The NEW California Residential Purchase Agreement (RPA) - started November 2014

[irvinerealtor]

In the professional RE industry, we've had a significant change in the latest RPA that came out this past month.

One of several major changes is the elimination of the WPA (wood pest addendum) that was typically associated with the agreement.

Why was this changed, and how is this better?
For some background, for the past several years the vast majority of resales would include the WPA and language that indicated something to the effect that the sellers would pay for all section 1 repairs (existing damage), and buyers would pay for any section 2 repairs. This created an issue for sellers as the agreement was writing a blank check for an unknown amount, if they hadn't already performed their own termite inspection or if conflicting information was collected in a subsequent report. Now, with the WPA removed, the wood pest inspection (a.k.a. termite report) is anticipated to be treated more like how the other buyer inspections have been.
- The buyer can order a termite report IF desired, but doesn't have to.
- IF issues are found, the repairs can be negotiated just like other inspection report items.

What new problems does this create?
- How will lender requirements change, since in many/most cases they are lending against 80-90% of the home's value? Are they going to require a report even if the buyer doesn't ask for one?
- What about the buyer, who may be unaware of the legal and procedural changes?
- How does the listing agent best advise their client? Can/should you get a pre-emptive report?
- How should the selling (buyer's) agent advise their client? Can/should you write the offer to include the repairs, even if unknown?
- Will the termite inspections become more detailed and expensive, knowing that they will be likely used as a negotiating tactic much like the home inspections are?
- Will there just be fewer inspections (the "ignorance is bliss" theory)?

My broker (CB) has offered some extensive training and legal advising for our agents, but I'm curious to know what the reality is on the streets with your own experiences. Any new interesting tidbits from your own dealings that you're willing to share I'd be very curious to hear.

Thanks,
-IR2

 

[irvinehomeowner]

I don't like this change.

I've been on both sides of this where we had to pay for termite repairs as a seller and as a buyer, the seller had to pay for them. I didn't mind having to pay for it and as a buyer, I was happy that it was not an additional cost for me.

Termites is something that every seller should make sure is taken care of before a sale. Too bad we can't add stuff like leaks, mold, HVAC, and roof as mandatory.

 

[rkp]

IR2 - I notice some realtors still use forms from 2010 while others use the latest.  Does using the old form mean that the old terms are still valid and that all section 1 repairs have to be performed by the seller?

 

[irvinerealtor]

IR2 - I notice some realtors still use forms from 2010 while others use the latest.  Does using the old form mean that the old terms are still valid and that all section 1 repairs have to be performed by the seller?

If they are choosing to use the old forms, they can, and as you guessed, the old terms are still valid.

If buyer and seller agree as part of those terms that the seller pays for the report and all section 1 repairs, then that is what is agreed to. If the seller subsequently refuses to pay for them, he would be in breach of contract.

The question becomes, "Would the listing agent have been acting in their client's best interests and giving best representation by using the old version, when such great lengths were made to create the new contract?"

I have a good story about the poop hitting the fan already with this situation.

I'd highly recommend to get the training and use the new one.
-IR2

 

[rkp]

IR2 - I notice some realtors still use forms from 2010 while others use the latest.  Does using the old form mean that the old terms are still valid and that all section 1 repairs have to be performed by the seller?

If they are choosing to use the old forms, they can, and as you guessed, the old terms are still valid.

If buyer and seller agree as part of those terms that the seller pays for the report and all section 1 repairs, then that is what is agreed to. If the seller subsequently refuses to pay for them, he would be in breach of contract.

The question becomes, "Would the listing agent have been acting in their client's best interests and giving best representation by using the old version, when such great lengths were made to create the new contract?"

I have a good story about the poop hitting the fan already with this situation.

I'd highly recommend to get the training and use the new one.
-IR2

Thanks for insight on this IR2 and good to know that the RPA is the binding doc.  If the buyers agent chooses to use the old RPA and seller signs, its valid.  As a buyer, making the termite repairs the sellers responsibility seems like a better route.  Obviously the new RPA might have additional protections that make it better for buyer to use but if all else is the same, I would think buyers prefer sticking to the old RPA.  Now a good sellers agent would demand latest RPA but thats on them.

We have made many offers through listing agents and it was very interesting seeing the varying styles.  Almost all of them were realtors who had access to zipforms with the latest forms but still many used old forms and some even manually wrote or typed in everything.  In the same offer packet, I would see RPAs with 2010 dates while addendums would have newer dates!  And these folks were from big name brokerages that would have training and procedures in place...or at least I imagine they would.