When buying a Los Angeles home it helps if you understand the Residential Purchase Agreement (RPA) which is what will be filled out when making an offer. The majority of the contract is standard and pretty much self-explanatory, but there are areas that need to be filled out that can cause some confusion.
Below is an explanation of the Purchase Agreement you will be filling out once you have decided on a property. It will help you understand some of the terms of the contract.
1. This is pretty self-explanatory. Details of the property are provided together with the amount of the offer. Item D. will determine the length of the escrow period.
3. Item A. is the amount of the good faith deposit, usually 3% of the purchase price, which will need to be delivered to escrow within 3 days of acceptance of the contract by both sides. Item C. refers to the amount of the loan. Item D. is the balance of the loan which will be part of the closing costs. Items H and I. If you are getting a loan then these are the contingencies which will allow you to cancel the contract should you a) after a good faith effort be unable to get a loan or b) cancel or re-negotiate the contract should the home not appraise. 17 days used to be enough time to get loan approval, but in today’s tight lending environment, it can sometimes be difficult to meet this timeline. Generally sellers are aware of this and may be amenable to a few days extension. Cash buyers usually waive these two contingencies.
4. Here an explanation of who pays for what is determined. The contract is filled out for a condominium purchase to demonstrate costs for this type of purchase. HOA costs would not apply for a single family home not in a gated community or Planned Unit Development (PUD). Item A.1. (Wood Pest Analysis) is usually accompanied by a separate form which confirms that the Seller will pay for the remediation of any immediate problems (Part 1) and the Buyer will pay for anything that could be a future problem, if they wish Part 2). Item C.2. In Southern California the Seller generally pays for the owner’s Title Insurance (Buyer pays for Lender’s Title Insurance). Item D.6. This is the cost for a one-year home warranty for appliances, air-conditioning, etc. (something in this competitive sellers’ market it may be advisable to waive).
5. If this is an investment property Item A. would be checked (does not intend to occupy)
8. Item B.2. The stove and refrigerator boxes would be checked if the buyer would like to keep them. Item B.3. Here is where a buyer would request additional items they would like. Item C. If a buyer particularly does not want items left then they would be entered here.
13. Item B. If the offer is contingent upon the buyer selling another property, then this box would be checked. In this sellers’ market this kind of contingency would probably not be accepted.
14. Item B. The standard time period per the contract for the buyer to conduct his or her inspections is 17 days. To make the offer stronger it is advisable to lower the time period to 7 to 10 days.
29. Here you can determine how much time you give the Seller to respond to your offer. The standard is 3 days but you can shorten it or extend it. Should the time period expire, the contract can always be extended.
Take time to read through the contract and if you have any questions, please don’t hesitate to contact me.
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