There are changes coming to the Orange County Real Estate landscape.
In just a few weeks, a the California Association of Realtors, or CAR, will introduce a new version of the Residential Purchase Contract, or RPA.
CAR is also introducing some new forms and eliminating some old forms. There is no shortage of changes to the home buying and selling process based on these new contracts.
There will now be a due date for the return of escrow instructions. Both the buyer and the seller are obligated to return their completed escrow instructions within five days of receipt of said instructions.
This will mean your agent as well as the escrow officer will be contacting you to hurry you along with those forms. And don’t be surprised if you get a more substantial nudge in the form of a Notice to Perform.
If you are served a Notice to Perform (there’s one for buyers and another one for sellers – nobody gets a free pass here), you usually only have two days to submit your paperwork. Failure to complete your part of the bargain with the time allotted will give the other party the right to cancel the contract.
Any of you who have been in a situation, especially when there’s a back-up offer in the wings, knows that this is serious business.
There will now be a requirement that the loan pre-approval letter (listen up buyers and lenders) must state that the buyers are qualified to purchase based on the qualifying rate, not the initial loan rate.
You can read between the lines on the purpose of this new requirement given the resurgence of adjustable-rate home loan options with so-called “teaser” rates.
There will now be a provision that if the appraisal contingency has been waived or removed, the buyer is not entitled to exercise the right to cancel pursuant to the loan approval contingency.
This simply means that if you are waiving the appraisal as a tactic to make your offer more appealing to a seller, you will have to make up the short fall if the appraiser says the house is worth less than what the you agreed to pay. Or find someone to make up the shortfall, which may include pleading with the seller to reduce the price.
Regardless, the buyer cannot fall back on the loan approval contingency as a solution to this situation. Waiving or removing the appraisal contingency is typically seen in a seller controlled market where there are rapidly rising home values and fewer homes for sale. Under those conditions, the seller may look for any reason to cancel you in order to move on to another, perhaps more appealing buyer.
There will now be a requirement for the designation of the payment for homeowners association documents and payment of these fees up front.
Apparently, there have been too many cases where the seller agreed to pay for the HOA documents, then escrow used the buyer’s deposit funds to cover the upfront fee. When the contract was canceled, the buyer’s deposit was returned minus the cost of the HOA docs. For a house the buyer is now not buying.
Apparently most buyers didn’t take too kindly to this situation.
I predict there will be some finger pointing, escalating to management, bent relationships, plenty of drama, and near tragedies this December as everyone adjusts to the new forms.
Contact us at Integrated Realty Group, for more help with your future purchase, or Sale.