection & Allocation) details what is commonly called the Termite Inspection. Actually, they are looking for all wood destroying pests, including fungus, and rodents. The technician will itemize on a map of the house, where the pests are located, and what is necessary to eliminate the problem: tenting, localized chemical treatment, replacement of wood, etc. Limitations are outlined as to whether the garage, outbuildings, and fences, are included, with the costs to remedy. Who pays for what is negotiated with the original RPA.

RLA (Residential Listing Agreement) is used when someone wishes to contract a real estate agent to sell their home. It details the features of the home that are on record with the Tax Assessors office, and additional details provided by the homeowner such a s a newer roof or the addition of air conditioning. An important part of this process is identifying the disclosures that must be made to the prospective buyer. A common rule of thumb is, when in doubt, disclose. If you don’t let the buyer know about a flood that happened several years ago, or the infestation of rodents in the attic that you dealt with, it will appear that you are deliberately deceiving them. This could be cause for them to seek compensation in the future.

AD (Disclosure Regarding Real Estate Agency Relationships): This form is required by both agents and informs all parties who the agent represents; Is it just the buyer, just the seller, or both parties?

AVID (Agent Visual Inspection Disclosure ): When an agent is listing your home, they must complete, and have you sign, this form identifying any irregularities that they may note. This becomes part of the disclosure process whereby you reveal to buyers all that you know about the house, particularly repairs or items that need fixing. It may include anything like a room that seems to have been added on, a spot on the ceiling where the roof may have leaked, or a drippy faucet.

BIA (Buyer’s Inspection Elections): This is an extensive list of the types of inspections that a buyer might consider, beyond the usual termite, home inspection, and geological inspection called a Natural Hazards Report. When a problem is noted in the home inspection, others may be indicated, such as mold, structural problems for cracks, or a pool inspection.

CO (Counter Offer): Once you submit your offer, accompanied by a pre-approval letter from your bank showing they will lend you the money to buy the home (unless you are paying cash), the seller may counter your offer. That is, you may be offering less than the advertised purchase price and s/he may remain fixed on that price, or propose a compromise. This bargaining may go back and forth several times. Not only the price is negotiable, representation in escrow and title may be desirable to both parties, a maximum amount payable for repairs may be proposed, or the date of closing may need to be pushed back or moved forward. Perhaps the seller needs to rent back for a month or two after close of escrow. All of these terms are negotiated as much as possible at this time on Counter Offer forms.

RR (Request for Repair) is the form used after the property inspection, to request the seller make relevant repairs. They may include inoperable appliances included in the sale, missing rain gutters, damaged patio covers, many different items. By law, the seller is only required to provide a few items such as: double brace the water heater, smoke and carbon monoxide detectors, and low-flow toilets and shower heads. However, if the buyer is overly concerned about the extent of repairs needed to make the home serviceable to them, they could cancel the contract. So, inserting a maximum repair amount early in the contract is a good way to help avoid problems.

Once a purchase contract is accepted by both parties, it, and accompanying forms are submitted to escrow. They assign an escrow number, and detail the contract that both parties have agreed to, and that they will require to be fulfilled before closing. This must be read carefully as details could be interpreted incorrectly, typos made, or important items left out, thereby delaying close of escrow. Let’s pick up here next time, as there’s a long way to go before the house is sold!

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